Court Rejects 340B Cuts

A federal court has ruled that the Centers for Medicare & Medicaid Services overstepped its authority in reducing Medicare payments for prescription drugs covered by the section 340B prescription drug discount program.

While the court conceded that CMS has the authority to address 340B payments, it found that CMS’s drastic payment cuts, introduced in FY 2018, “…fundamentally altered the statutory scheme established by Congress…” for determining 340B payment rates.

The court suggested that CMS either change its methodology for determining 340B payments to justify the specific cuts it proposes or raise its objections with Congress, which created the program and has the authority to change it.

According to documents submitted to the court by the parties that filed the suit, eligible hospitals have seen their 340B payments reduced $1.6 billion since the cuts began in FY 2018.  The court asked the federal government and those who filed the suit to suggest remedies for compensating participating hospitals for their losses.

The ruling has major implications for the country’s private safety-net hospitals, most of which participate in the 340B program.

Learn more about the 340B litigation, the court’s ruling, and its impact in the New York Times story “Court Rejects Trump’s Cuts in Payments for Prescription Drugs.”

Hospitals Ask Congress to Protect 340B Program

The leaders of more than 700 hospitals and health systems have written to congressional leaders to ask them to protect the section 340B prescription drug discount program.

The letter states that

 We are concerned about recent regulatory actions that have reduced the reach of this vital program and by legislative proposals that would undo more than two decades of bipartisan work to preserve the health care safety net.

The letter explains that

 In 2015, 340B hospitals provided $26 billion in uncompensated and unreimbursed care to low-income and rural patients in need. That represented 60 percent of all such care delivered in the U.S. even though our hospitals comprise only 38 percent of all acute care hospitals operating in our country. Because of the savings from 340B, we are able to offer vital but often money-losing services including obstetrics, trauma care, opioid addiction treatment, and HIV/AIDS care. In many rural communities, 340B savings are the difference between hospitals staying open and closing. We do all of this without using taxpayer dollars.

And

Efforts to reduce the scope of the 340B program would not reduce the cost of prescription drugs in the U.S. and would weaken nonprofit hospitals’ ability to serve patients who often have nowhere else to turn.

NAUH has long advocated protecting the 340B program, writing to Congress to express this view on many occasions, and most recently, earlier this year.

Go here to see the complete letter from the more than 700 hospitals and health systems.

New Reg Pushes Medicare Toward Site-Neutral Outpatient Payments

Medicare would make more payments for outpatient services on a site-neutral basis under a newly proposed regulation just released by the Centers for Medicare & Medicaid Services.

The 2019 Medicare outpatient prospective payment system regulation, published in proposal form, calls for:

  • paying physician fee schedule rates rather than hospital outpatient rates at excepted off-campus provider-based departments;
  • slashing payments for office visits;
  • extending this year’s 340B prescription drug discount payments, already cut nearly 30 percent this year, to additional providers; and
  • raising ambulatory surgical center rates and expanding the list of procedures that can be performed in such facilities so they can compete with hospitals for outpatient services.

The proposed regulation also calls for reducing quality reporting requirements and giving providers financial incentives to prescribe non-opioid pain medicine for surgery patients.

The regulation, which would affect provider payments beginning on January 1, 2019, was published in proposed form and will be finalized later in the year.  Stakeholders have until September 24 to submit comments to CMS.  For further information about what CMS has proposed, see this CMS fact sheet outlining the proposed regulation and the 761-page proposed regulation itself.

HHS Chief Says 340B Changes are Coming

Health care providers and drug manufacturers should expect changes in the section 340B prescription drug discount program in the near future.

That was the message conveyed by Health and Human Services Secretary Alex Azar during a recent conference held by the 340B Coalition.

The 340B program, which provides discounts on the prescription drugs dispensed on an outpatient basis by eligible providers to their low-income patients, has become increasing controversial in recent years as it has expanded and pharmaceutical companies have objected to the discounts they must provide.

