In an attempt to bring down out-of-pocket drug costs for Medicare patients, the Centers for Medicare & Medicaid Services has proposed cutting Medicare drug payments to hospitals serving low-income and other disadvantaged communities in the government’s so-called 340B program. But an advocacy group for hospitals and other providers that participate in the program contend that CMS’s proposal would actually backfire and cause those hospitals to serve less patients and provide fewer services.
The 340B program, established by Congress in 1992, requires drug manufacturers to sell certain outpatient drugs at discounts to health care providers that serve low-income and other disadvantaged populations. The providers, in turn, use their 340B drug savings to serve more patients and provide more services at no cost to the government, according to 340B Health, which represents more than 1,300 hospitals and other providers participating in the program.
In July, CMS published in the Federal Register its proposal to pay 340B participants a discount on certain drugs at an average sales price (ASP) minus 22.5 percent, rather than ASP plus 6 percent. The proposed reduction would go into effect on Jan. 1, 2018.
On its website, the agency states that ASP minus 22.5 percent was the Medicare Payment Advisory Commission’s estimate of the average minimum discount eligible hospitals received for drugs acquired under the 340B program. Applicable drugs not purchased under the 340B drug program would continue to receive ASP plus 6 percent payment.
“CMS seeks comment on implementing this proposal in a manner that will bring down out-of-pocket drug costs for Medicare patients and allows providers to best meet their patients’ needs,” the agency writes.
However, 340B Health and its members submitted comments strongly opposing the almost 30 percent proposed payment reduction, contending it would be counterproductive and would actually reduce access to care.
“CMS’s proposal would contravene 340B’s purpose by significantly reducing the savings that hospitals currently receive through the program and, in turn, severely hamper their ability to care for low-income patients,” writes Jeff Davis, 340B Health’s legislative and policy counsel. “Moreover, the proposal would harm patient care without reducing patient costs or Medicare spending.”
The advocacy group conducted a survey of 340B hospitals to evaluate the impact the proposal would have on their ability to treat their low-income patients, and found that the majority would be hampered in a number of ways:
86 percent say they would have to close clinics or limit chemo infusion and other oncology services for low-income patients.
74 percent say it would impact their ability to provide pharmacy services, including staffing, offering discounted drugs, and operating programs such as medication therapy management.
More than two-thirds say it would affect their ability to provide uncompensated care, which would directly impact access to care for low-income and rural individuals.
Nearly half say the proposal would impact quality of care and patient outcomes.
One hospital respondent says: “Our system would likely eliminate or significantly cut back on the extra programs and services it offers, such as providing drugs to our community ambulance service providers, providing an anticoagulation clinic that deeply discounts Coumadin, providing a respiratory clinic that covers the out-of-pocket medication expenses for 227 patients, providing $2.4 million in community benefit services, and $1.3 million in charity care.”
Moreover, the advocacy group contends that CMS’s proposal would violate the 340B statute and the Medicare statute; the proposal “relies on a faulty premise” that fails to recognize that 340B hospitals serve patients with more expensive medical needs; and that CMS’s proposed modifier for non- 340B drugs billed under the Outpatient Prospective Payment System (OPPS) would pose operational and financial challenges for 340B hospitals.
“While we share the administration’s concern about high drug prices, we don’t believe that dramatically cutting payments to health care providers is the way to go," says Ted Slafsky, president and chief executive of 340B Health. “The administration intends for the proposal to be consumer friendly but the reality is that it will do nothing to reduce high drug prices or reduce costs for Medicare or seniors.”