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CMS Issues Final Rule on 340B Drug Program

The Centers for Medicare & Medicaid Services (CMS) finalized its rule concerning the amount that hospitals will be paid for delivering drugs to patients in the outpatient setting. The rule is promulgated pursuant to the Hospital Outpatient Prospective Payment System (OPPS) and the 340B drug program. The program ostensibly is being changed to lower the out-of-pocket drug costs of Medicare beneficiaries with copays for these Part B drugs. An estimated $320 billion will be saved by beneficiaries under this new rule.

The 340B drug pricing program allows certain hospitals to obtain discounted prices on some outpatient drugs. This saves the hospitals money and was meant to allow eligible hospitals the ability to stretch government healthcare payments to allow for redistribution to other patients.

Starting in January 2018, CMS will pay minus 22.5% rather than plus 6% of the average sales price (ASP) for these outpatient Part B drugs in the 340B program. The Medpac Report to Congress in 2015 estimated that the hospitals receive on average a 22.5% discount. The Medpac Report also points out that the 340B program has grown substantially over the past decade, in part due to increased eligibility criteria under the Affordable Care Act. Medicare paid the same amount for the drug to the 340B hospitals as the non-340B hospitals, despite the deep discount, making the 340B program very profitable.

In a reversal from previous intentions, CMS decided in the final rule to roll the savings from the 340B program, which amounts to about $1.6 billion, into additional payments for both 340B and non-340B hospitals. Therefore, there will be a net gain to non-340B hospitals, which largely consist of for-profit hospitals. Certain children’s hospitals, cancer hospitals, and rural hospitals will be exempt from the 340B final rule.

The American Hospital Association (AHA) and other stakeholders have announced proposed litigation over the 340B cuts. “We’re deeply disappointed in the Centers for Medicare & Medicaid Services’ recent decision to cut payments to hospitals participating in 340B that will put needed prescription drugs further out of reach, and dramatically threaten access to healthcare for many, including the uninsured, the elderly, those with chronic conditions and the disabled,” wrote AHA CEO Richard Pollack on the AHA blog.

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