340B Policy and Procedures Manual

Outpatient Drugs and Physician Administered Drugs



This document contains the Health First Colorado policies and procedures for Managed Care Organization (MCO) and Fee-for-Service providers who participate in the 340B Drug Pricing Program. This guidance applies to prescription drugs dispensed in an outpatient setting (i.e., pharmacy) and drugs administered in a physician's office or clinic. This guidance does not apply to drugs provided in an inpatient hospital setting.

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A duplicate discount is when a manufacturer provides a drug to a covered entity with the 340B discount, in addition to the manufacturer paying a rebate to Health First Colorado on the same drug (42 USC 256b(a)(5)(A)(i) (2010)).

The term contract pharmacy is an arrangement in which the 340B covered entity signs a contract with a pharmacy to provide pharmacy services. Contract pharmacies can be made available to covered entities that do not have access to available or appropriate "in-house" pharmacy services.

A covered entity is defined as an entity that is enrolled with the 340B Federal Drug Pricing Program and is required to adhere to all state, federal and 340B regulations pursuant to the 340B Public Health Service Act (42CFR1.A 10.3 and 42CFR1.A 10.10 (2018)).

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340B Background

The 340B Drug Pricing Program is a federal program that requires drug manufacturers to provide prescription drugs to eligible covered entities at significantly reduced prices.

Covered Entities and Health First Colorado
Covered entities choose whether to dispense 340B purchased drugs to Health First Colorado members and this decision affects how providers bill Health First Colorado.

  • Health First Colorado requires covered entities to determine whether they will dispense only 340B drugs to Health First Colorado members (carve-in) or whether they will dispense no 340B drugs to Health First Colorado members (carve-out). Covered entities cannot bill both 340B purchased drugs and non-340B drugs to Health First Colorado.
  • Covered entities which choose to carve-in must bill Health First Colorado for 340B drugs at their acquisition cost.
  • Covered entities must ensure that there is a mechanism in place which does not allow for duplicate discounts, i.e., the covered entity cannot receive a drug at a 340B discounted price in addition to Health First Colorado receiving a rebate from the drug manufacturer.

Covered Entities and 340B
When an eligible entity enrolls in the 340B Drug Pricing Program it accepts the responsibility of complying with all provisions.

  • Covered entities which carve-in must have their NPI number listed on the Health Resources & Service Administration (HRSA) Medicaid Exclusion File.
  • Covered entities must comply with the no diversion stipulation which mandates that 340B drugs may not be resold or transferred to a person who is not a patient of the entity.
  • Non-compliance could result in the repayment of discounts, the repayment of discounts with interest, and/or the covered entity could be removed from the 340B Drug Pricing Program entirely.

Health First Colorado and 340B
Health First Colorado has the responsibility of accurately reimbursing covered entities and appropriately collecting rebates from drug manufacturers.

  • Health First Colorado identifies and excludes all 340B drug claims from the utilization data submitted to drug manufacturers to ensure that covered entities are not getting a discounted drug in addition to Health First Colorado receiving rebates from the drug manufacturers.

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340B Policy Statements

  1. Health First Colorado allows covered entities to dispense 340B drugs at the provider level (i.e., carve-in).
    1. Any covered entity that is billing 340B drugs to Health First Colorado must register with the Health Resources and Services Administration (HRSA).
    2. The covered entities' National Provider Identification (NPI) number must be listed on the Medicaid Exclusion File (MEF). The Department excludes 340B claims from rebate at the provider level, meaning that it is pivotal that the NPI number unique to each pharmacy location is listed on the MEF.
    3. The Department uses the HRSA Medicaid Exclusion File (MEF) as the official data source for identifying which covered entities have elected to carve-in Medicaid. HRSA updates the MEF on a quarterly basis so if a covered entity plans to carve-out, the update needs to be reported to HRSA so that the applicable NPI number can be terminated on the MEF effective at the beginning of the next quarter.
    4. Claim modifiers are required on 340B claims as discussed under "Health First Colorado Fee-for-Service NCPDP D.0 Billing Changes for 340B Outpatient Drug Claims" and "Health First Colorado Billing Instructions for 340B Physician Administered Drugs".  These requirements apply when Health First Colorado is the primary and/or secondary payor. 
  2. Duplicate discounts are prohibited in the 340B Drug Pricing Program.
    1. To prevent duplicate discounts from taking place, the covered entity is required to follow HRSA's rules and provide HRSA with their NPI at the time of enrollment.
    2. HRSA lists the covered entity and their NPI on the Medicaid Exclusion File, which lets states and manufacturers know that drugs billed under those NPI number(s) are not eligible for rebates.
    3. Child Health Plan Plus (CHP+) claims are not rebate eligible. This means that the duplicate discount provision does not apply to CHP+ 340B claims.
  3. The submitted ingredient cost on a claim must be the 340B acquisition cost.
  4. Manufacturers are permitted to audit covered entities' records if they suspect product diversion or that multiple discounts are taking place.
    1. Covered entities are responsible for creating and maintaining a system that inhibits this to ensure compliance.
  5. The Dispensing Fees (DF) paid on Fee-for-Service outpatient drug claims for 340B entities shall be tiered based upon a pharmacy's Total Annual Prescription Volume. This policy is not specific to 340B pharmacies, this applies to most pharmacy providers. Health First Colorado does not pay a dispensing fee on Physician-Administered Drug (PAD) claims. Below are the tiers for DFs:
    1. Less than 60,000 total prescriptions filled per year=$13.40 per prescription
    2. Between 60,000 and 90,000 total prescriptions filled per year= $11.49 per prescription
    3. Between 90,000 and 110,000 total prescriptions filled per year=$10.25 per prescription
    4. Greater than 110,000 total prescriptions filled per year=$9.31
  6. Contract pharmacies are not permitted to bill 340B drugs to Health First Colorado.
    1. The use of contract pharmacy services is voluntary and covered entities are not required to use multiple contract pharmacies or any contract pharmacy at all. Covered entities should conduct their own business review and patient assessment to determine what level of pharmacy services are needed, and the appropriate delivery mechanism for those services.

