Department of Health and Human Services 

OFFICE OF

INSPECTOR GENERAL

 

STATE MEDICAID POLICIES AND 

OVERSIGHT ACTIVITIES 

RELATED TO 340B-PURCHASED 

DRUGS 

 

Daniel R. Levinson 

Inspector General 

June 2011 

OEI-05-09-00321 
 

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 EXECUTI VE SUMMARY

OBJECTIVE

To describe State Medicaid agencies’ policies and oversight activities 

related to drugs purchased under the 340B Drug Discount Program.

BACKGROUND

The 340B Drug Discount Program (340B Program) requires drug 

manufacturers to provide covered outpatient drugs to certain eligible 

health care entities, known as covered entities, at or below statutorily 

defined discount prices (340B ceiling prices). After a Federal qui tam

lawsuit alleged that covered entities overcharged Medicaid for drugs 

purchased under the 340B Program (340B-purchased drugs), Senator 

Charles Grassley requested that the Office of Inspector General describe 

Medicaid reimbursement practices related to the 340B Program.

The Health Resources and Services Administration (HRSA), the agency 

that administers the 340B Program, has issued guidance regarding 

billing of 340B-purchased drugs. In 1993, HRSA directed covered 

entities to bill State Medicaid agencies at actual acquisition cost (AAC) 

for 340B-purchased drugs. In 2000, HRSA issued new guidance 

directing covered entities to instead refer to State Medicaid agencies’ 

policies for applicable billing policies. The Patient Protection and 

Affordable Care Act (ACA) requires the Secretary to issue new guidance

describing methodologies available to covered entities for billing 

340B-purchased drugs to State Medicaid agencies.

State Medicaid agencies generally create State-specific billing and 

reimbursement policies and may also choose to do so specifically for 

340B-purchased drugs that covered entities dispense to Medicaid 

patients (referred to as 340B policies). The Centers for Medicare & 

Medicaid Services (CMS), which administers the Medicaid program at 

the Federal level, does not require State Medicaid agencies to set 340B

policies.

When reimbursing for 340B-purchased drugs, State Medicaid agencies 

have a responsibility to accurately reimburse covered entities and 

appropriately claim Medicaid rebates from drug manufacturers. State 

Medicaid agencies can use prepay edits and postpay reviews to ensure 

accurate reimbursements. With respect to rebates, State Medicaid 

agencies should exclude claims for 340B-purchased drugs (340B claims) 

from Medicaid rebate requests to prevent subjecting drug 

manufacturers to duplicate discounts (i.e., selling 340B-purchased drugs 
 

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EXECUTIVE SUMMARY

to covered entities at the discounted ceiling prices and providing 

Medicaid rebates on the same drugs).

HRSA created the Medicaid Exclusion File to help State Medicaid 

agencies identify 340B claims. The ACA requires that the Secretary

develop procedures for covered entities to annually update their 

information in HRSA’s covered-entity database, from which the file is 

derived.

In March 2010, we surveyed 50 State Medicaid agencies and the District 

of Columbia’s Medicaid agency (hereinafter referred to as States) about 

their policies and oversight activities related to 340B-purchased drugs. 

We received responses from all 51 States.

FINDINGS

Approximately half of States have written 340B policies that direct 

covered entities to bill Medicaid at cost for 340B-purchased drugs. 

Twenty-five States reported having written policies that direct covered 

entities to bill at AAC for 340B-purchased drugs, while 25 States do not 

have written policies. One State has a written policy to reimburse 

340B-purchased drugs at rates other than AAC. Over half of States 

without written 340B policies reported that they rely on HRSA’s 1993 

guidance directing covered entities to bill States at AAC, despite 

subsequent HRSA guidance directing covered entities to refer to States’ 

policies. Based on the 1993 HRSA guidance, these States reported that 

they expect covered entities to bill at AAC.

States do not have necessary pricing information to create prepay 

edits for 340B-purchased drugs; 20 States conduct postpay reviews 

to identify overpayments. States do not have access to AAC or 340B 

ceiling prices because of logistical and legal issues. States cannot create 

effective prepay edits because without AAC or 340B ceiling prices they are 

unable to tell when the amount that covered entities bill exceeds 

established State policies, which are typically AAC. Twenty States 

conduct postpay reviews to identify overpayments for 340B-purchased 

drugs.

Over half of States developed alternatives to the Medicaid Exclusion 

File to identify 340B claims and prevent duplicate discounts. Thirty 

States reported that they developed alternatives to the Medicaid Exclusion 

File to identify 340B claims and prevent duplicate discounts. Of these 

States, 26 contacted all or some of the covered entities in their States 

directly and created their own lists of covered entities that dispense 
 

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EXECUTIVE SUMMARY

340B-purchased drugs to Medicaid patients. Nine of the thirty States 

instruct covered entities to identify specific 340B claims using the 

National Council for Prescription Drug Plan (NCPDP) Telecommunication 

Standard, an electronic standard used in pharmacies’ prescription drug 

transactions, and two States instruct covered entities to bill using an 

alternative billing identification number. Ten of the thirty States that use 

alternatives reported that they do so because of inaccuracies in the 

Medicaid Exclusion File.

Fourteen States use only the Medicaid Exclusion File to identify 340B 

claims, and seven States reported that they do not use any method to 

identify 340B claims.

RECOMMENDATIONS

Based on our findings, we recommend that:

CMS direct States to create written 340B policies. CMS should direct 

States to create written 340B policies if they do not have them in place. 

CMS could also encourage States to consider the benefits and 

drawbacks of different 340B policies before setting their policies. 

CMS inform States about tools they can use to identify claims for 

340B-purchased drugs. CMS should inform States that they can have 

covered entities use the NCPDP Telecommunication Standard to 

identify 340B claims. CMS could also direct States to the Medicaid 

Exclusion File tutorial on HRSA’s Web site.

HRSA share 340B ceiling prices with States. Providing 340B ceiling 

prices to States will help them create prepay edits to oversee their 

reimbursements for 340B-purchased drugs. Although the ACA gave 

HRSA authority to share 340B ceiling prices with covered entities, 

HRSA would have to seek legislative authority to share 340B ceiling 

prices with States.

HRSA, in conjunction with CMS, improve the accuracy of the 

Medicaid Exclusion File. HRSA should instruct covered entities to 

update their information in the Medicaid Exclusion File. HRSA could 

also work with States to ensure that covered entities’ information in the 

file is correct. In addition, CMS could instruct States to notify HRSA if 

they find discrepancies between their records and the Medicaid 

Exclusion File.
 

