Pennsylvania Medical Assistance Program Bulletin & 340B Implications

On December 22, 2022, the Pennsylvania Department of Human Services released a Medical Assistance (“MA”) Program Bulletin (“Bulletin”) applicable to 340B covered entities enrolled in the MA program. The Bulletin, which took effect on January 1, 2023, prohibited covered entities from utilizing contract pharmacies to dispense 340B-purchased drugs to MA beneficiaries in fee-for-service and/or managed care delivery models.  This effectively eliminated the ability of contract pharmacies to dispense 340B drugs in Pennsylvania’s Medicaid program. Additionally, the Bulletin outlined the Department’s plan to invoice drug manufacturers for Medicaid rebates on non-340B prescription drugs dispensed to MA beneficiaries.

While the Bulletin did not prevent covered entities from using contract pharmacies, it did eliminate covered entities’ ability to engage contract pharmacies to dispense 340B drugs to MA beneficiaries. The Bulletin seems to be aimed at preventing duplicate discounts within Pennsylvania’s Medicaid program. Specifically, under the 340B Statute, “duplicate discounts” are prohibited. Duplicate discounts typically arise in instances where there is a discounted drug acquisition cost and, in the absence of appropriate safeguards, a rebate is also paid to a payor on the same discounted drug. Generally, based on the duplicate discount prohibition, HRSA will require contract pharmacies to dispense non-340B drugs to Medicaid beneficiaries, i.e., “carve-out” such beneficiaries, unless the covered entity has an arrangement with the state Medicaid agency to prevent duplicate discounts. This means that a covered entity’s contract pharmacy can dispense 340B drugs to Medicaid beneficiaries only if  the covered entity has (i) reported to HRSA that it will “carve in” Medicaid beneficiaries to provide beneficiaries with 340B-purchased drugs and (ii) entered into an agreement with the state Medicaid Agency and contract pharmacy to prevent duplicate discounts.  

Given the above 340B Statute and HRSA guidance, it appears that the Bulletin went too far by effectively eliminating the mechanism provided by the 340B statute for including Medicaid beneficiaries in contract pharmacy arrangements. However, on January 19, 2023, the Department rescinded the Bulletin without explanation. This significant decision to rescind the Bulletin suggests that the Department may have recognized that the policy exceeded the MA Program’s authority. Nevertheless, the Bulletin highlights the potential for the Pennsylvania MA Program, as well as other state Medicaid agencies, to engage in efforts to limit the 340B program beyond HRSA’s statutory and regulatory guidance. Covered entities, contract pharmacies, and other effected stakeholders should engage qualified 340B counsel to navigate the complex framework of Federal and state rules and regulations within the 340B program as well as the complexities of agency rulemaking.  

How Frier Levitt Can Help:

Covered entities, contract pharmacies, and other stakeholders participating in or impacted by the 340B Drug Pricing Program should be aware of the implications of state restrictions on the program and potential state agency rulemaking that may impact 340B. Frier Levitt can provide counsel and assistance to these stakeholders in assessing such legal issues. We can also provide resources and strategies to bulletins and other guidance, like Pennsylvania’s recent Bulletin, that may serve to restrict the scope of the 340B program.  Contact us to speak with an attorney.