Over 1,300 Hospitals Urge CMS to Withdraw 340B Drug Payment Cuts

October 24, 2017 - Over 1,300 rural hospitals and other healthcare organizations that serve low-income communities added their voices to the growing list of stakeholders opposing proposed payment cuts to the 340B Drug Pricing program.

CMS proposed in July 2017 to reduce hospital reimbursement for most 340B prescription drugs. Rather than paying eligible hospitals average sales price plus 6 percent, Medicare would reimburse the organizations average sales price less 22.5 percent.

340B hospitals would see their Medicare Part B reimbursement drop by almost 30 percent, reported 340B Health, a trade group representing the program’s hospitals.

The federal agency designed the rule to “reflect more accurate costs” of prescription drugs, which have experienced significant price increases. Savings from the proposed 340B payment cuts would benefit hospitals by going back into the Medicare Outpatient Prospective Payment System.

However, cutting Medicare reimbursement for 340B drugs would not reduce prescription drug rates. The reduced payments would actually hinder hospitals that serve a significant portion of low-income and uninsured patient populations from providing high-quality, accessible care, the coalition of rural hospitals and other organizations argued.

A cited analysis from 340B Health earlier this year uncovered that all 340B hospitals surveyed said the payment cuts would impact their ability to provide healthcare services to low-income and rural individuals.

Another 86 percent of the hospitals reported that it would impede their ability to provide key clinical services that require prescription drugs covered by the program, including infusion therapy and oncology care.

Almost three-quarters of respondents also said that the proposed reductions would limit their pharmacy services and the organization’s ability to deliver uncompensated care to uninsured patients.

“For my hospital alone, implementation of this regulation would reduce our savings by $3 million a year,” stated Matthew Perry, President and CEO of Genesis Healthcare System, which serves rural communities in Ohio. “This would seriously jeopardize the system’s ability to serve as its community’s healthcare safety net and could force it to cancel critical services such as opioid addiction treatment, cancer treatment, and behavioral health programs.”

Urban medical centers that treat greater portions of low-income and uninsured individuals would also feel the negative effects of lower 340B payments.

“Our patients would face higher costs, less access to care, and we could lose the ability to assist them with transportation, care navigation, and other valuable services,” explained Benjamin Li, MD, Director of the MetroHealth System Cancer Center in Cleveland, Ohio. “We cannot simply absorb an $8 million cut.”

The group of healthcare organizations urged CMS to withdraw the proposal to reduce 340B hospital reimbursements.

The CMS Advisory Panel on Hospital Outpatient Payment expressed similar views in August 2017. The group urged CMS to abandon proposed changes to the 340B Drug Pricing Program.

Reducing 340B hospital payments would inappropriately take from the program in an effort to resolve broader Medicare Part B issues, such as rising prescription drug rates set by manufacturers.

CMS did not create the program to “directly subsidize or offset inadequate drug payments under Part B, but rather to provide discounts on drugs which could be used to assist safety net providers in the care of uninsured patients, develop community benefit programs, offset the costs of providing access to needed medications for vulnerable patients, and invest in other needed services for their patients,” the panel argued.

However, supporters of the 340B payment reductions contended that hospitals do not always transfer savings obtained by the program to their patients and care services.

Instead, the lack of check and balances has resulted in care shifting to more expensive hospital outpatient settings. A recent Berkeley Research Group study commissioned by the Pharmaceutical Research and Manufacturers of America (PhRMA) stated that Part B reimbursement increased at 340B hospitals during 2008 and 2015 for three medications, while the share of payments decreased at less expensive physician offices.

The portion of Medicare Part B reimbursements going to non-340B hospitals remained relatively stable during the period.

In an effort to improve the program, several House Representatives called for increased program transparency at a recent House Energy and Commerce Oversight and Investigations Subcommittee hearing. Increasing transparency would help healthcare leaders to ensure hospitals are using the discounted prices to improve care services and charity care.

The comment period on the proposed 340B payment cuts ended in September. CMS plans to respond to comments in a final ruling in November.