Tag Archives: 340B Drug Discount Program

Among Those Who Want to Lower Drug Prices, Cacophony, Not Consensus

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Everyone seems to want lower drug prices. 5 reasons why that hasn’t happened

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Everyone seems to want lower drug prices. 5 reasons why that hasn’t happened.

Of all his campaign promises, President Trump’s vow to bring down drug prices was perhaps the most popular.

An assortment of interest groups spoke out loudly and passionately on the need for action, from hospitals to doctors to insurers to generic drug makers to patients themselves.

And in many ways, they seem to have the clout, and resources, to counter drug makers’ slick ad campaigns and lobbying firepower. Last year, the American Medical Association, America’s Health Insurance Plans, and the American Hospital Association together spent more than $45 million lobbying Congress, almost twice what the drug makers’ group, PhRMA, spent in the same time period.

Instead, congressional efforts to lower drug prices are at a total standstill. In interviews with STAT, lobbyists, lawmakers, and congressional staffers, Republicans and Democrats alike, said the most powerful health industry players conspicuously disagree about exactly how to move forward. Every group pushes its own priorities and strategies — a cacophony that makes it unlikely that crushing drug prices will change any time soon.

“They all say, ‘Yes, we should [lower drug prices], and someone else is responsible for it,’” Sen. Patty Murray of Washington, the top Democrat on the Senate Health, Education, Labor, and Pensions Committee, told STAT. “Everybody needs to come to the table and say what can my industry do, what can pharma do. … That will be how we solve this.”

Solving it, however, seems a stretch when just addressing it has gone nowhere. Despite President Trump’s insistence, on the campaign trail and in office, that he will lower drug prices, there has been no major federal effort to do so in the first year of his administration.

The disarray was on full display at a recent congressional hearing, when representatives from nearly every major trade group with any stake in the country’s drug prices — AMA, AHIP, and AHA included — spent almost an hour and a half testifying without more than a cursory discussion of how Congress could fix the problem. When they finally did talk solutions, outside of buzzy phrases like “increase transparency,” almost none of their answers matched.

So why can’t the broader health care industry agree on how to make drugs more affordable? Here are five factors.

1. Health care lobbyists are stuck playing defense.

When it comes to drug pricing, hospitals, insurers, and PBMs in particular have spent the last year fending off congressional inquiries into their own business practices — leaving little time to go on the offensive.

Meanwhile PhRMA has alternately pointed at hospitals, insurers, and PBMs as the profiteers in the current system.

It’s “lobbying 101, to muddy the waters,” according to Rep. Peter Welch (D-Vt.). And in the complicated world of drug pricing, it’s an effective strategy.

Drug makers’ efforts to vilify PBMs and to demand more transparency about their role in the supply chain are well-documented. The Washington Post earlier this year called pharma’s tactics against those players an effort to “start an industry war.”

They’ve opened a similar front against insurers, ramping up rhetoric and backing new patient groups that decry how higher deductibles and copays mean steeper costs for consumers, even when list prices don’t change much.

And they’ve accused hospitals of marking up the price of drugs and pocketing the difference, both in general and specifically as part of a push to overhaul the hot-button 340B drug discount program.

“That disarray you talk about, it’s not accidental,” Welch said. “The flames of that are fanned by pharma, [which] is doing everything they can to create confusion about what’s the right remedy,” he said.

The problem, according to Walid Gellad, who leads the University of Pittsburgh Center for Pharmaceutical Policy and Prescribing, “is that every part of the industry says things that are correct. It is correct that one of the reasons patients are feeling such high prices is because they have to pay coinsurance and big deductibles,” Gellad said, noting that pharma’s concerns with the PBMs and hospitals had some validity, too. “And it’s true that pharma sets the list prices high. They do do that.”

PhRMA spokesman Robby Zirkelbach also said there was a reason for lawmakers’ interest in so many players: the validity of the concerns. He pointed to data that showed slowing growth of prescription drug prices and increasing copays and deductibles.

“There’s no wonder that people are continuing to dig into this issue, and what they’re realizing is that to really be able to address the drug pricing concerns that people have raised, you’ve got to address some of the misaligned incentives in the system,” he said. “This is a complicated system, and we’ve got to look at how money flows across the system.”

And the tactic has successfully diverted lawmakers’ attention. Republicans in both chambers of Congress have held hearings in the past year looking at the “supply chain” that goes into the cost of drugs — broadening their spotlight from the companies that set the price to the other actors that can impact it. And lawmakers on both sides of the aisle say they want to better examine the vast array of players before they make any sudden policy moves.

