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340B Drug Pricing Program

Revised: 02-22-2017


The 340B Drug Pricing Program requires drug manufacturers to provide outpatient drugs to eligible health care organizations or covered entities at significantly reduced prices. Federal law prohibits duplicate discounts, which means that manufacturers are not required to provide both a discounted 340B price and a Medicaid drug rebate for the same drug.

Covered entities must have procedures in place to prevent duplicate discounts.

Eligible Providers

340B covered entities are facilities eligible to purchase drugs through the 340B program. These entities appear on the Health Resources and Services Administration Office of Pharmacy Affairs Database.

340B contract pharmacies are pharmacies that have contracted with the 340B entities to provide pharmacy services to the covered entity’s patients, including the service of dispensing the entity-owned 340B drugs.


Bill MHCP directly for prescription drugs for fee-for-service (FFS) recipients; bill the managed care organization for prescription drugs for recipients enrolled in a managed care plan.

340B-Covered Entities

All covered entities that use 340B drugs and serve MHCP recipients enrolled through FFS or a managed care organization (MCO) must follow either these carve-in or carve-out procedures:

  • 1. Carve out all MHCP prescriptions and clinic-administered drugs from the 340B program
  • • Use non-340B drugs for all MHCP recipients you serve, including FFS and managed care.
  • • Bill either MHCP or the managed care organization only for drugs purchased outside the 340B program.
  • • Indicate to the Health Resources and Services Administration (HRSA) that you will not use 340B medications for MHCP recipients; do not list the 340B entity’s NPI with HRSA.
  • 2. Carve in MHCP prescriptions and clinic-administered drugs into the 340B program
  • • Use 340B drugs for all MHCP recipients you serve, including FFS and managed care.
  • • Inform HRSA that you intend to purchase and dispense 340B drugs for Medicaid patients, and list with HRSA all NPI numbers used for billing 340B medications.
  • • Do not bill MHCP FFS or the MCO for 340B medications if your NPI is not listed on the HRSA Medicaid Exclusion File.
  • • Purchase all drugs billed to MHCP FFS or the MCO on the covered entity’s NPI under the 340B program unless the product is not eligible for 340B pricing (example: orphan drug products for free-standing cancer hospitals or vitamins).
  • • Submit pharmacy claims for 340B-procured products to MHCP or the MCO with a value of 20 in the Submission Clarification Code field 420-DK.
  • No implementation of changes can be made in carve-in or carve-out status without that change first being reflected in the HRSA Medicaid Exclusion File (MEF). Covered entities must ensure that information in the MEF is accurate each quarter and at the time of annual recertification.

    MHCP assumes that all prescriptions for covered outpatient drugs dispensed by 340B entities choosing to carve Medicaid into the 340B operation are filled using 340B-procured medications.

    Pharmacy Claims Reimbursement

    340B entity pharmacies may submit claims to fee-for-service MHCP at their usual and customary rate. MHCP will pay the rates as shown in the table for 340B entity pharmacy claims.

    MHCP Pharmacy 340B Claim Reimbursement Rates

    Type of drug or supplies

    MHCP Payment Rate

    Generic drugs subject to state maximum allowable cost (SMAC)

    SMAC plus $3.65 dispensing fee

    Branded drugs, specialty drugs, and generic drugs not subject to SMAC

    Wholesale acquisition cost (WAC) minus 40 percent, plus $3.65 dispensing fee

    Items not considered “covered outpatient drugs” by the Centers for Medicare & Medicaid Services (CMS) (for example, diabetic testing supplies, OTC vitamins)

    Regular MHCP pharmacy payment rate:

  • • WAC plus 2 percent, plus $3.65 dispensing fee
  • • SMAC plus $3.65 dispensing fee
  • • Diabetic testing supply rate
  • Some 340B entities are unable to purchase drugs designated as orphan drugs by the FDA through 340B when used for orphan indications. MHCP will pay the regular MHCP pharmacy payment rate for such cases. To initiate an orphan drug 340B price exemption, call the MHCP Provider Call Center at 651-431-2700 or 800-366-5411.

    Medical Claims Reimbursement for Clinician-Administered Drugs

    The following apply for FFS clinician-administered drugs:

  • • Submit claims to MHCP at your usual and customary rate.
  • • MHCP will pay 80 percent of the regular MHCP allowable rate.
  • • Reimbursement will not change for critical access hospitals. Critical access hospitals will continue to be paid a percentage of billed charges. Refer to the Provider Manual section on Critical Access Hospital (CAH) Services for more information.
  • • MHCP assumes that clinics procure through the 340B program all covered outpatient drugs administered by 340B entities choosing to carve Medicaid into the 340B operation.
  • 340B Contract Pharmacies
    Contract pharmacies may not submit claims to MHCP FFS or to managed care for 340B-procured medications. A 340B contract pharmacy must carve out MHCP FFS and managed care from its 340B operation. All contract pharmacies that use 340B drugs and bill to an MCO must carve out MHCP managed care prescriptions from the 340B program and purchase all drugs billed to MHCP managed care outside the 340B program.

    Consult MHCP Managed Care Pharmacy Identification for help identifying MHCP managed care enrollees.

    Additional Resources

    HRSA Medicaid Exclusion/Duplicate Discount Prohibition

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