On July 10, the Centers for Medicare & Medicaid Services (CMS) released the 2025 Medicare Physician Fee Schedule (MPFS) proposed rule, which includes proposals related to identification of Medicare Part B and Part D claims for 340B drugs in order to exclude them from inflation-related Medicare drug rebates established under the Inflation Reduction Act. Because MPFS is not often on the radar for 340B stakeholders, we want to make sure that folks are aware of the 340B-related provisions in the proposed rule and the deadline for submitting comments. We have excerpted the relevant pages of the MPFS proposed rule for ease of reference (the entire proposed rule is well over 2,000 pages and available here. The proposed rules are generally consistent with guidance materials previously released by CMS.

As described in more detail below, the CMS proposals would eventually require claims-level information reporting to exclude Medicare Part D 340B claims and use claim modifiers to exclude Part B claims. ALL 340B-covered entities are now expected to report claim-line modifiers for separately payable Medicare Part B drugs under guidance that was effective January 1, 2024.

Comments are due on September 9, 2024. We note that in light of the recent US Supreme Court decision in the Loper Bright case and the end of the Chevron doctrine, 340B stakeholders should consider submitting comments (both in support of the proposals and with alternatives that CMS should implement). Legal challenges to whatever rules CMS ultimately implements should be expected, and the record of comments from 340B stakeholders could play a key role in the outcome of such cases. Our July 24, 2024, webinar will discuss the importance of stakeholder comments on CMS proposed rules after Loper Bright; reserve your spot here.

Part B/Part D Drug Inflation Rebates

The Inflation Reduction Act requires drug manufacturers to provide rebates to Medicare on certain Part B and Part D drugs if the price rises faster than the rate of inflation. Part B drugs are generally administered by physicians in a clinic setting, while Part D drugs are generally dispensed to patients from a retail pharmacy to take at home. Although the methodologies for the calculations of the rebates for Part B and Part D drugs differ, both exclude drugs purchased through the 340B Program (340B drugs). Due to the statutory exclusion of 340B drugs from the inflation rebate calculations, CMS has proposed methodologies for identifying 340B drugs billed to Part B and Part D in order to exclude them.

Proposed Methods for Identifying 340B Drugs

CMS has proposed different approaches for identifying and excluding Part B 340B drugs and Part D 340B drugs. Notably, the CMS proposals appear to reflect a far better understanding of how 340B-covered entities and pharmacies manage and bill for 340B drugs than was reflected in the proposals (also from CMS) related to identification of 340B drugs for purposes of the Medicare drug price negotiation program.

Part D

For Part D, beginning in 2026, CMS proposes excluding 340B drugs using an estimation methodology. CMS will calculate the ratio of 340B units purchased by 340B-covered entities based on NDC-9 to the total units sold of the same NDC-9. The agency will obtain the 340B unit purchase information from the 340B Prime Vendor.

CMS recognizes that the above process will not capture all 340B units purchased and is seeking comments on how to account for underreporting of 340B unit purchases. The total units sold by NDC-9 would be obtained from data already required to be reported by manufacturers under the Medicaid Drug Rebate Program. The agency is also seeking comments on how to address differences in total drug unit purchase volumes that include all payors and adjustments that may be necessary to adjust the estimation methodology for differences in expected Part D purchases.

CMS is also seeking comments on establishing a Medicare Part D claims data repository that would be used to identify 340B units, including the timing and frequency of data submissions and whether to allow submissions from 340B third party administrators. CMS notes that this approach would require reporting certain data elements related to 340B-identified drugs on claims to Medicare Part D and that it may be necessary for covered entities to submit revised claim information if the 340B status of a claim later changes.

Part B

For Part B, CMS proposes initially using different methodologies for identifying claims for 340B drugs from covered entities submitting professional services claims and claims for 340B drugs from hospitals. As a reminder, CMS previously communicated that ALL 340B-covered entities submitting claims to Medicare Part B for 340B drugs must include a modifier on the claim line with the drug beginning January 1, 2024.

For professional services claims submitted during 2023 and 2024, CMS proposes excluding claims for 340B drugs from entities listed in the online 340B registration database (OPAIS) based on the NPIs and Medicare Provider Numbers of the billing entity. Beginning in 2025, CMS will exclude 340B drugs on professional claims based on the use of the “TB” modifier. For hospital claims, CMS will exclude 340B drugs based on the use of the “JG” or “TB” modifier for claims submitted in 2023 and 2024, and it will transition to use of the “TB” modifier only beginning in 2025.

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