“There are some that zero in on just one piece of the cost curve, so what I’m trying to do on the committee is look methodically at every piece,” Rep. Greg Walden, the Oregon Republican who chairs the influential Energy and Commerce Committee, told STAT. “We’re going to look at PBMs, we’re going to look at hospital costs, we’re going to look at what insurance costs. We’re going to look top to bottom.”

2. Congress isn’t jumping to act.

Beyond hearings, Congress hasn’t actually shown great appetite to tackle drug pricing. And that lethargy can dampen lobbyists’ enthusiasm to throw their weight and resources behind a given campaign or piece of legislation.

One physician lobbyist called it a “chicken and the egg” problem, wondering whether it would be Congress or the industries to first signal their motivation to act.

Case in point: the so-called CREATES Act. It’s one of the few pieces of drug price legislation that has the support of hospitals, insurers, doctors and a whole host of other groups and companies. But it’s languishing on Congress’s to-do list.

The bill, like its counterpart, the Fast Generics Act, takes aim at what supporters call delay tactics that drug makers use to keep generic competitors off the market. The legislation would give generic manufacturers that are legitimately seeking product samples the right to sue the drug makers if they refuse to hand over those samples.

It’s a small but meaningful change — the Congressional Budget Office has estimated that the legislation could save Medicare, Medicaid, and other federal government health programs more than $3 billion over 10 years.

And industry has been pushing the legislation, albeit without the same urgency that’s animated other priorities. Together, many of the trade associations — along with some three dozen other groups and companies, including Walmart, CVS, and AARP — formed a coalition, the so-called Campaign for Sustainable Rx Pricing, to push the bill. They hired a handful of lobbyists who are largely focused on the issue, too, to the tune of $440,000 over 2017.

But as one supporter put it, “it’s kind of telling that it has to be such an egregious abuse for everyone to coalesce.”

So far, drug makers have blocked attempts to include the measure in the 21st Century Cures Act that passed in 2016 or in last year’s reauthorization of FDA user-fee agreements, a priority for the drug industry. They say the bill will weaken protections for patients and spur “meritless, wasteful litigation.”

Supporters were nonetheless optimistic about the path forward for the bill. Several lobbyists backing the effort, along with staffers in both the House and Senate, told STAT there is momentum on Capitol Hill to include the measure in an upcoming spending package since it could help offset some other spending.

3. Each industry has very different priorities, even when they do agree.

Even when they do agree — as on CREATES, for example — health industry lobbyists don’t always prioritize the same issues. Some may have spent 2017 more focused on the repeal and replace of the Affordable Care Act than drug pricing. Others might have they used their meetings with lawmakers to defend a tax credit. Or perhaps some argue for other, more important drug pricing policies that need to be tackled first.

“When you work with these other groups, they rank [policy proposals] differently. There are certain things they want first. So it’s not only about finding solutions you can agree on, but about which ones you want to do first,” one patient advocate told STAT.

Drug makers, on the other hand? Pricing is their primary concern.

Other groups “have their own fish to fry, their own priorities,” said David Mitchell, the founder of the patient group Patients for Affordable Drugs. For drug companies, “it’s their number one issue: drug pricing. All the rest of them have their own number one issues, and drug prices aren’t it.”

4. All the major players have a stake in the status quo.  

Academics had another easy explanation for the lack of consensus — and the lack of concerted effort — from health care industry groups that profess an interest in lowering drug prices. They all profit from the current system.

Hospitals are paying more for drugs for patients admitted to the hospital, but on the flip side, at least some facilities are profiting from reimbursements for drugs in outpatient settings and in their own specialty pharmacies, according to Peter Bach, the director of Memorial Sloan Kettering’s Center for Health Policy and Outcomes. PBMs also earn bigger rebates if the list prices are higher. And doctors, too, make more money under Medicare rules if they administer a more expensive drug to a given patient.

“People are paying these bills and the pie is getting bigger. Everyone’s arguing about where the knife comes in and cuts the slices of pie,” he said. “Everybody thinks everybody else is getting an unfair share.”

Gellad agreed.

“Everyone is making a lot of money. No one’s gone broke. So they don’t want to change things,” he said. “And that’s why the industry is not going to all agree to do something [on drug prices], because they’d all have to agree to lose money. Why would anyone agree to do that?”

