Author Archives: Greg Wilson, PharmD, BCPS, 340B ACE

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CMS Most Favored Nation Drug Payment Model – What You Need to Know

The end of 2020 is upon us, for better or worse, and the healthcare industry as a whole is envisioning a brighter 2021 ahead of us, especially with the availability of two new COVID-19 vaccines that could signal an end to the pandemic.  But we want to make sure our hospital 340B covered entities are aware of another important change, beginning with the new year – the CMS Most Favored Nation drug payment model, which was published as an interim final rule on November 27th. It has taken some time to fully understand its impact, below is what we believe you need to know…

What is it? 

The MFN model is a revised Medicare Part B reimbursement methodology for certain high-cost drugs that will reduce payments to most hospitals and physician offices. 

When does it go in effect?

The first wave of changes was initially scheduled to go into effect on January 1, 2021.  However, on December 23rd, the U.S. District Court for the District of Maryland issued a temporary restraining order, delaying implementation for 14 days, i.e. January 6, 2021.  Additional elements of the MFN model will be phased in over the next 7 years.  There has been a fair amount of speculation that this rule will be suspended or eliminated altogether by the incoming Biden Administration, and a number of legal challenges to the rule have been initiated, but for now, hospitals will need to plan on executing operational changes to comply with the rule on January 6.

Which 340B hospitals will be impacted?

The MFN model is mandatory for disproportionate share hospitals (DSHs), rural referral centers (RRCs) and sole community hospitals (SCHs).   Critical access hospitals (CAHs), PPS-exempt cancer hospitals and free-standing children’s hospitals are excluded, and should not be impacted, at least for now.

What drugs are included?

The MFN model identifies 50 high-cost drugs and biologicals (including some biosimilars), outlined in Table 2 of the rule.  The list primarily consists of specialty injection drugs and other agents commonly administered in infusion centers.  Keep in mind that the list is fluid, as CMS intends to add and remove drugs on an annual basis, selecting the “top 50” drugs by total allowed drug charges from the prior year’s Medicare Part B claims.  Also, some drug categories are presently excluded from the MFN model, including oral drugs, intravenous immune globulin products and medications with an Emergency Use Authorization or FDA-approval for treatment of COVID-19, among others.  CMS is gathering feedback on whether other categories, like blood products and gene/cell therapies should be included or excluded from the model.

How is reimbursement defined in this new model?

The MFN drug payment amount will be calculated using a phased-in formula based on a ratio the “MFN price” and the manufacturer’s reported average sales price (ASP), along with a per-dose add on payment. 

  • The “MFN price” will be determined by the lowest adjusted international price for the drug (more specific details on the price definition can be found in section III.E of the rule). 
  • The add-on payment for Q1 2021 is $148.73 per dose of qualifying MFN drug. 
  • Importation Action!  Note that you must bill for the add-on payment separately on the claim form by using a new HCPCS code – M1145, and setting the “units” for this line to equal the number of MFN drug doses administered for the encounter (more specific details on the claims processing of the MFN model can be found in section III.G of the rule).

What will this mean to my reimbursement in 2021 and beyond?

It depends on your covered entity type.  In 2021, DSH, RRC and non-rural SCH covered entities will see reimbursement similar to their current ASP – 22.5%, and in fact, may see slightly higher revenue for these drugs due to the add-on payment.  However, MFN model drugs that have pass-through status will generate lower reimbursement this coming year.  Rural SCH covered entities unfortunately will see a decrease in revenue (340B Health has estimated up to a 16% reduction on the MFN model drugs), as they move away from a rate of ASP +6% to the MFN model. 

After 2021, the ratio of the MFN drug payment amount leans more to the MFN price and away from the ASP price, so reimbursement for all participating providers is going to be decreased, despite the continuation of add-on payments and inflation adjustments.  HHS has provided estimates on payment reductions ranging from up to 3% to as high as 60% once the MFN model is fully implemented.

Is this thing going to stick?

Many experts in health policy are saying probably not, but we’re not sure.  Many are anticipating that the incoming Biden Administration will thoroughly scrutinize, modify or even altogether abandon the rule, and there is an open comment period through January 26, 2021, for stakeholders to submit feedback on the rule.  Numerous organizations, representing both providers as well as pharmaceutical manufacturers, have expressed opposition to the model, and lawsuits have already been filed to halt implementation. However, barring any type of success in delaying or enjoining the rule here in tail end of December, providers should be prepared for the MFN model to begin January 6.

What should I do right now to prepare?

            A few things:

  1. Communicate – Talk with your billing/revenue cycle departments to make sure they are aware of the need to update their claims processing procedures for the MFN model beginning January 6, 2021.
  2. Analyze – Work with your finance teams to analyze the budget impact this could yield for your organization in 2021.  Remember that DSH, RRC and non-rural SCH covered entities will probably not see a negative impact next year (except for those pass-through drugs), but rural SCH entities will see a dip in reimbursement.
  3. Comment – Consider submitting comments to CMS on the rule.  340B Health members should be on the lookout for a template to submit comments soon. 

As always, reach out to us if you have any questions about the MFN model, we are always glad to help our clients navigate complicate changes to their 340B programs!