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EXECUTIVE SUMMARY

AGENCIES’ COMMENTS AND OFFICE OF INSPECTOR 

GENERAL RESPONSE

CMS concurred with our recommendations. To address them, CMS 

plans to (1) inform States that they should incorporate 340B policies

into their Medicaid State Plans, (2) inform States of alternative

methods of identifying 340B claims that we identified in this report, and

(3) facilitate communication between HRSA and States by providing a 

list of State Medicaid pharmacy directors to HRSA and instructing

States to contact HRSA when errors in the Medicaid Exclusion File are 

found.

HRSA also concurred with our recommendations. However, it did not 

specify any actions it would take in response to them.
EXECUTIVE SUMMARY ................................ ..... i

INTRODUCTION ............................................ 1 

FINDINGS .................................................. 9 

Approximately half of States have written 340B policies that 

direct covered entities to bill Medicaid at cost for 

340B-purchased drugs ................................... 9 

States do not have necessary pricing information to create 

prepay edits for 340B-purchased drugs; 20 States conduct 

postpay reviews to identify overpayments ................... 11

Over half of States developed alternatives to the Medicaid 

Exclusion File to identify 340B claims and prevent duplicate 

discounts.............................................. 13

 

RECOMMENDATIONS ..................................... 16

Agencies’ Comments and Office of Inspector General Response . . 17

APPENDIXES ............................................. 19

A: State Medicaid Agencies’ 340B Policies .................. 19

B: Agencies’ Comments.................................. 21

ACKNOWLEDGMENTS ..................................... 26

 TABLE OF CONTENTS
 

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INTRODUCTION INTRODUCTION

OBJECTIVE

To describe State Medicaid agencies’ policies and oversight activities 

related to drugs purchased under the 340B Drug Discount Program

(340B Program). 

BACKGROUND

A 2005 Federal qui tam lawsuit alleged that some 340B-covered entities 

overcharged a State Medicaid agency for covered outpatient drugs. 

Partly in response to this lawsuit, Senator Charles Grassley requested 

that the Office of Inspector General (OIG) describe Medicaid 

reimbursement practices related to the 340B Program. 

The 340B Program

The Veterans Health Care Act of 1992 established the 340B Program in 

section 340B of the Public Health Service Act (PHS Act).1 The 340B 

Program requires drug manufacturers participating in Medicaid to 

provide discounted covered outpatient drugs to certain eligible health 

care entities, known as covered entities. Congress intended for the 

savings from discounted drugs purchased under the 340B Program “to 

enable [participating] entities to stretch scarce Federal resources as far 

as possible, reaching more eligible patients and providing more 

comprehensive services.”2

Covered entities include disproportionate share hospitals, family 

planning clinics, and federally qualified health centers, among others.3 

As of October 2010, approximately 15,000 covered-entity locations were 

enrolled in the 340B Program.

To participate in the 340B Program, covered entities must register with 

the Health Resources and Services Administration (HRSA), the agency 

responsible for administering the 340B Program. After the entity has 

registered, HRSA enters the entity’s information into HRSA’s 

covered-entity database.4 Provisions in the Patient Protection and 

1 Veterans Health Care Act of 1992, P.L. 102-585 § 602; PHS Act § 340B; 42 U.S.C. § 

256b.

2 H.R. Rep. No. 102-384, at 12 (1992)(Conf. Rep.).

3 42 U.S.C. § 256b(a)(4) enumerates the complete list of the types of entities eligible to 

become 340B-covered entities.

4 The 340B Program registration form may be found on HRSA’s Web site. Accessed at 

http://www.hrsa.gov on February 10, 2010.
 

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INTRODUCTION

Affordable Care Act (ACA) require HRSA to develop procedures for 

covered entities to annually update their information in the

covered-entity database.5

Once approved, covered entities may purchase and dispense drugs 

under the 340B Program (hereinafter referred to as 340B-purchased 

drugs) through in-house pharmacies, or they may enter into contracts 

with retail pharmacies to dispense 340B-purchased drugs on their 

behalf.6 A retail pharmacy dispensing 340B-purchased drugs on behalf 

of a covered entity is referred to as a contract pharmacy.

Covered entities may purchase drugs at or below 340B ceiling prices, 

which are the maximum prices drug manufacturers can charge for each 

340B-purchased drug.7 The 340B ceiling price is calculated using a 

statutorily defined formula based on the average manufacturer price 

(AMP) of drugs. In general, AMP is the average price paid to drug 

manufacturers for drugs distributed to retail community pharmacies.8 

Drug manufacturers must calculate and report AMP to the Centers for 

Medicare & Medicaid Services (CMS). The 340B ceiling price of a drug 

is generally much lower than its retail price.

Historically, neither CMS nor HRSA have shared AMP or the calculated 

340B ceiling prices with State Medicaid agencies. The Deficit Reduction 

Act of 2005 gave CMS authority to share AMP with State Medicaid 

agencies. However, a Federal court injunction prohibited CMS from 

sharing AMP with State Medicaid agencies.9, 10 The injunction was 

withdrawn in December 2010. HRSA has not shared 340B ceiling prices 

with State Medicaid agencies as it does not have legislative authority to 

do so. The ACA provided HRSA with the authority to share 340B 

ceiling prices with covered entities.11

5 ACA, P.L. 111-148 § 7102(a); PHS Act § 340B(d)(2)(B)(i); 42 U.S.C. § 256b(d)(2)(B)(i).

6 61 Fed. Reg. 43549, 43555 (Aug. 23, 1996).

7 42 U.S.C. § 256b(a)(1).

8 42 U.S.C § 1396r-8(k)(1). The statutory definition of AMP was redefined by the ACA to 

include direct manufacturer sales to retail community pharmacies as well as sales to 

wholesalers that supply retail community pharmacies, and to clarify which types of 

discounts should be excluded from the calculation. ACA, P.L. 111-148 § 2503(a)(2).

9 42 U.S.C. § 1396r-8(b)(3).

10 National Association of Chain Drug Stores v. Leavitt, U.S. District Court for the

District of Columbia, Dec. 19, 2007, Civil Action No. 1:07cv02017 (RCL).