5. There’s no silver bullet.

It’s not as if there’s one easy solution, ripe for the picking, if only groups could agree on it, several trade association officials told STAT. The piecemeal approach — getting behind policies like CREATES and then turning to other, smaller issues — may be the best way to approach the issue, they argued.

Similarly, lawmakers said there’s no one fix.

“The reason you haven’t seen all of the groups coalesce around one proposal — it’s not really clear what the solution is at this point because it’s such an opaque process,” Rep. Diana DeGette (D-Colo.) told STAT. “It’s hard to see what one solution there would be.”

Mitchell, along with a spokesman for the Association of Accessible Medicines, which represents generic manufacturers, also pointed to growing consensus behind smaller, targeted policies that would keep branded drug manufacturers from “gaming the system” — policies like CREATES and other changes to the patent system that could garner broader support. They each noted, too, that newly confirmed Health and Human Services Secretary Alex Azar, himself a former drug company executive, had voiced support for those changes during confirmation hearings.

They also preached patience. Bach, a former senior adviser to the Centers for Medicare and Medicaid Services, likened the push to the decades of jockeying between various environmental groups over fossil fuel regulation.

“Environmental regulation is a classic example of this,” Bach said. “You have this broad array of interested parties that would like to see movement, but the flavor of the movement they want, the ranking of their priorities, it’s not ‘one and only,’ even if it’s top [priority] — against a highly concentrated entity that specifically has a single agenda counter to it, with deep influence. That is a very hard row to hoe.”

“We are making progress,” he added. “But we get there in fits and starts.”

Court sets speedy 340B lawsuit schedule, siding with AHA

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https://www.healthcaredive.com/news/court-sets-speedy-340b-lawsuit-schedule-siding-with-aha/515988/

Dive Brief:

  • The American Hospital Association and other parties’ request for an expedited brief schedule for the group’s lawsuit over CMS cuts to the 340B program was agreed to by the U.S. Court of Appeals for the District of Columbia Circuit Tuesday, despite the government’s request for more time to respond to the lawsuit.
  • U.S. District Judge Rudolph Contreras dismissed the initial lawsuit in December, saying the groups did not have standing to sue because the cuts hadn’t yet taken effect. On January 11, AHA and the other groups appealed the decision, and then asked the court to expedite the case citing the immediate impact the cuts have on 340B hospitals’ ability to provide services to underserved communities.
  • Attorneys for the Department of Justice argued the compressed briefing schedule would not give adequate time for the government to prepare its brief and coordinate with affected agencies.

Dive Insight:

The lawsuit concerns a HHS final rule that took effect at the start of the year changing the amount 340B hospitals are paid for drugs to 22.5% less than the average sales price. Last year, hospitals paid the average price plus 6%.

“America’s hospitals and health systems are pleased that the U.S. Court of Appeals has accepted our expedited brief schedule in our appeal to reverse the significant cuts to the 340B Drug Savings Program, which for over 25 years has played a vital role in helping hospitals stretch scarce federal resources to expand and enhance patient services and access to care for vulnerable communities without any cost to the government,” Melinda Hatton, general counsel for the American Hospital Association, told Healthcare Dive.

AHA is joined in the lawsuit by America’s Essential Hospitals, the Association of American Medical Colleges, Eastern Maine Healthcare Systems (Brewer, Maine), Henry Ford Health System (Detroit) and Adventist Health System’s Park Ridge Health (Henderson, North Carolina).

The groups argue the cuts will hurt 340B hospitals’ budgeted operations, bond covenants and other items necessary to provide community care, and say the reimbursement change exceeds HHS’ authority.

“For 340B hospitals, the ability to provide care to their communities is tied to receipt of third-party reimbursements; constriction in the flow of Medicare revenues to 340B hospitals will increasingly constrict funds for medical care for all their patients, most particularly those who are poor and underserved and most reliant on these services,” the groups wrote in their request to expiate the appeal brief schedule.

AHA noted that it is actively exploring other options to address the cuts.

“We will continue to pursue our legislative and legal strategies to reverse these cuts, and expect to prevail in holding the agency accountable for overstepping its authority,” Hatton said.

The Court of Appeals set the the brief schedule to conclude by April 2, appearing to allow AHA’s request that oral arguments to occur by May, prior to the summer recess. “Otherwise the next opportunity for argument would be in September, which would likely significantly delay the resolution of this action,” the plaintiff attorneys had argued.

 

 

340B Drug Program Sees Massive Changes on the Horizon

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A proposal in the Senate aims to create savings for health providers while a new report details how to maximize the program’s pharmacy benefits.  

