[Federal Register Volume 65, Number 51 (Wednesday, March 15, 2000)]
[Notices]
[Pages 13983-13984]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-6287]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Resources and Services Administration


Notice Regarding the Section 340B Drug Pricing Program--Program 
Guidance Clarification

AGENCY: Health Resources and Services Administration, HHS.

ACTION: Notice.

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SUMMARY: Section 602 of Public Law 102-585, the ``Veterans Health Care 
Act of 1992,'' enacted section 340B of the Public Health Service Act, 
``Limitation on Prices of Drugs Purchased by Covered Entities.'' 
Section 340B provides that a manufacturer who sells covered outpatient 
drugs to eligible (covered) entities must sign a pharmaceutical pricing 
agreement with the Secretary of HHS in which the manufacturer agrees to 
charge a price for covered outpatient drugs that will not exceed an 
amount determined under a statutory formula.
    The purpose of this notice is to clarify section 340B program 
guidance related to the mechanism to prevent duplicate discounts (i.e., 
the generation of a

[[Page 13984]]

Medicaid rebate on a section 340B discounted drug). Any covered entity 
that purchases its non-Medicaid drugs through the 340B program but its 
Medicaid drugs through other avenues must provide the Office of Drug 
Pricing (ODP) notice of this type of dual purchasing activity. The ODP 
will place a notation ``non-applicable'' (N/A) by the covered entity 
name on the eligibility list so that any reimbursement requests for its 
Medicaid drugs will continue to generate manufacturer rebates. For 
appropriate Medicaid drug reimbursement procedures, the Health 
Resources and Services Administration (HRSA) refers the covered entity 
to its respective State Medicaid agency for guidance.

FOR FURTHER INFORMATION CONTACT: Captain Robert Staley, Office of Drug 
Pricing, Bureau of Primary Health Care, Health Resources and Services 
Administration, 10th Floor, East-West Towers, 4350 East-West Highway, 
Bethesda, MD 20814; Phone (800) 628-6297; Fax (301) 594-4982.

SUPPLEMENTARY INFORMATION: Section 340B(a)(5)(A) required HHS to 
develop a mechanism to prevent a section 340B drug discount and a 
Medicaid rebate on the same drug (i.e., prevention of double 
discounting). HRSA, together with the Medicaid Rebate Program, Health 
Care Financing Administration, developed a process to prevent this 
potential double price reduction and published the final notice of this 
mechanism on June 23, 1993, at 58 FR 34058. The mechanism, which 
focuses only on 340B covered outpatient drugs, requires a covered 
entity that bills Medicaid on a cost basis (e.g., community health 
centers using fee for service and not all inclusive rates) to submit to 
ODP its Pharmacy Medicaid Number (i.e., the number used to bill 
Medicaid for the drugs). This information is placed by the name of the 
covered entity on the master electronic eligibility list. Using this 
Medicaid number, the State Medicaid agency creates a separate provider 
file for claims from that covered entity. This computer file then 
excludes data from this provider file when generating the rebate bills 
to the manufacturers. In this way, the mechanism prevents double 
discounting.
    An entity which utilizes a Medicaid billing system that includes 
pharmacy in an all-inclusive rate or does not submit Medicaid claims 
for covered outpatient drugs would not generate Medicaid rebates. 
Consequently, these entities do not have to provide their pharmacy 
numbers (58 FR 34059). However, such entities were instructed to 
provide ODP with notice of such purchasing practices so that this 
information could be provided to participating manufacturers and 
appropriate State Medicaid agencies (59 FR 25112, May 13, 1994).
    It has come to our attention that there may be some confusion 
concerning the appropriate reporting procedures for an entity not 
participating in the 340B Program for its Medicaid drugs (i.e., 
purchasing its non-Medicaid drugs through the 340B Program and its 
Medicaid drugs outside the Program). Because drugs purchased outside of 
the 340B Program are not considered covered 340B outpatient drugs, an 
entity that only purchases non-Medicaid drugs through the 340B Program 
would not request Medicaid reimbursement for its covered outpatient 
drugs (i.e., non-Medicaid drugs discounted through the 340B program). 
Consequently, the covered entity would not provide ODP its Medicaid 
Pharmacy number. However, this entity still must notify ODP of this 
type of purchasing practice. ODP will place N/A by the name of the 
covered entity, signaling no Medicaid reimbursement requests on drugs 
purchased with discounts under section 340B. In this way, Medicaid 
rebates will continue to be generated on its Medicaid drugs purchased 
outside the 340B program.
    Covered entities that have submitted Medicaid Pharmacy provider 
numbers now included in the covered entity database but are purchasing 
drugs for their Medicaid patients on the open market should contact ODP 
as soon as possible to request that their Medicaid Pharmacy numbers be 
replaced by N/A in the covered entity database. An entity that has 
purchased Medicaid drugs outside of the 340B Program but submitted its 
Medicaid provider number to ODP should attempt to preserve any 
documentation of such purchasing activity. The entity should contact 
its State Medicaid agency about these past drug purchases so that the 
agency can bill manufacturers for rebates that were excluded from past 
rebate claims.
    On behalf of the Medicaid Drug Rebate Program, HRSA provided notice 
to covered entities regarding appropriate procedures for requesting 
Medicaid reimbursement for covered outpatient drugs (58 FR 27293 and 59 
FR 25112 regarding ``actual acquisition cost''). Currently, HRSA is 
reviewing that portion of the guidance and recommends that covered 
entities refer to their respective Medicaid State agency drug 
reimbursement guidelines for applicable billing limits.

    Dated: March 9, 2000.
Claude Earl Fox,
Administrator.
[FR Doc. 00-6287 Filed 3-14-00; 8:45 am]
BILLING CODE 4160-15-P