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Working Together – Establishing a 340B Oversight Committee

With so much activity occurring in the 340B space in recent months, including HRSA Frequently Asked Questions (FAQs) related to 340B eligibility, hospital recertification, manufacturer developments around contact pharmacies, and the uncertainty of what lies ahead following the upcoming election, now is as good a time as any to rally your organization’s key 340B stakeholders.  A recognized “best practice” to facilitate interdisciplinary 340B-focused discussion and planning is through a 340B oversight committee.  This month’s blog will highlight important considerations to help ensure your covered entity (CE) has built a dynamic, well-informed team to help navigate the future of your 340B program. 

The most important aspect of a 340B oversight committee is the roster of participants.  It is well understood that 340B programs are incredibly complex, with operations spanning across numerous departments and business units within a single CE, and often across large multi-CE health systems.  Ensuring that the 340B oversight committee is comprised of a diverse group of representatives, each member bringing unique expertise and perspectives, will help to broaden the scope of the committee’s work and make sure that all the important bases are covered.  Below is a list of stakeholders to consider recruiting for your 340B oversight committee:

Hospital/Clinic Administration (“C-Suite”)

Starting with your covered entity’s Authorizing Official (AO) – for most CEs this is the Chief Financial Officer (CFO) –  involvement from executive leaders is crucial to make sure the direction of the 340B program is aligned with organizational goals and objectives.  Also, this provides a regular platform to inform and educate executive leadership on compliance trends, financial performance and resource gaps that may be impacting 340B program success.


Pharmacy staff often serve as the “workhorse” of a CE’s 340B program, and there are many moving pieces of the pharmacy’s operations that can impact program compliance and performance.  Consider a variety of pharmacy participants, including representation from pharmacy leadership, pharmacy procurement, and pharmacy operations.  Shared representation with the Pharmacy & Therapeutics (P&T) Committee may be of value to determine how hospital formulary decisions may impact 340B, and to facilitate policy/procedure review and approval.  


In addition to the CFO, key players in evaluating and monitoring for 340B program eligibility exist within the finance department.  Involvement from experts in revenue cycle and accounting is critical, given their familiarity with the Medicare Cost Report (MCR) and Trial Balance, and they can address questions related to Medicaid billing processes to promote Duplicate Discount prevention efforts.  

Compliance & Internal Audit

340B program compliance will be a pillar of the oversight committee’s function, so engaging compliance and internal audit is essential to validate the effectiveness of the CE’s compliance strategy.  These participants can help establish a compliance framework, and provide direction for self-auditing exercises and responses to HRSA audit requests.  They can also provide a conduit to your CE’s legal department, who can help review contracts and other agreements with outside parties.

Government Relations

Include colleagues from your organization that interact with your CE’s congressional delegates.  They can help craft your “340B story” to make sure the legislators who represent your CE in Washington understand the impact that 340B has on your patients and your community.  Additionally, these committee members can keep you apprised of legislative changes, both at the federal and state levels, that may impact your 340B program.    

Information Technology (IT)

With so many aspects of 340B operations reliant on data and software technologies, make sure you include leadership from your IT division.  Compliance risks and audit findings that warrant significant IT resources to mitigate should be shared, so that IT leadership can help allocate their expert work force accordingly.  Also, internal IT experts may be able to assist in responding to HRSA Audit data requests, which often require a substantial effort in response.  

While the above are core representatives to consider in the 340B oversight committee, other departments, based on your organization’s needs and resources, may be worth including.  A CE may benefit from having a Medical Staff Office (MSO) participant on their committee, if assistance is routinely needed to validate provider eligibility.   Another CE may decide to include a representative from nursing leadership, if insufficient documentation of medication administration has been a root cause of diversion risk.  The key is to find a roster of experts that represent the various intersections of each of your CE’s 340B program elements.  

Logistical arrangements for the 340B oversight committee, particularly with regard to meetings, should also be determined.  Executive leadership may have a specific vision for authority and governance of the 340B oversight committee, and the committee should be organized accordingly.  If this committee is new to your organization, consider drafting a “charter” to help clarify the scope and purpose of the committee, and to define a structure for how and when the group is to meet.   Consider adopting a “best practice” of quarterly meetings for your 340B oversight committee so that all members of the team are kept informed of key program changes and 340B developments, and also keep minutes summarizing the outcomes of your discussions.  

Once your oversight committee’s membership is established, the information reviewed, i.e., the agenda for each oversight committee meeting, should be carefully constructed.  Routine updates on compliance efforts, financial performance, and optimization strategies should be provided.  Additionally, these meetings can serve as a valuable opportunity to provide continuing education to your key stakeholders on program requirements and updates on “hot topics” across the national 340B landscape.   An example of a potential 340B oversight committee meeting agenda is provided in Figure 1. 

If your CE has an established 340B oversight committee, take some time to review your membership, and consider whether a key piece of the puzzle might be missing in your conversations around 340B program management.  And if you have not yet put a committee together and need some additional guidance, please don’t hesitate to reach out to the team at Turnkey Pharmacy Solutions with questions.