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340B Mandatory Billing Policy

Mandatory billing policy change for 340B purchased drugs takes effect November 1, 2018

Effective November 1, 2018, the Division of Medicaid (DOM) is implementing a mandatory billing policy whereby providers must identify 340B purchased drugs on claims. This billing policy is in response to the Centers for Medicare and Medicaid Services (CMS) requirement that DOM define its policies and oversight activities related to 340B purchased drugs as outlined in CMS State Release No. 161, dated Oct. 26, 2012. Providers can find the complete Administrative Code Filing on the Administrative Code final file page.

NOTE: This represents a mandatory change to DOM billing policy only and will not impact 340B reimbursement.

The 340B program is a Drug Pricing Program established by the Veterans Health Care Act of 1992, which limits the cost of covered outpatient drugs to certain federal grantees including, but not limited to federally-qualified health center look-alikes, and qualified hospitals. These providers are allowed to purchase, dispense and/or administer pharmaceuticals at significantly discounted prices. The significant discount applied to the cost of these drugs makes them ineligible for the Medicaid drug rebate. State Medicaid programs are mandated to ensure that rebates are not claimed on these drugs thereby preventing duplicate discounts for these drugs.

In early 2017, DOM mailed attestation packets to covered entities, requiring that they opt-in (bill 340B purchased drugs to Medicaid) or opt-out (not bill Medicaid for any 340B purchased drugs). Providers who opt-in must bill the appropriate codes on a claim billed with a 340B purchased drug.

Billing Guidelines for 340B covered entities who have opted in:

  • Medical claims:
    On CMS 1500 Health Insurance Claim Form or Uniform Billing (UB04) Form, a “UD” modifier is required to identify a 340B purchased drug in addition to the corresponding Healthcare Common Procedure Coding System (HCPCS) and National Drug Code (NDC).
  • Pharmacy point of sale claims billed electronically in the D.0 format:
    The ingredient cost must be billed to DOM at the actual acquisition cost (AAC). This AAC is defined as the price at which the covered entity has paid the wholesaler or manufacturer for the covered outpatient drug.
  • The AAC must be submitted in field #4Ø9-D9, field name “ingredient cost submitted”. The professional dispensing fee must be submitted in field # 412-DC, field name “dispensing fee submitted”.
  • Enter “08” in field 423-DN, the Basis of Cost Determination field, and “20” in field 420-DK, the Submission Clarification Code.