The Interplay Between 340B, State Medicaid Programs

October 19, 2019

First-of-its-kind survey brings clarity to the effect of 340B and Medicaid programs on each other through comprehensive state analysis.

The Comprehensive 50-State Survey: State Medicaid Programs and 340B study, was recently released by multidisciplinary, integrated professional services firm, Manatt, Phelps & Phillips, LLP, for a better understanding between the Medicaid and 340B programs.

The study was conducted by the firm’s healthcare legal and consulting group, Manatt Health, who reviewed statutory, regulatory, and sub-regulatory guidance issued by state Medicaid programs with respect to the 340B program. Some state officials also participated.

This study summarizes laws, regulations, and sub-regulatory guidance that govern how Medicaid programs in all 50 states reimburse for both 340B and non-340B drugs.

It also shows how Medicaid programs ensure those drugs are not also subject to a Medicaid rebate.

The 340B program, which requires drug manufacturers to provide outpatient drugs to eligible healthcare organizations at significantly reduced prices, has not been without controversy.

Supporters assert that it is vital to helping hospitals and other covered entities care for their uninsured and underinsured patients, while critics assert that it is being abused.

Both sides can agree, however, the program can be very confusing to navigate.

Related: 340B Program Helps Rural Hospitals Stay Afloat

One area of concern relates to the interplay between the 340B program and Medicaid rebates: Manufacturers who participate in the Medicaid program are required to pay rebates to states for drugs dispensed to Medicaid patients. The 340B statute provides that a drug may not be subject to both a 340B discount and a Medicaid rebate. Accordingly, 340B drugs may not be used for Medicaid patients unless the state Medicaid program has a mechanism in place to identify 340B drugs and exclude them from its rebate requests.

Manatt’s first-of-its kind study addresses the following questions: 

• What mechanisms do state Medicaid programs use to identify 340B-purchased drugs so they can exclude them from their rebate requests to manufacturers?
• How much do state Medicaid programs reimburse for 340B drugs as compared to non-340B drugs?
• Do state Medicaid programs set requirements for how much Medicaid managed care organizations (MCOs) may reimburse for 340B drugs and non-340B drugs, and if so, what are those requirements?

Based on some of the study’s findings:

• Twelve states rely solely on the federal Office of Affairs (OPA) Medicaid Exclusion File
• Twenty-two states rely solely on claims-level identifiers
• Some states rely on a combination of the Medicaid Exclusion File and claims-level identifiers.
• Dispensing fees for 340B drugs vary widely from a low of $2.32 to a high of $21.28.
• Most states set dispensing fees for 340B drugs between $10 and $11 per prescription.
• Almost two-thirds of states prohibit 340B contract pharmacies.


“Given the controversy that has surrounded the 340B program over the years and the complex interplay between it and Medicaid, we were committed to bringing much needed clarity to the issues,” says Helen Pfister, partner with Manatt Health and lead author of the report. “We felt this survey was particularly important in order to help 340B stakeholders understand what the legal framework is at the state level when it comes to Medicaid and 340B.”

An infographic highlighting the key takeaways can be found here.