Mintz IRA Update — Duplicate Discounts Between the 340B Program & Medicare Drug Price Negotiation Program

The 340B Drug Pricing Program (340B Program) is no stranger to controversy. We have previously covered the ongoing contract pharmacy legal battles and the new alternative dispute resolution process. And now, a new 340B hurdle is on the horizon for drug manufacturers whose drugs were selected for the Medicare Drug Price Negotiation Program (Selected Drugs): duplicate discounts with the Maximum Fair Price (MFP).

Under the IRA, manufacturers of Selected Drugs do not need to provide covered entities with both the 340B discounts and the MFP (which would result in “duplicate discounts”). Rather, manufacturers must provide covered entities with the lesser of the 340B price or the MFP. This requirement presents the same challenge that the 340B program has been dealing with for well over a decade under the duplicate discount prohibition between the Medicaid Drug Rebate Program and the 340B price. Central to this issue is: how do manufacturers identify when a drug is dispensed to a 340B eligible patient (a 340B Drug) and thus eligible for the 340B price?

Compounding the risk that manufacturers will potentially pay duplicate discounts to covered entities for Selected Drugs, is the fact that CMS is enacting a 14-day prompt pay requirement, requiring manufacturers to reimburse dispensing entities (including covered entities) the difference between the amount the covered entity paid for a Selected Drug and the MFP within two weeks of the drug’s identification as MFP-eligible. As pointed out in comments to this proposal, due to the difficulties in identifying when a drug is a 340B Drug, this timeframe may result in manufacturers carrying millions in excess payments.

The remainder of this article discusses how CMS is (or more accurately, is not) addressing this risk of duplicate discounts through its October 2, 2024 Medicare Drug Price Negotiation Program: Final Guidance, Implementation of Sections 1191 – 1198 of the Social Security Act (MFP Guidance), as well as manufacturers’ responses.

CMS Offers Limited Solutions for Duplicate Discounts between the MFP and 340B Price

To effectuate the MFP, CMS will establish the Medicare Transaction Facilitator Data Module (MTF DM) and the MTF Payment Module (MTF PM), which will facilitate the exchange of claims data and payments between manufacturers and dispensing entities. The idea is that the MTF DM would provide manufacturers with information regarding when a claim is an MFP-eligible claim and when the dispensing entity is entitled to the MFP. Manufacturers must then reimburse the dispensing entity if it paid more than the MFP within the 14-day requirement discussed above.

While the MTF modules play an important role in the Medicare Drug Price Negotiation Program, they do little to address 340B duplicate discounts. Critics of the MTF modules argue that the MTF DM will not contain data elements necessary to assist in the nonduplication of MFP and 340B claims. For example, CMS refused to implement proposals to include a mandatory data field identifying when a Selected Drug was dispensed to a 340B patient, thus making it eligible for the 340B price. In fact, CMS disavowed responsibility for deduplicating discounts, stating: “CMS is not charged with verifying or otherwise reviewing whether a particular drug claim is a 340B-eligible claim and will not, at this time, assume responsibility for deduplicating discounts between the 340B ceiling price and MFP.” This leaves the responsibility of nonduplication on the manufacturer and/or the covered entity.

Manufacturer Potential Solution – J&J’s Proposed Rebate Model

A controversial solution put forth by manufacturers participating in the 340B Program is the utilization of rebates to effectuate both the 340B price and the MFP. In a recent lawsuit filed against HRSA, Johnson & Johnson (J&J) argued that the use of rebates to effectuate both the 340B ceiling price and the MFP could alleviate some of the administrative burdens associated with both programs and would ensure that 340B covered entities serving Medicare patients would receive the appropriate drug prices with respect to the patient served. Rather than providing covered entities with the 340B ceiling price upfront, as is current practice, the rebate model proposed by J&J, and others, would allow manufacturers more time to confirm utilization of the drug under the 340B Program or some other government program (e.g., Medicare) and thus allow the manufacturer to avoid duplication of discounts. HRSA did not approve J&J’s proposed rebate model and instead threatened enforcement against the drug maker, thus leading to the lawsuit.

2025 Nonduplication Outlook

As stakeholders ponder solutions for nonduplication of the MFP, 340B ceiling price, and Medicaid drug rebates, we expect to see continued friction in the industry. Following J&J’s lawsuit over the proposed rebate model, four other drugmakers have since sued HRSA over its denial of similar proposed rebate models. In a letter to CMS, the American Hospital Association (AHA) urged CMS to take a more prescriptive approach in requiring drugmakers to standardize payment across pharmacies dispensing on behalf of Medicare patients. Further, AHA argued that silence from CMS on the duplicate discount issue “appears to have been perceived by drug companies as a ‘green light’ to pursue a 340B rebate model whereby drug companies will make the 340B price available in a retrospective manner similar to the agency’s process for making the negotiated MFP available through the MTF DM and PM.”

If CMS and HRSA decline to provide additional guidance on the subject of duplicate discounts, then manufacturers, covered entities, and contracted pharmacies will each develop independent processes for compliance with Medicare, Medicaid, and the 340B Program. Such a fragmented approach could lead to claims duplication, payment delays, and disputes amongst parties, and would not only affect the financial stability of entities operating within the pharmaceutical supply chain but could also impact patient access to their prescription medicines at accurate prices.

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