The 340B Drug Pricing Program represents ample healthcare and business opportunities to some, while others see it as a federal program in need of significant reforms to address outstanding cost concerns.

The program, which provides Medicare payments for outpatient drugs to hospitals serving high volumes of low-income patients, has garnered both praise and controversy in recent months. The program is viewed as crucial for rural hospitals attending to high Medicare populations, but also as a lightning rod for perceived governmental mismanagement.

Sage Growth Partners, a healthcare business consultant agency based in Baltimore, released a report Thursday titled, “Realizing the Full Power of 340B Pharmacy Benefits.” The report includes three distinct 340B models health systems can implement: do-it-yourself, contract pharmacy, or global managed services.

Dan D’Orazio, CEO of Sage Growth Partners, said while contract pharmacy models have been the most popular approach, businesses have to assess their own expectations and needs when getting involved with the 340B program.

“This report takes a look at how you decide to manage or operate one of these entities and whether you go it alone, find a commercial partner like a pharmacy or find a managed partner to help you do that,” D’Orazio told HealthLeaders Media. “There are different models to do that and I think they have different ramifications for profitability, patient care, coordination of care, and medication adherence.”

D’Orazio said recent reports have indicated the 340B program is “a little out of control” but said the public should not be scared, adding the program represents a “real opportunity” for health systems dealing with financial pressures. He also said the program’s rules are clear, though hospitals may need to engage with managed partners for experience and assistance with any lingering complexities.

Ire, attention center on 340B

Despite the enthusiasm to maximize 340B benefits, the program has sustained pointed criticism in recent months.

A recent Pacific Research Institute study found numerous cases of abuse and profiteering, ultimately urging Congress to reform the program. A report from the Department of Health and Human Services’ Office of Inspector General last month highlighted $4.4 billion in federal funds misspent on health care programs last year, including 340B.

Those interested in implementing the strategies detailed in the Sage Growth Partners’ report will have to account for legislative corrections, which could be on the way.

Sen. Bill Cassidy, R-La., introduced the HELP Act on Tuesday, which would create a moratorium on registering “new non-rural section 340B hospitals and associated sites.” In a press release, Cassidy stated his support for 340B while highlighting the need for improvement after documented instances of wasteful spending.

“But too often the program’s discounts are used to pad hospitals’ bottom lines instead of helping disadvantaged patients afford their treatments,” Cassidy said. “This bill will increase transparency and accountability and help ensure these discounts reach patients.”

The group 340B Health, which represents hospitals and health systems, issued a statement responding to Cassidy’s legislative proposal.

“We agree the 340B program is an important resource for hospitals and their patients, and support having a thoughtful conversation about transparency in the 340B program,” the statement read. “However, we are concerned by the proposals included in the HELP Act.

“If enacted, these changes would limit the ability of 340B hospitals to fulfill their mission to care for all Americans regardless of their ability to pay. The legislation would make changes to the rules on which hospitals can participate in 340B, which could reduce the number of hospitals that could qualify for the drug discounts. It would also impose significant new reporting requirements that would not shed any light on what hospitals do with their 340B savings to help patients.”

So far, the bill has not even advanced to a committee vote.

California, North Carolina and New York hit hardest by 340B cuts

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http://www.modernhealthcare.com/article/20171213/NEWS/171219953

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The CMS’ planned $1.6 billion in Medicare cuts to 340B hospitals across the nation will disproportionately impact providers in California, North Carolina and New York, according to a new study.

Slashing the 340B drug discount program, which is intended to lower operating costs for hospitals to give its low-income patients access to drugs, would result in large funding cuts across California, North Carolina and New York hospitals, ranging from $62 million to $126 million, researchers for consultancy Avalere found. Overall, six states will see drug payment cuts of more than $50 million next year.

About 62% of Medicaid disproportionate-share hospitals will experience less than a 5% reduction in Medicare Part B revenue due to the drug cuts, while 6% of impacted hospitals will experience cuts greater than 10%.

But the concurrent increase in non-drug payments will mean that most hospitals will have very minimal changes to their revenues, according to the study. Because the drug-related cuts will disproportionately impact 340B hospitals while the non-drug payment increases will be distributed evenly across facilities, some hospitals would see increased payments while hospitals with high 340B volumes will likely see decreases.

Still, any reduction to the already thin margins of hospitals could spell trouble for providers.