11 ACA, P.L. 111-148 § 7102(a), PHS Act § 340B(d)(1)(B)(iii), 42 U.S.C. §256b(d)(1)(B)(iii).
 

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INTRODUCTION

Medicaid Prescription Drug Benefit

All State Medicaid agencies offer outpatient prescription drug coverage 

and reimburse retail pharmacies for covered outpatient drugs dispensed to 

Medicaid patients. Overall, the Medicaid program spent approximately 

$23 billion on prescription drug coverage in 2009.12 CMS monitors the 

Medicaid program at the Federal level.

State Medicaid agencies are expected to act as prudent buyers of drugs. 

State Medicaid agencies establish reimbursement methodologies for the 

ingredient cost of covered outpatient drugs. These reimbursement 

methodologies typically apply a discount to published prices, such as

average wholesale price (AWP).13, 14 These reimbursement 

methodologies are included in a State Medicaid agency’s State plan and 

must be approved by CMS.15

State Medicaid agencies must also set a reasonable dispensing fee for all 

covered outpatient drugs they reimburse.16 This fee reimburses a

pharmacy’s cost of providing the drug to a Medicaid patient.17 

Dispensing fees ranged from $1.50 to $12.50 per prescription in 2009.18 

Some State Medicaid agencies set higher dispensing fees for generic 

drugs to encourage generic prescribing.

State Medicaid agencies can use prepay edits and postpay reviews to 

prevent overpayments and ensure that reimbursements for covered 

outpatient drugs are consistent with established policies. Prepay edits 

enable processing systems to compare claim amounts to established 

reimbursement limits and automatically pay all or part of a claim, deny 

all or part of a claim, or suspend all or part of a claim for manual 

12 2009 Medicaid utilization data from CMS.

13 Generally, the AWP is the price that a drug manufacturer sets for a drug and reports 

in publicly available sources.

14 Studies and audits by OIG and other experts found that the AWP overstates the prices 

pharmacies pay by as much as 10 to 20 percent for brand-name prescription drugs. See 

OIG, Office of Audit Services, Medicaid Pharmacy – Actual Acquisition Cost of Brand-Name 

Prescription Drug Products (A-06-00-00023) and Congressional Budget Office, Prices for 

Brand-Name Drugs Under Selected Federal Programs (June 2005).

15 42 CFR § 447.518(a).

16 42 CFR § 447.512(b)(1).

17 42 CFR § 447.502.

18 This range excludes dispensing fees for home intravenous therapy. Medicaid 

Prescription Reimbursement Information by State – Quarter Ending September 2009. 

Accessed at http://www.cms.hhs.gov on October 29, 2009. 
 

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INTRODUCTION

review. Postpay reviews include formal audits and ongoing monitoring 

of billing patterns. Audits typically involve document reviews or site 

visits to identify overpayments and may result in monetary recovery. 

340B Program and Medicaid

Covered entities choose whether to dispense 340B-purchased drugs to 

Medicaid patients, which affects how they interact with State Medicaid 

agencies.19 If covered entities choose not to dispense 340B-purchased 

drugs to Medicaid patients, they instead dispense drugs that were 

purchased outside of the 340B Program. Because of that, covered 

entities can bill State Medicaid agencies at the standard reimbursement 

rates that those agencies have established for all retail pharmacies. 

Covered entities might make this choice because their State Medicaid 

agencies’ standard reimbursement rates for covered outpatient drugs 

are higher than the purchase prices.20 However, if covered entities elect 

to dispense 340B-purchased drugs to Medicaid patients, specific 340B 

policies and guidance apply. Approximately 42 percent of covered 

entities indicated that they had dispensed 340B-purchased drugs to 

Medicaid patients at the time of our study (first quarter of 2010).21

State Medicaid agencies’ policies for 340B-purchased drugs. State Medicaid 

agencies may set specific policies for covered entities that dispense 

340B-purchased drugs to Medicaid patients (340B policies), though 

CMS does not require them to do so. If a State Medicaid agency’s 

340B policy requires covered entities to bill and be reimbursed for 

340B-purchased drugs at their actual acquisition costs (AAC), then the 

State Medicaid agency receives the full benefit of the 340B discount. If 

a State Medicaid agency’s 340B policy allows covered entities to bill and 

be reimbursed for 340B-purchased drugs above AAC, then the State 

Medicaid agency shares a portion of the savings from the 340B discount 

with covered entities.

HRSA guidance to covered entities about billing State Medicaid agencies. HRSA 

has twice issued guidance for covered entities that bill State Medicaid 

19 65 Fed. Reg. 13983, 13984 (Mar. 15, 2000).

20 The amount Medicaid reimburses, based on AWP, is typically higher than the 340B 

price, which is based on AMP. The difference in reimbursement for 340B- versus 

non-340B-purchased drugs is discussed in previous OIG reports. See OIG, Cost 

Containment of Medicaid HIV/AIDS Drug Expenditures, OEI-05-99-00611, July 2001; and 

OIG, Medicaid’s Mental Health Drug Expenditures, OEI-05-02-00080, August 2003. 

21 According to the Medicaid Exclusion File, a subset of HRSA’s covered entity database.
 

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INTRODUCTION

agencies for 340B-purchased drugs. In 1993, HRSA issued guidance 

stating:

When a covered entity submits a bill to the State Medicaid 

agency for a drug purchased by or on behalf of a Medicaid 

beneficiary, the amount billed shall not exceed the entity’s 

actual acquisition cost for the drug, as charged by the 

manufacturer. ... This will assure that the discount to the 

covered entity will be passed on to the State Medicaid 

agency.22

In 2000, HRSA altered its guidance, stating that it was reconsidering 

the AAC provision in its 1993 guidance, and directed covered entities to 

“refer to their respective Medicaid State agency drug reimbursement 

guidelines for applicable billing limits.”23 Provisions in the ACA require 

“the development of more detailed guidance describing methodologies 

and options available to covered entities for billing covered drugs to 

State Medicaid agencies in a manner that avoids duplicate discounts.”24

Chart 1 shows the policies and guidance related to covered entities 

dispensing 340B-purchased drugs to Medicaid patients.

22 58 Fed. Reg. 27293, 27293 (May 7, 1993).

23 65 Fed. Reg. 13983, 13984 (Mar. 15, 2000).

24 ACA, P.L. 111-148 § 7102(a), PHS Act § 340B(d)(2)(B)(iii), 42 U.S.C. 

§ 256b(d)(2)(B)(iii).
 

