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340B Prescription Drug Reimbursements Facing Huge Cuts

Written by: Kimberly Commito on Tuesday, August 15, 2017 Posted in: Home Infusion, Specialty Pharmacy

The OPPS Proposed Rule could reduce payments by nearly 30%.

In July, CMS released the 2018 Medicare “Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs” proposed rule (also known as the OPPS Proposed Rule). Among the changes suggested in the 664-page document is a sizeable cut in Medicare Part B payments for drugs purchased by hospitals under the 340B drug program. Rather than paying average sales price (ASP) plus 6 percent, CMS will now pay ASP minus 22.5%.

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The 340B program, created by Congress in 1992, mandates that, in order to remain eligible for reimbursements through entitlement programs such as Medicaid and Medicare, drug manufacturers must provide outpatient drugs to eligible healthcare organizations at reduced prices. While this charitable plan sounds great on paper, the program has been criticized for its lack of oversight, which has led to some participants taking advantage of the program for their own gain.

In 2013, Iowa Senator Chuck Grassley investigated three health systems and reported that “hospitals are reaping sizeable 340B discounts on drugs and then turning around and upselling [those drugs] to fully insured patients covered by Medicare, Medicaid, or private health insurance in order to maximize their spread.” Subsequent and larger studies have had similar findings, supporting the belief that the 340B program “is being converted from one that serves vulnerable patient populations to one that enriches hospitals and their affiliated clinics,” wrote the authors of a 2014 Health Affairs report.

Therefore, this dramatic cut in reimbursement is considered by some as a necessary repair to a broken system. However, not everyone agrees, including the American Hospital Association (AHA) and the American Society of Health System Pharmacists (ASHP). Both organizations released statements saying they oppose the OPPS Proposed Rule. ASHP went so far as to say that, if enacted, the proposed payment cuts could “have devastating consequences for the low-income and uninsured patients that receive care from the nation’s safety net hospitals.”

If you don’t have the time to read the entire 664-page document, Adam J. Fein, PhD, CEO of Drug Channels Institute, provides these three key points about the proposal:

  1. It does not affect 340B hospitals’ contract pharmacies; the proposal applies to Part B reimbursement for hospitals.  
  2. It would reduce patients’ coinsurance obligations because the coinsurance is based on the amount that Medicare pays hospitals.
  3. Drug manufacturers do not benefit from these changes.

If implemented as proposed, the payment cut would be effective January 1, 2018. Public comments on the Proposed Rule may be submitted through September 11, 2017. You can make your voice heard by using the “Comment Now!” button at the regulations.gov site.

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