Consumers stand to benefit from the cuts, researchers said. Since Medicare beneficiaries are responsible for a portion of the total drug reimbursement, consumers in California, North Carolina and New York would save a range of $15 million to $32 million. Ten states will have aggregated Medicare beneficiary savings greater than $10 million in 2018.

“The 340B program has become a big business for hospitals,” Avalere President Dan Mendelson said. “As a result, all hospitals in the program have to think about this carefully going into next year.”

Beginning in 2018, Medicare intends to reduce 340B payments from average sales price (ASP) plus 6% to ASP minus 22.5%, which the CMS estimates to be closer to the hospitals’ acquisition cost. With the proposed changes, if a drug costs $84,000, the CMS would pay just over $65,000, instead of the current $89,000. Hospital groups have sued to prevent those cuts and litigation is ongoing.

About half of the hospitals across the country participate in the 340B program, which has been criticized because it does not restrict how hospitals spend 340B money. Critics say that some hospitals use the program to pad profits while rural and critical access hospitals maintain that it’s a vital revenue source and helps support preventive services.

In a House Energy and Commerce Committee hearing on the pharmaceutical supply chain on Wednesday, U.S. Rep. Dr. Larry Bucshon (R-Ind.) said that some hospitals manipulate the program. A financially stable hospital could acquire a physician practice in a rural community and get a 340B distinction for it, he said.

Mandating more transparency on how hospitals use 340B money would prevent abuse, Bucshon said.

“The rules allow the hospitals to pursue these mechanisms aggressively,” said Mendelson. “Some members of Congress believe the rules diverge from the original intent of the program as a way for low-income individuals to access drugs.”

 

Bipartisan group of senators seek to block Trump cuts to drug discount program

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http://thehill.com/policy/healthcare/363772-gop-senators-move-to-block-trump-administrations-cuts-to-drug-discount?utm_source=&utm_medium=email&utm_campaign=12524

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Six senators, including three Republicans, are asking GOP leadership to block a Trump administration rule that slashes funding for a federal drug discount program.

The program, called 340B, requires drug companies give discounts to health-care organizations that serve high volumes of low-income patients.

But a new rule from the Centers for Medicare and Medicaid Services, which takes effect Jan. 1, cuts Medicare payments to hospitals enrolled in the program by $1.6 billion.

The senators are urging the cuts to be reversed in the year-end spending deal.

“We recognize there are opportunities to strengthen the program through targeted clarifications and improvements to ensure it continues to fulfill its purpose with integrity and efficiency and are willing to work with stakeholders to find productive solutions in this space,” the senators wrote in a letter to Senate Majority Leader Mitch McConnell (R-Ky.) and Minority Leader Charles Schumer (D-N.Y.).

“However, with a January 1, 2018 start date and over half of the Senate and half of the House of Representatives having expressed concerns with CMS’ rule, we request your help in ensuring the long-term sustainability of the 340B program by preventing these changes in an end of the year package.”

Sens. John Thune (R-S.D.), Rob Portman (R-Ohio), Shelley Moore Capito (R-W.Va.), Bill Nelson (D-Fla.), Tammy Baldwin (D-Wis.) and Debbie Stabenow(D-Mich.) all signed the letter.

The request follows a letter 51 senators sent to CMS earlier this year expressing concerns over the changes.

Hospital groups argue the rule would jeopardize the ability to serve low-income patients.

The American Hospital Association, America’s Essential Hospitals and the Association of American Medical Colleges are suing the administration to block the rule.

CMS has argued that the changes will increase access to care and lower out-of-pocket drug costs for Medicare beneficiaries.

 

Hospital groups, health systems sue HHS to halt $1.6B in payment cuts

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https://www.beckershospitalreview.com/finance/hospital-groups-health-systems-sue-hhs-to-halt-1-6b-in-payment-cuts.html

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Three hospital groups and three provider organizations sued HHS Monday in an attempt to stop payment cuts for drugs purchased through the 340B Drug Pricing Program.

The lawsuit, which was filed in U.S. District Court for the District of Columbia, was filed by the following hospital groups: the American Hospital Association, America’s Essential Hospitals and the Association of American Medical Colleges. The groups were joined in the lawsuit by three health systems: Brewer, Maine-based Eastern Maine Healthcare Systems; Detroit-based Henry Ford Health System; and Hendersonville, N.C.-based Park Ridge Health.