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INTRODUCTION

Chart 1: Policies and Guidance for Covered Entities That Dispense 

340B-Purchased Drugs to Medicaid Patients

Source: OIG analysis of HRSA guidance and State Medicaid agencies’ 340B policies, 2010.

* CMS issued guidance to State Medicaid agencies in 1993 and 2000 advising them that covered entities are required to bill at 

AAC.

HRSA CMS

Covered entities State Medicaid 

agencies

Covered entities should 

follow State Medicaid 

agencies’ reimbursement 

policies for 

340B-purchased drugs

Does not require State 

Medicaid agencies to 

have 340B policies*

May have 

340B policies

Preventing duplicate discounts.

from drug manufacturers for covered outpatient drugs dispensed to 

Medicaid patients.25 To request Medicaid rebates, State Medicaid 

agencies send drug manufacturers quarterly invoices based on the type 

and quantity of drugs that the State reimbursed (utilization data).26

There is a potential for drug manufacturers to pay duplicate discounts if

they pay Medicaid rebates to State Medicaid agencies for drugs that 

they have already sold to covered entities at discounted prices through 

the 340B Program. Duplicate discounts are prohibited by law.27 To 

prevent duplicate discounts when claiming Medicaid rebates, State 

Medicaid agencies need to identify claims for 340B-purchased drugs 

(340B claims) and exclude them from the utilization data submitted to 

drug manufacturers.

 State Medicaid agencies obtain rebates 

25 Drug manufacturers must enter into rebate agreements with the Secretary of the 

Department of Health & Human Services and pay quarterly rebates to State Medicaid 

agencies for their drugs to qualify for Medicaid reimbursement. Social Security Act, 

§ 1927(a)(1).

26 42 U.S.C § 1396r-8(b)(2)(A).

27 42 U.S.C. § 256b(a)(5)(A).
 

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INTRODUCTION

HRSA established a Medicaid Exclusion File to help State Medicaid 

agencies identify 340B claims.28 The file, a subset of HRSA’s covered 

entity database, lists covered entities that dispense 340B-purchased drugs 

to Medicaid patients. State Medicaid agencies should be able to use this 

database to identify and exclude all of the 340B claims associated with 

these covered entities from the utilization data submitted to drug 

manufacturers.

Previous OIG Studies

OIG has conducted several studies on the 340B Program. Previous OIG 

studies found inaccuracies in covered entities’ contact and participation 

information in HRSA’s covered-entity database.29 OIG also found that 

because of systemic problems with the accuracy and reliability of 

HRSA’s record of 340B ceiling prices, HRSA was unable to appropriately 

oversee the 340B Program.30 Finally, OIG found that covered entities 

were paying more than 340B ceiling prices, resulting in projected 

overpayments of $3.9 million in June 2005.31

METHODOLOGY

Scope

In response to the congressional request to look at reimbursement 

practices related to 340B-purchased drugs, this study describes State 

Medicaid agencies’ policies for covered outpatient drugs purchased under 

the 340B Program. It also describes State Medicaid agencies’ oversight of 

their reimbursements for 340B-purchased drugs, including State Medicaid 

agencies’ ability to prevent overpayments for 340B-purchased drugs and 

duplicate discounts.

This study does not include information on covered entities’ knowledge of

States’ policies or oversight. This study collected information from State 

Medicaid agencies, not from covered entities. Further, this study does not 

assess how different State Medicaid agencies’ policies affect States’ or 

28 58 Fed. Reg. 27293, 27293 (May 7, 1993).

29 OIG, Deficiencies in the 340B Drug Pricing Program’s Database, OEI-05-02-00071, 

June 2004.

30 OIG, Deficiencies in Oversight of the 340B Drug Pricing Program, OEI-05-02-00072, 

October 2005.

31 OIG, Review of 340B Prices, OEI-05-02-00073, July 2006.
 

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INTRODUCTION

covered entities’ finances. Finally, this study does not include information 

about State Medicaid agencies’ policies for physician-administered drugs.32

Data Collection and Analysis

In March 2010, we surveyed 50 State Medicaid agencies and the District of 

Columbia’s Medicaid agency (hereinafter referred to as States). We asked 

about State policies for 340B-purchased drugs, activities to monitor 

payments and enforce their policies, identification of 340B claims, and 

communication with CMS or HRSA regarding the 340B Program.

We conducted a pretest of the survey with two States and, where 

appropriate, revised the survey based on pretesters’ feedback.

We emailed the survey to each State’s Medicaid director with instructions 

to consult with or delegate the survey to a pharmacy director or other 

official familiar with the State’s policies and oversight regarding 

340B-purchased drugs. We received 51 replies for a 100-percent response 

rate. We followed up with States to clarify survey responses, where 

necessary.

For the purposes of this study, we counted a State as having a 340B policy 

only if it was documented in writing. We asked States to identify the 

types of documents that contained their policies and for citations when the 

policies were written in State laws, administrative codes, or pharmacy 

manuals. In some cases, we consulted the text of the written policies to 

clarify survey responses.

We exported survey results from Adobe LiveCycle to Microsoft Excel for 

analysis. We analyzed the survey data using Microsoft Excel. We also 

analyzed States’ narrative responses for additional themes.

Limitations

This study relies on self-reported survey data from States. We did not 

verify States’ responses.

Standards

This study was conducted in accordance with the Quality Standards for 

Inspection and Evaluation issued by the Council of the Inspectors 

General on Integrity and Efficiency. 

32 A physician-administered drug is a prescription drug that is directly administered to a 

patient by a physician during an outpatient office or hospital visit (e.g., certain injectible 

drugs). Because prescriptions for physician-administered drugs are not filled at retail 

pharmacies, they are generally not covered by the same reimbursement policies as other 

outpatient drugs.
 

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 FINDINGS

Approximately half of States have written 340B Twenty-five States reported having 

policies that direct covered entities to bill 340B policies that direct covered 

entities to bill at cost (i.e., AAC) for Medicaid at cost for 340B-purchased drugs 340B-purchased drugs. The 

policies appear in documents such as State laws, State administrative 

codes, State Medicaid pharmacy manuals, official letters to covered 

entities, and written agreements between States and covered entities.

Another State reported having a written 340B policy. However, its

policy is to reimburse 340B-purchased drugs at AWP price minus a 

certain percentage. The percentages of AWP used in this calculation 

vary by each covered entity and range from 23 to 36 percent.33

See Appendix A for a list of States and whether they have written 

340B policies.

