Blog Post

GAO Calls for More Oversight of 340B Medicaid Discounts

Richard P. Kusserow | February 2020

Key points

  • 340B compliance risk still ranks high
  • Weak HHS oversight may be resulting in duplicate discounts
  • Continuing conflict between pharmaceutical industry and providers

The 340B Drug Pricing Program (340B Program) and the Medicaid Drug Rebate Program require manufacturers to provide reduced sales prices on outpatient drugs to covered entities participating in the 340B Program. Manufacturers are not allowed to “duplicate discounts” for both 340B Program discounted prices and Medicaid rebates. A Government Accountability Office (GAO) Report found weak oversight by the Department of Health and Human Services (HHS), and noted that the Centers for Medicare & Medicaid Services (CMS) conducted only limited oversight of state Medicaid programs’ efforts to prevent duplicate discounts. They are also failing in tracking and reviewing states’ policies and procedures for preventing duplicate discounts. The result is that CMS is not getting the needed information to ensure states are excluding 340B drugs from Medicaid rebate requests. The GAO Report also noted that audits from the Health Resources and Services Administration (HRSA) are unable to determine whether a 340B hospital is following state requirements and taking the necessary steps to avoid duplicate discounts. The GAO previously reported that HRSA does not give guidance on, or audit for, duplicate discounts in Medicaid managed care. The GAO recommends that:

  1. CMS call for state Medicaid programs to have in place written procedures addressing duplicative discounts; and
  2. HRSA also incorporate compliance with such procedures into their audits and require facilities to work with manufacturers on any repayment of duplicate discounts.

About the Author

Richard P. Kusserow established Strategic Management Services, LLC, after retiring from being the DHHS Inspector General, and has assisted over 3,000 health care organizations and entities in developing, implementing and assessing compliance programs.

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