Earlier this month, CMS released its 2018 Medicare Outpatient Prospective Payment System rule, which finalizes a proposal to pay hospitals 22.5 percent less than the average sales price for drugs purchased through the 340B program. That’s compared to the current payment rate of average sales price plus 6 percent. This change would reduce Medicare payments to hospitals by $1.6 billion.

The lawsuit argues the 340B provisions of the OPPS final rule violate the Social Security Act and should be set aside. The lawsuit further alleges the 340B provisions are outside of the HHS secretary’s statutory authority.

The hospital groups and health systems are seeking an injunction that would prohibit HHS from implementing the 340B provisions of the OPPS final rule pending resolution of the lawsuit.

“From its beginning, the 340B Drug Pricing Program has been critical in helping hospitals stretch scarce federal resources to enhance comprehensive patient services and access to care,” said Rick Pollack, president and CEO of the AHA. “CMS’s decision to cut Medicare payments for so many hospitals for drugs covered under the 340B program will dramatically threaten access to healthcare for many patients, including uninsured and other vulnerable populations. This lawsuit will prevent these significant cuts from moving forward.”

 

CMS Cut to Outpatient Drugs Will Hit Some 340B Hospitals Hard

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The 340B program is intended to help safety net hospitals, but some others have taken advantage. A lack of transparency and accounting led to deep cuts for all participants.

Hospitals receiving drug discounts will take a big financial hit in January when the federal government sharply reduces the Medicare payment for outpatient drugs, effectively cutting a subsidy that some hospitals use to provide needed medications to those who cannot afford them.

The affected hospitals are bracing for a significant drain on their bottom lines, and some serve the neediest populations. However, some other hospitals have used the program to increase profits rather than to help underserved populations.

The U.S. Department of Health and Human Services, Centers for Medicare & Medicaid Services released a final Medicare Outpatient Prospective Payment System (OPPS) ruleNovember 1 that cuts Medicare reimbursement for separately payable outpatient drugs purchased by hospitals under the 340B program, which helps certain hospitals and other healthcare entities pay for covered outpatient drugs. The 340B program requires pharmaceutical companies to sell drugs to these hospitals at a discount, but CMS reimburses the hospitals as if there were no discount.

CMS will cut the reimbursement rate from the current average sales price (ASP) plus 6% to ASP minus 22.5%, starting January 1, 2018.

CMS estimates that the change will result in a $1.6 billion reduction in OPPS payments to 340B hospitals for separately payable drugs. The new reimbursement rate was derived from a May 2015 Medicare Payment Advisory Commission (MedPAC) Report to Congress, which estimated that the ASP minus 22.5% rate was the “lower bound of the average discount” on drugs paid under the Medicare OPPS. However,MedPAC’s March 2016 Report to Congress recommended a less drastic reduction in payment to ASP minus 10%. Under that rate, most 340B hospitals could still see a financial benefit from the program.

Instead, the adopted rate will negatively affect all 340B hospitals, says Keely Macmillan, general manager of bundled payments for care improvement with Archway Health, a Boston-based firm that works with providers to manage bundled payments.

CMS finalizes 340B drug program cut

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https://www.healthcaredive.com/news/cms-finalizes-340b-drug-program-cut/509892/

Dive Brief:

  • The CMS on Wednesday released a final rule that will significantly cut drug payments to hospitals that use the 340B Drug Pricing Program. The changes to the Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Program take effect Jan. 1, 2018.
  • The rule also puts a moratorium on enforcement of the direct supervision policy in certain cases, increases outpatient payments by 1.35%, removes six measures from the Outcome Reporting Program and removes total knee arthroplasty from the inpatient only list.
  • The American Hospital Association released a statement blasting the 340B cut, saying it “will dramatically threaten access to healthcare for many patients, including uninsured and other vulnerable populations.” AHA, America’s Essential Hospitals and the Association of American Medical Colleges plan to sue the administration over the change.

Dive Insight:

The cut to drug payments in the 340B program, which is mostly used by safety net hospitals, is dramatic. Instead of being paid the average sales price plus 6%, they will now be paid 22.5% less than the average price. Children’s hospitals and community hospitals in rural areas are exempt from the reduction.

Hospitals that use the program say it is necessary to helping them care for vulnerable populations, and have cautioned the cut will jeopardize that. There is little oversight, however, over how hospitals track and use the savings generating through 340B. Some lawmakers have said hospitals should be required to make this information readily available.

A controversial study released last month showed hospitals participating in 340B had more of a decline in charity care than other hospitals. AHA said the report is misleading and doesn’t take into account other community benefits hospitals provide.