Seven of the twenty-five States that have written 340B policies 

directing covered entities to bill at AAC provide a higher dispensing fee 

for 340B-purchased drugs than for non-340B-purchased drugs.34 These 

States reported that they offer a higher dispensing fee for two main 

reasons. First, States reported offering a higher dispensing fee to 

extend additional resources to covered entities. Second, States reported 

that they set a higher dispensing fee for 340B-purchased drugs to 

motivate covered entities to dispense such drugs to Medicaid patients. 

Given that 340B ceiling prices are considerably lower than States’ 

standard reimbursement rates for drugs, States might save money 

(even when paying a higher dispensing fee) if more covered entities 

dispensed 340B-purchased drugs to Medicaid patients.

Twenty-five States do not have written 340B policies

Of the 25 States that do not have written 340B policies, 16 reported that 

they want covered entities to bill at AAC for 340B-purchased drugs. 

Fifteen of these sixteen States reported that they do not have written 

340B policies because they believe that HRSA’s 1993 guidance to 

covered entities to bill at AAC is in effect. However, HRSA’s 2000 

guidance withdrew the AAC provision of the 1993 guidance and directed 

covered entities to follow State guidelines for billing 340B-purchased 

drugs.35 States that rely on HRSA’s old guidance and do not have 

33 The State’s reimbursement for non-340B-purchased drugs is AWP minus 11.5 percent.

34 Connecticut, Florida, Louisiana, Massachusetts, Oregon, Vermont, and West Virginia. 

35 65 Fed. Reg. 13984 (Mar. 15, 2000).
 

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FINDINGS

written policies may not be able to enforce their expectation that 

covered entities bill at AAC.

Nine of the twenty-five States without written policies did not provide 

information about their expectations of covered entities’ billing. 

However, according to four of these States, covered entities did not 

dispense 340B-purchased drugs to Medicaid patients at the time of our 

survey.

States with and without written 340B policies requested more Federal 

guidance

Eleven States reported that they want more Federal guidance on the 

intersection of Medicaid and the 340B Program.36 Of these States, 

5 have written policies and 6 do not.

About half of the 11 States reported that CMS and HRSA guidance to 

States and covered entities on this topic is inconsistent and insufficient 

given the 340B Program’s complexity. For example, three States offered 

the following comments:

• It would be very helpful if more information and clarification on 

340B rules and regulations by HRSA and CMS are shared with the 

States. Direct communication to States regarding how to track and 

monitor 340B covered entities would be appreciated.

• Intersections between 340B Program rules, pricing, AAC 

requirements, and Medicaid administration and payments are 

complex, inconsistent, and nonaligned.

• Neither [the 340B Program nor Medicaid] has enough guidance for 

the two to operate together.

These comments describe some of the complexity and potential for 

confusion that arises from the intersection of Medicaid and the 340B 

Program.

36 Forty States did not comment on this issue in response to open-ended questions on our 

survey. 
 

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FINDINGS

States do not have necessary pricing information States do not have 340B 

to create prepay edits for 340B-purchased drugs; ceiling prices or covered 

20 States conduct postpay reviews to identify entities’ AAC for 

overpayments 340B-purchased drugs 

(together referred to as 340B 

drug prices).37 States do not have 340B ceiling prices because they 

are calculated using AMP, to which States historically have not had 

access. Further, no States reported regularly collecting covered 

entities’ AAC, even though 41 States expect covered entities to bill at 

AAC. The AAC varies by drug, quarter, and covered entity, so 

collecting it from covered entities regularly is difficult.

States cannot create effective 340B-specific prepay edits without 340B 

drug prices. In fact, 20 States reported that they need 340B drug prices to 

help them oversee their reimbursements for 340B-purchased drugs.38 

Without 340B drug prices, States are unable to tell when the amount 

billed exceeds established reimbursement policies, which typically are set 

at AAC. Without prepay edits, States reimburse 340B-purchased drugs at 

the amounts that covered entities bill—which may be above 340B prices—

even if States have a policy of reimbursing covered entities at 340B prices. 

While one State reported using a 340B-specific edit, the edit relies on 

historic data to estimate one type of covered entities’ acquisition costs for 

four drugs. 

Although almost no States have 340B-specific prepay edits, 48 have 

general prepay edits. However, these edits are insufficient to prevent 

reimbursements above 340B prices. General prepay edits apply to all 

Medicaid outpatient prescription drug claims and prevent payment above 

a calculated maximum allowable amount. These edits are insufficient to 

prevent reimbursements above 340B prices for 340B claims because the 

maximum allowable cost typically is higher than the 340B price. This 

means that it is possible for a State to pay more than the 340B price even 

when capping reimbursement at the maximum allowable cost for each 

drug.

States that do not have written 340B policies may be particularly 

vulnerable to such overpayments. Without written policies to reference, 

37 The 340B ceiling prices and AAC may differ if a covered entity purchases a drug at a 

price lower than the 340B ceiling price. 

38 Thirty-one States did not comment on this issue in response to open-ended questions 

on our survey.
 

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FINDINGS

covered entities may not know how States expect them to bill. For 

example, a hospital industry group surveyed disproportionate share 

hospitals, a type of covered entity, in 27 States and found that many of 

the surveyed hospitals did not know what their States’ 340B policies 

were.39

Twenty States conduct postpay reviews to identify overpayments for 

340B-purchased drugs

 If covered entities are not aware that a State expects them to 

bill at AAC for 340B-purchased drugs, they might bill above AAC and, 

in the absence of a 340B-specific prepay edit, a State would reimburse 

those covered entities above AAC. 

Twenty States reported that they conduct postpay reviews of 

reimbursements for 340B-purchased drugs. Fourteen States reported that 

they conduct audits, and eight reported that they conduct ongoing 

monitoring (two States do both). Of the 20 States that conduct postpay 

reviews, 14 have written 340B policies.

Of the 14 States that conducted audits, 8 reported finding overpayments 

for 340B-purchased drugs. These 8 States audited 41 covered entities over 

a 10-year period and found approximately $2.6 million in overpayments. 

The 41 audited covered entities represent approximately 3 percent of the 

covered entities in the 8 States. Generally, these States reviewed invoices 

to compare covered entities’ AAC to the States’ reimbursements. States 

conducted these audits between October 1999 and June 2009.

Most of the submitted audit documentation did not describe why 

overpayments occurred, although one State that audited hospital 

outpatient pharmacies found that the hospitals overbilled the State 

because of errors in hospital billing systems. The hospitals reported to the 

State that their billing systems had not been updated in time to reflect 

quarterly changes to 340B drug prices.