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Health First Colorado NCPDP D.0 Billing Instructions for 340B Outpatient Drug Claims

  1. 340B claims submitted via the National Council for Prescription Drug Programs (NCPDP) D.0 format must include the following:

    NCPDP Field Name & NumberValueDescription
    Submission Clarification Code (420-DK)20 = 340B claimRequired for 340B claims. Indicates that the drug was purchased through the 340B Drug Pricing Program.
    Basis of Cost Determination (423-DN)05 = Acquisition Cost
    08 = Disproportionate Share Pricing
    Required for 340B claims. Indicates the basis of cost determination.

    The above guidance supersedes all previous billing guidance for 340B claims submitted via the NCPDP D.0 format.

  2. Claims will deny if:
    • The Submission Clarification and Basis of Cost Determination fields indicate that the drug was purchased through the 340B Drug Pricing Program but the pharmacy NPI number is not listed on the HRSA 340B Medicaid Exclusion File.
    • The pharmacy NPI number is listed on the HRSA 340B Medicaid Exclusion File but the Submission Clarification and Basis of Cost Determination fields did not include the correct values.

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Health First Colorado Billing Instructions for 340B Physician-Administered Drugs

Health First Colorado uses HRSA's Medicaid Exclusion File (MEF) to identify all 340B drug claims. This process allows for the claim to be excluded from the rebate stream, thereby avoiding duplicate discounts. However, an additional identifier is required at the claim submission level for all 340B PADs.

340B claim level identifier is as follows:

  • All claims and encounters for PADs purchased through the 340B program should include the "UD" code modifier on the 837P, 837I, CMS 1500, and UB-04 claim formats.
  • For any PAD not purchased through the 340B program, the "UD" modifier is not required.
  • A valid national drug code (NDC) number must be included on all claims and encounters for PADs. Refer to Appendix X: HCPCS / NDC Crosswalk for Billing PADs located under the Appendices drop-down on the Billing Manuals web page for assistance with billing.

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Ceiling Price Calculation for Outpatient Drugs

If the submitted ingredient cost for a 340B-purchased drug exceeds the 340B ceiling price, claims will trigger a message. The ceiling prices are determined from the Average Manufacturer Prices (AMP) and the Unit Rebate Amounts (URA). Covered entities must submit their 340B acquisition cost to Health First Colorado. MCO's outpatient drug encounters are exempt from the ceiling price logic.

Visit the 340B Ceiling Price Calculation web page on the HRSA website for more information.

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Billing Information


NCPDP Field NameValue
BIN Number018902
Processor Control Number (PCN)  P303018902
Group IDCOMedicaid


Managed Care Organization (MCO)

There are two (2) MCOs that can be utilized through Colorado Medicaid. Providers need to follow-up with the MCO’s for detailed billing information: 

Denver Healthhttps://www.denverhealthmedicalplan.org/340b-outpatient-drug-products-compliance-revisionsDL_DHMP_Pharmacy@dhha.org
Rocky Mountain Healthhttps://professionals.optumrx.com/resources/manuals-guides/provider-manual.htmlzach.kareus@uhc.com 

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Additional Guidance

Visit the HRSA website for FAQS on the 340B program itself, as well as information on how to ask additional questions.

Contact HCPF_Colorado.SMAC@state.co.us with questions on policy and billing for Health First Colorado.

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Revision Log

Revision DateSection/ActionMade By
3/26/2021Creation of manual as a web pageHCPF
4/23/2021Made requested changes to the Purpose statement and Billing InstructionsHCPF
7/28/2021Added requested updates to the "340B Policy Statements"HCPF
8/8/2022Added Billing InformationHCPF
1/24/2023Added TPL/COB clarification to Policy Statements, added CHP+ clarification to Policy Statements and updated MCO contact information HCPF
6/16/2023Edited CHP+ policy for clarityHCPF
8/31/2023Updated contact web page for RMHPHCPF
11/27/2023Updated contact web page for RMHPHCPF
5/9/2024Updated contact web page for DHMPHCPF
5/29/2024Updated contact email for DHMPHCPF

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