Hospitals will also be angered by the CMS decision to allow total knee replacement surgeries to take place in outpatient settings. The agency is following the lead of commercial payers, who are pushing for care to move away from more expensive inpatient settings. CMS has said the change will let Medicare beneficiaries get a knee replacement at lower cost, but hospitals say the quality of care for those procedures could decrease.

 

Hospital groups to sue CMS over $1.6 billion cut to 340B payments

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http://www.healthcarefinancenews.com/news/cms-finalizes-outpatient-payment-rule-reduces-hospitals-payment-rate-under-340b-drug-program?mkt_tok=eyJpIjoiWVdWa1lXTTBORFJpWTJSayIsInQiOiJndXNTdWM2czNvZzR6dDlRVXA4N3ZZWUhiV29FTzZ4VndOT3VGeUkzSGtGcms1QnlhSnNRTTlQbGRmcmY5UEpEY2VuWWg1UHIwTXVQUkg1ZklLZGN6SGYxMmpwc3lmZGJtK1pBcTNDNnZZZ0FmYzQ3Q2R2YWloNjVJSlorWStcL3QifQ%3D%3D

Credit: <a href="https://en.wikipedia.org/wiki/United_States_Department_of_Health_and_Human_Services#/media/File:DHHS2_by_Matthew_Bisanz.JPG">Matthew Bisanz</a>.

The final rule will also allow for higher payment when Medicare beneficiaries receive certain procedures in outpatient departments.

Several groups representing U.S. hospitals on Wednesday said they plan to sue the Centers for Medicare and Medicaid Services over a hospital outpatient prospective payment system final rule released Wednesday that reduces what hospitals are paid under the 340B drug program.

The rule lowers the cost of prescription drugs for seniors and other Medicare beneficiaries by reducing the payment rate to hospitals for certain Medicare Part B drugs purchased through the 340B program. The existing rule would have paid hospitals 6 percent above the sale price of drugs, but the final rule instead pays hospitals 22.5 percent less than sale prices, amounting to a $1.6 billion cut.

The American Hospital Association, Association of American Medical Collegesand America’s Essential Hospitals said they will seek litigation to prevent the cuts.

“CMS’s decision in today’s rule to cut Medicare payments to hospitals for drugs covered under the 340B program will dramatically threaten access to health care for many patients, including uninsured and other vulnerable populations,” AHA Executive Vice President Tom Nickels said in a statement. “We strongly urge CMS to abandon its misguided 340B rule, and instead take direct action to halt the unchecked, unsustainable increases in the cost of drugs.”

America’s Essential Hospitals CEO Bruce Siegel said the organization saw no reasonable rationale for diverting Medicare Part B reimbursement from hospitals in the 340B drug pricing program that are in the greatest need of support to providers not eligible for 340B discounts. CMS has no evidence that the policy will combat rising drug prices, he said.

“Congress clearly intended that the 340B program help hospitals that care for many vulnerable patients; this new policy subverts that goal,” Siegel said. “Essential hospitals operate with an average margin less than half that of other hospitals and depend on 340B program savings to stretch resources for patient care and community services. Given their fragile financial position, essential hospitals will not weather this policy’s 27 percent cut to Part B drug payments without scaling back services or jobs.”

340B Health said the rule is a backdoor effort to undermine an important drug discount program.

“Responding to a survey earlier this year, 340B hospitals were unanimous in saying implementation of the CMS rule would cause them to cut back services. For example, Genesis Healthcare System in Zanesville, Ohio, estimates a loss of $3 million in Medicare payments could force it to cancel critical services such as substance abuse treatment, cancer treatment, and behavioral health programs.The MetroHealth System Cancer Center in Cleveland, Ohio, estimates an $8 million loss would raise patients’ costs and reduce access to needed services including transportation and care navigation that are supported by 340B savings,” said 340B Health CEO Ted Slafsky.

However, the AIR340B Coalition said it would continue to advocate for regulatory action to better align the program with its original intent of helping vulnerable patients.

“We applaud the Administration for taking action to help address one aspect of the 340B program that has been leading to higher costs for Medicare and its beneficiaries,” the AIR340B Coalition said.

Areas of change it supports include clearly defining a 340B eligible patient, examination of hospital and satellite clinic eligibility criteria, and a more rational and legally supportable policy on contract pharmacy arrangements.

CMS said the savings will be reallocated equally to all hospitals paid under the hospital outpatient prospective payment system. Children’s hospitals, certain cancer hospitals, and rural sole community hospitals will be excluded from these drug payment reductions.

