How Will 340B Discounts Interact with Negotiated Drugs’ MFP?

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The IRA requires covered entities to pay the lesser of a drug’s 340B ceiling price and MFP, presenting operational complications for manufacturers and providers.

The Inflation Reduction Act of 2022 (IRA) requires the Centers for Medicare & Medicaid Services (CMS) to negotiate a “maximum fair price” (MFP) for a specified number of Part B and Part D products every year, with the prices applicable beginning in 2026 for the first 10 selected products under Medicare drug-price negotiation. Manufacturers are responsible for offering access to the MFP, which could be prospective or retrospective. When a provider is a 340B covered entity, manufacturers of negotiated drugs will be required to offer a discount so the cost of the drug acquisition is the lesser of the MFP and the 340B ceiling price. However, covered entities are not entitled to both discounts. While CMS issued revised guidance on the operationalization of Medicare negotiation for the initial price applicability year (2026), the agency has yet to clarify how the prevention of duplicate discounts should be addressed by stakeholders.

MFP for Eligible Individuals

Beginning in 2026, manufacturers will be responsible for ensuring that all Medicare beneficiaries can purchase negotiated drugs with cost-sharing based on MFP. Plans will reimburse pharmacies so the beneficiary and plan shares sum to MFP. In the initial Medicare Drug Price Negotiation Program guidance released in March, CMS said that manufacturers could effectuate MFP prospectively or retrospectively, but the agency did not set a standard method. In a prospective model, pharmacies would acquire an inventory of drugs at a price based on MFP, and then likely would need to hold the MFP inventory separately from drugs to be sold at other prices. In a retrospective model, pharmacies could maintain a single drug inventory acquired at a price (e.g., the wholesale acquisition cost), notifying manufacturers that they must pay pharmacies the difference between purchase price and MFP-based reimbursement from Part D plans. Manufacturers would be required to remit payment within 14 days of the notification.

In revised guidance issued in June, CMS introduced the concept of a Medicare Transaction Facilitator (MTF) that could facilitate data exchange between manufacturers, pharmacies, and plans to effectuate MFP access. The MTF could support the verification process for MFP eligibility when a selected drug is dispensed.

Interaction with the 340B Program

CMS has yet to propose a method to avoid manufacturers issuing both 340B and MFP discounts on the same claim. In fact, the timeframes for adjudicating and providing access to MFP and 340B pricing do not align under current policies and business rules (see Figure 1). In revised guidance, CMS stated that it would work with supply chain stakeholders to evaluate existing data flows and identify opportunities for increased connectivity and data sharing in relation to the MTF and 340B.

Figure 1. Potential for Duplicate Discounts Between 340B and MFP
Figure 1. Potential for Duplicate Discounts Between 340B and MFP

Managing Duplicate Discounts

Prior to the IRA’s passage, stakeholders have expressed concern about duplicate discounts in the 340B program related to preventing duplication between 340B discounts offered to covered entities and Medicaid Drug Rebate Program discounts offered to states. Duplicate discounts may also include instances where a manufacturer provides a contracted rebate on a unit of drug that was acquired at a 340B price, even though 340B units are usually excluded from rebate agreements with payers. To prevent duplicate discounts, some manufacturers have required covered entities to share claims with a third-party clearinghouse to identify and exclude 340B claims.

While there is a 340B modifier for Medicare Part B claims, several stakeholders noted in comments on the Medicare Drug Price Negotiation Program guidance that a 340B claims modifier for Part D products would minimize duplicate discounts. A 340B claims modifier in Part D may address stakeholder concerns if the claim is identified as 340B eligible at the point of sale. However, a 340B claims modifier is less feasible if 340B eligibility is determined in a retrospective review after adjudication of the claim, which is the case in most contract pharmacy operations. A 340B modifier in Part D would also not address the “lesser of” provision.

Dive Deeper

Implementation of the Medicare Drug Price Negotiation program creates opportunities for stakeholders to engage with CMS on how to use existing and new infrastructure to operationalize MFP. To learn more about the complexities related to operationalizing the MFP and 340B, potential solutions, and the policies necessary to implement them, connect with us.

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