Eight States reported that they monitor reimbursements after claims for 

340B-purchased drugs are paid by conducting periodic checks of covered 

entities’ billing. In some cases, States compare their estimates of AAC to 

covered entities’ billed amounts to identify potential overpayments. For 

example, one State compares reimbursements for 340B-purchased drugs to 

73 percent of the amount it reimburses for drugs purchased outside the 

340B Program. Estimating AAC could lead to imprecise identification of 

39 Safety Net Hospitals for Pharmaceutical Access, Shedding Light on Medicaid Billing 

Requirements: A Survey of State Policies Addressing the Drug Billing Practices of 340B 

Hospitals, November 16, 2009. Accessed at http://www.snhpa.org/ on November 20, 2009.
 

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FINDINGS

overpayments because 340B drug prices fluctuate each quarter and do not 

necessarily fluctuate in concert with other drug prices.

Over half of States developed alternatives to the 

Medicaid Exclusion File to identify 340B claims 

and prevent duplicate discounts

Thirty States reported that they use 

alternatives to the Medicaid 

Exclusion File, a subset of HRSA’s 

covered-entity database, to identify 

340B claims. Ten of the thirty States reported that they developed 

alternatives because the file contains inaccurate data. Previous OIG work 

found inaccuracies in other fields of HRSA’s covered-entity database, such 

as enrollment status, and billing and shipping information.40

States need accurate data to identify 340B claims so they do not subject 

drug manufacturers to duplicate discounts by including 340B claims in 

utilization data submitted for Medicaid rebates. Alternatively, States may 

forgo rebates they are owed if non-340B claims are incorrectly excluded 

from utilization data submitted for Medicaid rebates.

Of the 30 States that created alternatives to the Medicaid Exclusion File, 

26 contacted all or some covered entities directly and created their own 

lists of covered entities that dispense 340B-purchased drugs to Medicaid

patients.

On the other hand, 11 of the 30 States instructed covered entities to 

identify 340B claims. These States instruct covered entities to identify 

340B claims in one of two ways. Nine States instruct covered entities to 

identify 340B claims using the National Council for Prescription Drug 

Plan (NCPDP) Telecommunication Standard 5.1 when they submit a 340B 

claim.41 Two States instruct covered entities to bill 340B claims using an 

alternative billing identification number provided to covered entities that

bill Medicaid for 340B-purchased drugs.

Seven States use their own lists and instructions to covered entities to 

identify 340B claims.

40 Previous OIG work found inaccuracies in HRSA’s covered-entity database related to 

covered entities’ enrollment status and address, as well as billing and shipping information. 

Deficiencies in the 340B Drug Discount Program’s Database (OEI-05-02-00071). Accessed 

at http://oig.hhs.gov/ on May 13, 2010.

41 The NCPDP Telecommunication Standard 5.1 is the electronic transaction standard 

that pharmacies and payers use to submit and exchange information about prescription 

drug claims. The new version of the NCPDP Telecommunication Standard (version D.0) 

reserves a specific value, 08, to indicate a 340B claim. 
 

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FINDINGS

Chart 2 shows States’ reported alternative methods to identify 340B 

claims.

14

20

10

7

Medicaid Exclusion File only

Medicaid Exclusion File and one 

or more alternative methods

One or more alternative methods 

only

No method reported

Chart 2: States’ 

Methods To 

Identify 340B 

Claims

Source: OIG analysis of survey data, 2010.

Neither of the alternative methods employed by the 30 States necessarily 

ensures accurate identification of 340B claims. States’ lists of covered 

entities that dispense 340B-purchased drugs to Medicaid patients may not 

be more accurate than the Medicaid Exclusion File. Additionally, States 

that instruct covered entities to identify 340B claims must rely on covered 

entities to do so accurately and consistently.

Fourteen States rely solely on the Medicaid Exclusion File to identify 340B 

claims, and seven States do not use any method to identify 340B claims

Fourteen States reported that they use only the Medicaid Exclusion File to 

identify 340B claims. As discussed previously, 10 States reported 

inaccuracies in the file and use alternative methods to identify 340B 

claims. Inaccuracies in the file could mean that these 14 States may not 

accurately identify 340B claims. When States do not accurately identify 

340B claims, they may subject drug manufacturers to duplicate discounts 

or not claim Medicaid rebates that they are owed.

Seven States did not report a method of identifying 340B claims and may, 

as a result, submit utilization data to drug manufacturers that include 

340B claims, subjecting manufacturers to duplicate discounts. Of these

seven States, four reported that, at the time of the survey, no covered 

entities had submitted 340B claims. One State reported that it was 
 

OEI - 0 5 - 0 9 - 00321 S TATE MEDICAID P OLICIES AND OVERSIGHT ACTIVITIES RELATED TO 340B- P URCHASED D RUGS 15

FINDINGS

implementing a system of identifying 340B claims. Two States did not 

report a reason for not identifying 340B claims.
 

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RECOMMENDATIONS RECOMMENDATIONS

RECOMMENDATIONS

Our findings raise concerns about States’ ability to conduct oversight 

activities related to 340B-purchased drugs. Nearly half of States (25 of 

51) do not have 340B policies. Fifteen of these States reported that they 

expect covered entities to bill 340B-purchased drugs at AAC based on 

the rescinded 1993 HRSA guidance. Additionally, States do not have 

drug pricing information necessary to create prepay edits for 

340B-purchased drugs to prevent overpayments. Finally, over half of 

States developed alternatives to the Medicaid Exclusion File to identify 

340B claims and prevent duplicate discounts. Some of these States 

reported that they had to develop alternatives because of inaccurate 

data in the Medicaid Exclusion File.

Based on these findings, we recommend that:

CMS direct States to create written 340B policies

CMS should direct States to create written 340B policies if they do not 

have them because current HRSA guidance directs covered entities to 

follow States’ 340B policies. CMS should encourage States to make 

their written policies widely available to interested parties, including

covered entities. CMS should also alert States to any new HRSA-issued 

guidance about covered entities billing States for 340B-purchased 

drugs.

CMS could also encourage States to consider the benefits and 

drawbacks of different 340B policies before setting their policies (e.g., 

consider how State expenditures might be affected if covered entities 

decide to dispense non-340B purchased drugs to Medicaid patients). As 

part of this effort, States could work with covered entities to explore 

policy options that might result in savings for the States and the 

covered entities. HRSA’s Web site has information about covered 

entities and the 340B Program that States could consult in setting their 

policies.