CMS will work with Congress for additional considerations on 340B for safety net hospitals, said CMS Administrator Seema Verma.

Consumers would save an estimated $320 million in copayments in 2018 under the new payment rule that gives Medicare beneficiaries the benefit of discounts hospitals receive under the 340B program, according to Verma.

“As part of the president’s priority to lower the cost of prescription drugs, Medicare is taking steps to lower the costs Medicare patients pay for certain drugs in the hospital outpatient setting,” Verma said.

The final rule will also allow outpatient payment to be made when Medicare beneficiaries receive certain procedures in a lower cost setting, the outpatient department. The new availability of the higher OPPS payment applies to six procedures, including total knee replacements, a common and costly Medicare surgical procedure, CMS said.

Starting in January 2018, Medicare beneficiaries undergoing any of the six procedures can opt to have them performed in a lower cost setting when a clinician believes such a setting is appropriate.

Additionally, the final rule provides relief to rural hospitals by placing a two-year moratorium on the direct physician supervision requirements for rural hospitals and critical access hospitals.

“CMS understands the importance of strengthening access to care, especially in rural areas,” Verma said. “This policy helps to ensure access to outpatient therapeutic services for seniors living in rural communities and provides regulatory relief to America’s rural hospitals.”

In a home health prospective payment system final rule, CMS is not finalizing the home health groupings model and will take additional time to further engage with stakeholders.

Moody’s: Proposed changes to 340B program will hurt the finances of nonprofit hospitals

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drugs

Inpatient drug costs will continue to rise for nonprofit and public U.S. hospitals, but the pace of drug price increases will likely slow down amid growing scrutiny of drug manufacturers’ pricing practices.

But even with the slowing rate of price increases, the rising drug costs and potential changes to Medicare 340B payments for outpatient drugs would further reduce hospital margins, according to a new report from Moody’s Investors Service.

Pharmaceutical costs have outpaced hospital revenue growth in recent years, contributing to weaker operating margins, Moody’s finds. “Price increases in recent years were extraordinarily high for certain branded hospital inpatient drugs, but drug manufacturers are pulling back on these increases,” said Diana Lee, a Moody’s vice president. “On the generic drug side, we expect that some of the pressure will ease as the U.S. Food and Drug Administration approves more generic drugs for the first time.”

However, the government’s proposed reduction of Medicare Part B outpatient drug reimbursement to 340B hospitals by roughly 30% would hurt hospital margins.

“Hospitals and health systems of varying size and across the rating spectrum have noted anecdotally that they have benefited from cost savings from this discount drug program,” Lee says. “In some instances, the savings and income gained from this program can be meaningful relative to total operating cash flow. While about half of hospitals in the nation are 340B providers, those that have limited financial flexibility would be most exposed to possible changes to the 340B program.”

Hospitals and industry trade groups have urged the Centers for Medicare & Medicaid Services to withdraw its proposal to cut the drug payments to hospitals in the federal drug discount program. Hospitals use the savings to waive copays and provide drugs and other services for free or reduced costs to low-income patients.

Last week a bipartisan group of more than 220 members of the House of Representatives also told CMS in a letter (PDF) they oppose the proposal.

“This program is a lifeline for the hospitals that serve our most vulnerable patients. These arbitrary cuts will do nothing to improve patient care, or address rising costs in the Medicare program. Instead they simply jeopardize access to the treatments and services that 340B hospitals provide,” said Rep. Mike Thompson (D-Calif.) in an announcement. “There is robust bipartisan agreement that CMS should go back to the drawing board to prevent harm to patients across the country.”

Rep. David P. McKinley (R-W.Va.) said CMS’ proposal was “misguided.” “Our letter shows strong bipartisan opposition to this proposed rule, and hopefully will convince CMS to change course. We must address the high costs of drugs, but this is not the way to do it,” he said.

Meanwhile, the Health Resources and Services Administration has once again delayed (PDF) the effective date of a different 340B final rule that would set drug price ceilings and penalties for drug manufacturers that knowingly overcharge hospitals for drugs purchased under the program. The Department of Health and Human Services said it has delayed the effective date to July 1, 2018, to give more time to make changes to facilitate compliance. “After reviewing the comments received from stakeholders regarding objections on the timing of the effective date and challenges associated with the complying with the final rule, HHS has determined that delaying the effective date to July 1, 2018, is necessary to consider some of the issues raised.”