Among the changes Azar suggested are coming are greater accountability among participating hospitals for how they use the savings they derive from the discounts and a narrowing of the difference between the prices hospitals pay for the drugs and their average sales price, which Azar said is currently too great.  CMS recently imposed a 28 percent reduction of Medicare payments to participating providers for drugs dispensed to 340B-qualified patients.

To qualify for participation in the program, providers must serve especially high proportions of low-income patients.  Most private safety-net hospitals participate in the program.

Learn more about Secretary Azar’s comments from this Healthcare Dive article.

 

Energy and Commerce to Look at 340B Today

The Health Subcommittee of the House Energy and Commerce Committee will hold a hearing today to review various proposals to alter the 340B prescription drug discount program.

That program enables hospitals that care for especially large numbers of low-income patients to receive discounts on prescription drugs that they dispense on an outpatient basis to low-income patients.

Among the issues the Health Subcommittee is expected to consider are whether hospitals are using these discounts to benefit their low-income patients and whether the extent of the discounts the pharmaceutical industry is required to provide result in increased prescription drug costs for others.

The subcommittee has already held two hearings on the 340B program this year and is currently considering more than a dozen proposals to change the program in some way.

Private safety-net hospitals typically participate in the 340B program and consider it an essential tool in their efforts to serve the residents of the low-income communities in which they are located.

Learn more about the 340B program and the various proposals to change it currently before Congress in this Roll Call article.

GAO Recommends Changes in Oversight of 340B Program

The federal Government Accountability Office is recommending that the Department of Health and Human Services improve its oversight of the 340B prescription drug discount program.

That program was created by Congress to help safety-net providers obtain discounts on prescription drugs they dispense to low-income patients on an outpatient basis.  Those discounts are provided by pharmaceutical companies and not paid for with taxpayer money.

The 340B program has been controversial in recent years, and in response to a request from Congress for the GAO to look into the contract pharmacies that operate the 340B programs for many safety-net providers, the GAO performed an examination of the program.

Its review identified several weaknesses in the manner that HHS’s Health Resources and Services Administration oversees the program.

  • HRSA audits do not fully assess compliance with the 340B Program prohibition on duplicate discounts for drugs prescribed to Medicaid beneficiaries. Specifically, manufacturers cannot be required to provide both the 340B discount and a rebate through the Medicaid Drug Rebate Program. However, HRSA only assesses the potential for duplicate discounts in Medicaid fee-for-service and not Medicaid managed care. As a result, it cannot ensure compliance with this requirement for the majority of Medicaid prescriptions, which occur under managed care.
  • HRSA requires covered entities that have noncompliance issues identified during an audit to assess the full extent of noncompliance. However, because HRSA does not require all the covered entities to explain the methodology they used for determining the extent of the noncompliance, it does not know the scope of the assessments and whether they are effective at identifying the full extent of noncompliance.
  • HRSA does not require all covered entities to provide evidence that they have taken corrective action and are in compliance with program requirements prior to closing the audit. Instead, HRSA generally relies on each covered entity to self-attest that all audit findings have been addressed and that the entity came into compliance with 340B Program requirements.

To address these concerns, the GAO recommends that the HRSA administrator:

  • require covered entities to register contract pharmacies for each site of the entity for which a contract exists
  • issue guidance to covered entities on the prevention of duplicate discounts under Medicaid managed care, working with CMS as HRSA deems necessary to coordinate with guidance provided to state Medicaid programs
  • incorporate an assessment of covered entities’ compliance with the prohibition on duplicate discounts, as it relates to Medicaid managed care claims, into its audit process after guidance has been issued and ensure that identified violations are rectified by the entities
  • issue guidance on the length of time covered entities must look back following an audit to identify the full scope of noncompliance identified during the audit
  • require all covered entities to specify their methodology for identifying the full scope of noncompliance identified during the audit as part of their corrective action plans, and incorporate reviews of the methodology into their audit process to ensure that entities are adequately assessing the full scope of noncompliance
  • require all covered entities to provide evidence that their corrective action plans have been successfully implemented prior to closing audits, including documentation of the results of the entities’ assessments of the full scope of noncompliance identified during each audit. The Administrator of HRSA should provide more specific guidance to covered entities regarding contract pharmacy oversight, including the scope and frequency of such oversight

Private safety-net hospitals typically participate in the 340B program and consider it an essential tool in the work they do serving the low-income residents of their communities.

