Policy & Regulation News

340B Hospitals Oppose Drug Acquisition Cost Survey from CMS

340B Health urges CMS to withdraw its plan to survey 340B hospitals on drug acquisition costs, saying it’s a violation of Medicare statute and too burdensome.

Drug Acquisition Costs

Source: Thinkstock

By Samantha McGrail

- Hospitals are fed up with CMS’ plan to survey 340B hospitals to obtain drug acquisition cost data for drugs covered under the program. In a letter to CMS, 340B Health recently asked CMS to withdraw a proposal to collect drug acquisition cost data from 340B hospitals because the survey is a violation of Medicare statute and would be too burdensome for safety-net hospitals. 

 “CMS’s proposed survey is intended to dramatically break with over two decades of Medicare payment policy to ultimately pay 340B hospitals an average acquisition cost for Medicare Part B drugs, thereby removing a key benefit 340B hospitals receive from the 340B program, and undermining their ability to treat their low-income patients,” the group representing 340B hospitals stated in the letter.

CMS floated the idea of asking 340B hospitals for average acquisition cost data for more than 400 HCPCS codes and 1,100 national drug codes (NDCs) in an opportunity for public comment in September. The information would be used to help determine payment amounts for drugs acquired under the 340B program.

The proposal came after a federal judge ruled in December of 2018 that CMS didn’t have the authority to tie Medicare payment rates to 340B hospitals to acquisition costs, a move that would cut payments by nearly 30 percent. The judge stated that CMS had not collected the necessary date to set payment rates based on acquisition costs.

While CMS is appealing the decision, the agency hoped to start obtaining the data necessary to justify changing the Medicare payment formula for hospitals acquiring outpatient drugs through the 340B program.

But 340B Health sees inevitable errors occurring if CMS asks hospitals to complete calculations for hundreds of thousands of NDCs, which will further contribute to inaccuracies in the data hospitals report. 

In addition, the groups argued that CMS does not have the authority under the Medicare statute to conduct a survey of just 340B hospitals to determine drug acquisition costs. The law states that surveys must have a large sample of hospitals that is able to “generate a statistically significant estimate of the average hospital acquisition cost for each specified covered outpatient drug,” their letter to CMS stressed. 

340B Health also questioned the fact that CMS’ proposal mentioned that they will collect drug acquisition cost data from children’s and free-standing cancer hospitals even though those hospitals are exempt from Medicare’s 340B cuts. 

For these reasons, the organization urged CMS to withdraw its proposal to obtain drug information from 340B hospitals. The organization also strongly opposed setting payment rates at average acquisition cost for 340B hospitals by Medicare, a move that “reverses more than 20 years of Medicare payment policy.” 

CMS has been actively seeking comments from healthcare companies upon the notice of the drug acquisition survey. And 340B Health isn’t the only organization that expressed their dissatisfaction.  

The AAMC submitted comments in response to CMS’s survey proposal. The association expressed their belief that CMS has “grossly underestimated the expenditure of time and resource hospitals will incur in order to collect and submit the required data.”

Hospitals would need to redirect financial resources that would otherwise be used for care in order to comply with the survey’s requirement, AAMC highlighted.

Furthermore, AHA released comments on behalf of their nearly 2,000 340B member hospitals. 

“340B hospitals typically purchase their 340B drugs through wholesalers, like McKesson, Pharmaceuticals, or directly from the drug manufacturer,” the association wrote.”The wholesaler contracts, in particular, typically have strict non-disclosure provisions. It is our understanding that they may prevent 340B hospitals from sharing any drug pricing information with any entity not party to the contract. These non-disclosure provisions may make it impossible for 340B hospitals to share the data necessary to complete the survey.” 

CMS is currently parsing through comments on the proposed survey and expects to make a decision once agency leaders have considered the opinions of stakeholders from across the industry.