CMS inform States about tools they can use to identify claims for 

340B-purchased drugs

CMS should inform States of the multiple ways to identify 340B claims. 

States can instruct covered entities to use the NCPDP 

Telecommunication Standard to identify claims for 340B-purchased 

drugs. The new version of the NCPDP Telecommunication Standard 

(version D.0) reserves a specific value, 08, to indicate that a claim is for 

a 340B-purchased drug.
 

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RECOMMENDATIONS

CMS could also direct States to the Medicaid Exclusion File tutorial on 

HRSA’s Web site. HRSA developed the tutorial to help States and 

others understand how to use the file to identify covered entities 

dispensing 340B-purchased drugs to Medicaid patients. 

HRSA share 340B ceiling prices with States

Providing 340B ceiling prices to States would help States create prepay 

edits to ensure that they accurately reimburse 340B-purchased drugs. 

Although the ACA gave HRSA authority to share 340B ceiling prices 

with covered entities, HRSA would have to seek legislative authority to 

share those prices with States. Once given that authority, HRSA could 

use the mechanism that it establishes to share 340B ceiling prices with 

covered entities to share those prices with States as well.

HRSA, in conjunction with CMS, improve the accuracy of the Medicaid 

Exclusion File

HRSA should instruct covered entities to update their information in 

the Medicaid Exclusion File as part of the new annual database 

recertification required by the ACA.

HRSA could also work with States to ensure that covered entities’ 

information in the Medicaid Exclusion File is correct. HRSA could 

obtain updated information on covered entities from States that have 

verified all or part of the file for their State. To assist HRSA, CMS 

could provide HRSA with contacts familiar with the covered entities in 

their respective States. CMS could also instruct States to notify HRSA 

if they find discrepancies between their records and the Medicaid 

Exclusion File. 

AGENCIES’ COMMENTS AND OFFICE OF INSPECTOR 

GENERAL RESPONSE

CMS concurred with our recommendations. To address them, CMS 

plans to (1) inform States that they should incorporate 340B policies 

into their Medicaid State Plans, (2) inform States of alternative 

methods of identifying 340B claims that we identified in this report, and

(3) facilitate communication between HRSA and States by providing a 

list of State Medicaid pharmacy directors to HRSA and instructing 

States to contact HRSA when errors in the Medicaid Exclusion File are 

found.

CMS requested further information regarding our statement in the first 

recommendation about States conducting cost-benefit analyses before
 

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RECOMMENDATIONS

setting their policies. In response, we revised the language in the 

recommendation.

HRSA generally concurred with our recommendation that it share 340B 

ceiling prices with States. HRSA agreed that such sharing may improve 

Medicaid reimbursement if States use the information to design 340B 

policies that result in savings for States and covered entities. HRSA 

also emphasized that 340B policies should take into account the impact 

on covered entities and additional costs associated with the patient 

populations they serve. HRSA did not, however, specify any action it 

would take to address this recommendation. We continue to 

recommend that HRSA take steps to share 340B ceiling prices with 

States.

HRSA also concurred with our recommendation to improve the accuracy 

of the Medicaid Exclusion File. HRSA stated that its guidance from 

March 2000 requires covered entities to keep their information in the 

file up to date. HRSA also encouraged States to share any discrepancies 

found between States’ records and the file, noting that such information 

sharing would improve oversight of the 340B Program and compliance 

with the prohibition of duplicate discounts. However, HRSA did not 

indicate that it would take new action to instruct covered entities to 

update their information in the Medicaid Exclusion File. We continue 

to recommend that HRSA include specific instruction to covered entities 

to update their information in the file as part of any new guidance it

issues defining the new annual database recertification required by the 

ACA.

HRSA provided technical comments on the report, which we 

incorporated where appropriate.

For the full text of CMS and HRSA comments, see Appendix B.
 

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 APPENDIX ~ A

Table A-1: State Medicaid Agencies’ 340B Policies

State Written 

Policy Location(s) of Written Policy

Alabama  State administrative code

Alaska  State administrative code, pharmacy manual, official letter

Arizona - - 

Arkansas  Official letter

California  State law, pharmacy manual

Colorado - - 

Connecticut  State law

Delaware - - 

District of Columbia - - 

Florida  State law, state administrative code, pharmacy manual, official letter

Georgia  Pharmacy manual

Hawaii  State law, state administrative code

Idaho - - 

Illinois  Pharmacy manual, written agreements

Indiana - - 

Iowa  Pharmacy manual, official letter

Kansas - - 

Kentucky  State administrative code, pharmacy manual

Louisiana  State administrative code, pharmacy manual

Maine - - 

Maryland - - 

Massachusetts  State administrative code

Michigan  Pharmacy manual

Minnesota  Written agreements

Mississippi - - 

Missouri - - 

Montana  Official letter

 continued on next page
 

OEI - 0 5 - 0 9 - 00321 S TATE MEDICAID P OLICIES AND OVERSIGHT ACTIVITIES RELATED TO 340B- P URCHASED D RUGS 20

APPENDIX ~ A

Table A-1: State Medicaid agencies’ 340B Policies, Continued

State Written 

Policy Location(s) ofWritten Policy

Nebraska - - 

Nevada - - 

New Hampshire - - 

New Jersey - - 

New Mexico - - 

New York  State law

North Carolina  Pharmacy manual

North Dakota - - 

Ohio - - 

Oklahoma  Official letter

Oregon  Pharmacy manual

Pennsylvania - - 

Rhode Island - - 

South Carolina - - 

South Dakota  State administrative code

Tennessee  Written agreements

Texas  State administrative code, pharmacy manual, written agreements

Utah - - 

Vermont  Written agreements

Virginia - - 

Washington  State administrative code, pharmacy manual

West Virginia  Pharmacy manual, written agreements

Wisconsin - - 

Wyoming - - 

Source: Office of Inspector General analysis of survey data, 2010.
A P PEN D x B 


Agency Comments 

CMS Comments 

Oenters for Medicare & Medicaid SelVices 

Administrator 

Washington, DC 20201 

DATE: filAR 231m

TO: 	 Daniel R. Levinson 

Inspector Oeneral 

FROM: 	 Donald M. Berwick, M.D. 