Go here to see highlights from the report and here to see Drug Discount Program: Federal Oversight of Compliance at 340B Contract Pharmacies Needs Improvement, the full GAO report.

NAUH Endorses 340B Bill

In a letter to the leaders of the House Energy and Commerce Committee, NAUH has endorsed H.R. 6071, the Stretching Entity Resources for Vulnerable Communities Act (SERV), which was introduced earlier this week by Representative Doris Matsui (D-CA).

H.R. 6071 seeks to clarify the intent of the 340B prescription drug discount program and restore $1.6 billion in funding that was eliminated from the program effective January 1.

See NAUH’s letter to the House Energy and Commerce Committee here.

 

S&P: 340B Cuts Will Hurt

Payment cuts in the 340B prescription drug program will most likely hurt hospital financial performance, and among those most likely to be hurt are DSH hospitals, small hospitals, and rural hospitals.

These are among the conclusions in a report recently issued by S&P Global Ratings.

The report concludes that

…the impact of the cuts to the 340B Drug Pricing Program on not-for-profit hospitals that rely on 340B drug savings will likely weaken their operating performance at a time of already tightening margins.

Effective the beginning of 2018, the Centers for Medicare & Medicaid Services cut the 340B program 16 percent, or $1.6 billion, reducing the reimbursement 340B-eligible hospitals receive for dispensing prescription drugs on an outpatient basis to eligible patients.

The hospitals most affected, according to S&P, are those that

…depend more on the margin they receive from 340B medications to sustain their bottom line and overall financial profiles.  In these cases, cuts to the program are likely to further stress already-constrained operating performance, adding to financial pressure and possible negative rating actions.

Most private safety-net hospitals participate in the 340B program and will be affected by the recent cut.  NAUH conveyed to CMS its opposition to the cut when it was proposed last fall and earlier this year asked Congress to intervene and reverse it.

Learn more about the possible financial impact on hospitals of recent 340B payment cuts in this S&P Global report.

 

The 340B Issue Explained

The section 340B prescription drug discount program has grown increasingly controversial in recent years.

The program, established in the 1990s to help hospitals with the cost of the prescription drugs they provide to low-income patients on an outpatient basis, has grown considerably since its inception.  Pharmaceutical companies argue that it is too large, that it contributes to the growing cost of prescription drugs, and that hospitals are not using the savings they reap from the program to serve more low-income patients, as was envisioned when Congress created the program.

Eligible providers, on the other hand, note that much of the program’s growth was mandated by Congress and that 340B continues to serve its original purpose of helping hospitals serve low-income outpatients while using the savings the program generates to provide even further assistance to low-income patients.

Recent federal efforts to address some of these issues have satisfied neither side.

Most private safety-net hospitals participate in the 340B program and consider it to be a vital tool in helping them serve their communities.

The Vox news web site has published an article that describes the program and outlines both sides of the argument.  Find it here.

HHS Unveils Spring Regulatory Agenda

The U.S. Department of Health and Human Services has published a comprehensive list of the regulatory actions it plans to take in the coming months.

Included on the list are regulations that have been proposed, that are being finalized, and that are currently under development.  They address Medicare, Medicaid, Food and Drug Administration endeavors, medical devices, the 340B prescription drug discount program, and more.

Among the policy changes contemplated through future regulations are measures to reduce regulatory burdens for hospitals, address the opioid problem, facilitate the use of non-Affordable Care Act-compliant health insurance plans, and more.

Go here to see a complete list of the areas for proposed regulatory action by HHS and for links to brief statements about the contemplated actions.