23-1209 Lower Pricing Available to Providers Through 340B Federal Drug Discount Program
Date: 10/27/23
Access discounted pricing with UDO8 modifier
On July 31, 2023, California Health & Wellness Plan (CHWP) reminded providers through provider update 23-802 that The Department of Health Care Services (DHCS) implemented Medi-Cal Rx effective January 1, 2022.
Now CHWP wants providers to know that code 340B with UD08 modifier will allow for discounts to be applied to drug pricing. The 340B program requires drug manufacturers to offer drugs to certain hospitals and other health care providers (covered entities) at a greatly reduced price. By selling drugs at lower prices, participating drug manufacturers are not required to pay Medicaid drug rebates on drugs purchased through the 340B program and provided to a Medicaid beneficiary (better known as the provision against “duplicate discounts”).
What providers qualify for 340B pricing?
These include qualifying hospitals, federal grantees from the Health Resources and Services Administration, the Centers for Disease Control and Prevention, the Department of Health and Human Services’ Office of Population Affairs and Indian Health Services. Eligible covered entities are defined in statute and include HRSA-supported health centers and look-alikes, Ryan White clinics and State AIDS Drug Assistance programs, Medicare/Medicaid Disproportionate Share Hospitals, children’s hospitals, and other safety net providers.
The 340B program requires manufacturers of drugs that are paid for by state Medicaid programs to enter into an agreement with HRSA to provide statutory discounts on drugs to “covered entities.” Covered entities are required to identify claims for which the Medicaid beneficiary received a 340B purchased drug.
Does a provider need to identify claims where Medi-Cal beneficiaries receive 340B purchased drugs?
Yes. To comply with federal law, claims must be filled out correctly to prevent duplicate discounts. Duplicates occur when the drug manufacturer gives the provider the discounted 340B price and pays a Medicaid rebate. To prevent the duplicate discount, providers must include the appropriate code on the claim.
Physician Administered Drug claims require a “UD” modifier. Pharmacy claims need to have a “08” in the Basis of Cost Determination field. Both the “UD” modifier and the “08” inform DHCS that a 340B purchased drug was used for the claim. Our rebate system removes the claims from the drug manufacturers rebate invoice ensuring that the drug manufacturer is not subject to the duplicate discount.
Additional information
Providers are encouraged to access CHWP’s provider portal for real-time information, including eligibility verification, claims status, prior authorization status, plan summaries, and more.
If you have questions regarding the information contained in this update, contact CHWP at 877‑658‑0305.
For more information on Medi-Cal drug rebates please visit Frequently Asked Questions about Medi-Cal Drug Rebates.
FAQ (PDF) regarding the pharmacy carve out, questions 44 to 49 have some background and helpful information regarding 340B. (Physician Administered Drugs (PADs) are not part of the carve out if dispensed at the provider’s office.)
This information applies to Physicians, Independent Practice Associations (IPAs), Hospitals, Ancillary providers, Community Supports (CS) Providers, and Enhanced Care Management (ECM) Providers.