Administrator 

SUBJECT: Office of Inspector General (010) Draft Report: State Medicaid Policies and 

Oversight Activities Related to 340B Purchased Drugs (OEI-05-09-00321) 

Thank you for the opportunity to review and comment on the 010 Draft Report entitled, "State 

Medicaid Policies and Oversight Activities Related to 340B Purchased Drugs," (OEI-05-09­

00321). The purpose pfthis report wa~ to described State Medicaid agencies' policies and 

oversight activities related to drugs purchased under the 340B Drug Discount Program. 

The 340B Drug Discount Program requires drug manufacturers to provide covered outpatient 

drugs to certain eligible entities at or below a statutorily defined ceiling price. The 340B 

Program is administered through the Health Resources and Services Administration (HRSA). 

State Medicaid agencies may set specific policies for covered entities that dispense 340B drugs 

t6 Medicaid patients. 

The oro found that approximately half of States have written 340B policies that direct covered 

entities to bill Medicaid at cost for 340B-purchased drugs. Over half pf States without written 

policies reported that they rely on HRSA's 1993 guidance directing covered entities to bill States 

at actual acquisition cost (AAC) and expect covered entities to bill at AAC. The 010 also found 

that States do not have adequate infonnation to create prepay edits for 340B-purchased drugs due 

to logistical and legal issues. However, twenty States conduct postpay reviews to identify 

overpayments for 340B-purchased drugs. Finally, the OIG found that States employ a variety of 

methods 10 identify 340B claims to prevent duplicate discounts. These methods include 

contacting covered entities directly and maintaining their own list, utilizing HRSA's Medicaid 

Exclusion File, instructing covered entities to use the National Council for Prescription Drug 

Plans (NCPDP) Telecommunications Standard, and instructing covered entities to bill Medicaid 

using an alternative billing identification nwnber. 

OIG .Recommendation 

CMS should direct States to establish written 340B policies if they do not already have policies 

in place. Further, CMS should alerl States to any new guidance HRSA issues about covered 

OEI·05-09-00321 STATE MEDICAID POLICIES AND OVERSIGHT ACTIVITIES RELATED TO 340B·PURCHASED DRUGS 21 
 

OEI - 0 5 - 0 9 - 00321 S TATE MEDICAID P OLICIES AND OVERSIGHT ACTIVITIES RELATED TO 340B- P URCHASED D RUGS 22

APPENDIX ~ B
A P PEN D x 8 

HRSA Comments 

DEPARTMENT OF HEALTH &. HUMAN SERvrCES 

Health Resources and Services 

Administration 

Rockville MD 20857 

MAR 1 6 2011 

TO: 	 Inspector General 

FROM: 	 Administrator 

SUBJECT: 	 Office ofTnspector General Draft Report: "State Medicaid Policies and 


Oversight Activities Related to 340B-Purchased Drugs" 


(OEI-05-09-0032 J) 


This is in response to the Office ofInspector General's (OIG) request for comments on 

the draft report: "State Medicaid Policies and Oversight Activities Related to 340BPurchased Dmgs" (OEI-05-09-00321). Attached are the Health Resources and Services 

Administration's comments on this draft report. Under separate cover, technical 

comments are also being sent to OIG. If you have any questions, please contact Sherry 

Angwafo in HRSA's Office of Federal Assistance Management at (301) 443.9547. 

Mary K. Wakefield, Ph.D., R.N. 

Attachment 

OEI·05·09·00321 STATE MEDICAID POLICIES AND OVERSIGHT ACTIVITIES RELATED TO 340B·PURCHASED DRUGS 23 
 

OEI - 0 5 - 0 9 - 00321 S TATE MEDICAID P OLICIES AND OVERSIGHT ACTIVITIES RELATED TO 340B- P URCHASED D RUGS 24

APPENDIX ~ B
 

OEI - 0 5 - 0 9 - 00321 S TATE MEDICAID P OLICIES AND OVERSIGHT ACTIVITIES RELATED TO 340B- P URCHASED D RUGS 25

APPENDIX ~ B
 

OEI - 0 5 - 0 9 - 00321 S TATE MEDICAID P OLICIES AND OVERSIGHT ACTIVITIES RELATED TO 340B- P URCHASED D RUGS 26

 ACKNOWLEDGMENTS

This report was prepared under the direction of Ann Maxwell, Regional 

Inspector General for Evaluation and Inspections in the Chicago

regional office, and Thomas F. Komaniecki, Deputy Regional Inspector 

General. 

Kelly Waldhoff served as the team leader for this study. Other principal 

Office of Evaluation and Inspections staff from the Chicago regional 

office who contributed to the report include Adam Freeman, Abby 

Lopez, and Carolyn Pichert; other central office staff who contributed 

include Heather Barton.
Office of Inspector General http://oig.hhs.gov 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 

amended, is to protect the integrity of the Department of Health & Human Services (HHS) 

programs, as well as the health and welfare of beneficiaries served by those programs. This 

statutory mission is carried out through a nationwide network of audits, investigations, and 

inspections conducted by the following operating components:

Office of Audit Services 

The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 

audits with its own audit resources or by overseeing audit work done by others. Audits 

examine the performance of HHS programs and/or its grantees and contractors in carrying 

out their respective responsibilities and are intended to provide independent assessments of 

HHS programs and operations. These assessments help reduce waste, abuse, and 

mismanagement and promote economy and efficiency throughout HHS.

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on significant 

issues. These evaluations focus on preventing fraud, waste, or abuse and promoting 

economy, efficiency, and effectiveness of departmental programs. To promote impact, OEI 

reports also present practical recommendations for improving program operations. 

Office of Investigations 

The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 

of fraud and misconduct related to HHS programs, operations, and beneficiaries. With 

investigators working in all 50 States and the District of Columbia, OI utilizes its resources 

by actively coordinating with the Department of Justice and other Federal, State, and local 

law enforcement authorities. The investigative efforts of OI often lead to criminal 

convictions, administrative sanctions, and/or civil monetary penalties.

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support for OIG’s internal operations. OCIG represents OIG in all civil and 

administrative fraud and abuse cases involving HHS programs, including False Claims Act, 

program exclusion, and civil monetary penalty cases. In connection with these cases, OCIG 

also negotiates and monitors corporate integrity agreements. OCIG renders advisory 

opinions, issues compliance program guidance, publishes fraud alerts, and provides other 

guidance to the health care industry concerning the anti-kickback statute and other OIG 

enforcement authorities.