At the intersection of the federal 340B Drug Pricing program and the federal Medicaid Drug Rebate Program (MDRP), a potentially large set of Medicaid claims are generating duplicate discounts, which pharmaceutical manufacturers provide to eligible entities such as hospitals and health centers. These two complex federal programs were designed to reduce the costs of prescription drugs for providers that serve low-income patients, but both state Medicaid agencies and federal policymakers have been actively working to eliminate the unintended overlap of these two programs. To gain deeper insights into why duplicate discounts continue to occur, the scope of this concern, and to identify considerations of future policymaking, HMA conducted interviews with Medicaid officials and drug policy experts across several states.
Duplicate discounts occur when for a single sale a manufacturer is required to: (1) prospectively reduce the price of the product (a discount) they sell to a 340B covered entity in advance of the delivery of care to the patient; and (2) provide a retrospective payment (a rebate) to a state Medicaid program or managed care plan under the MDRP after care is delivered to a Medicaid enrollee. When duplicate discounts occur the manufacturer’s product is discounted twice for the same sale, contravening federal law, which prohibits duplicate discounts.
Despite the statutory prohibition, duplicate discounts remain a concern. Both state and federal policymakers have been actively addressing duplicate discounts but have been unable to identify clear and consistent policy solutions that neutralize this inefficiency. On the state level, Medicaid agencies and state legislatures have implemented policies to address duplicate discounts. On the federal level, the Health Resources and Services Administration (HRSA) and the Centers for Medicare & Medicaid Services (CMS) have conducted audits and published best practices for states to eliminate duplicate discounts. Nonetheless, duplicate discounts persist.
To gain deeper insights into how Medicaid agencies navigate duplicate discounts, Health Management Associates (HMA) conducted semi-structured interviews with former and current Medicaid directors and pharmaceutical policy experts in 14 states. Interviewees were asked about the frequency of duplicate discounts, the extent to which Medicaid agencies devote resources to tracking them, the policies states have implemented to address them, and the extent to which state or federal authorities are working to eliminate duplicate discounts.
Based on interviews, four key themes emerged:
- Duplicate discounts remain a problem, the scope of the problem is unclear, and better data collection from covered entities is necessary.
- The opacity and complexity of duplicate discounts create a burden for state Medicaid agencies, influencing the policies they implement, resulting in variable state policy strategies.
- Contract pharmacies add an additional layer of complexity, exacerbating the burden that duplicate discounts create.
- State and federal authorities could take more decisive action to address duplicate discounts.
Policymakers should consider that the environment for addressing duplicate discounts may become more complex in the future, which may increase the need for a federally coordinated policy solution. The complexity of the environment may deepen due to the increasing presence of contract pharmacies, the increasing presence of managed care in Medicaid programs, and the implementation of the drug pricing policies of the Inflation Reduction Act of 2022. Policy action coordinated across the various stakeholders (e.g., HRSA, CMS, state Medicaid agencies, covered entities, and manufacturers) may represent the best opportunity for success in eliminating duplicate discounts.
