Hospital groups urge CMS to withdraw proposal to slash 340B Medicare drug payments

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In a letter to CMS, hospital trade groups said a proposal to cut Medicare drug payments to hospitals that participate in a federal drug discount program would also violate both the 340B and Medicare statutes.

Two leading hospital trade groups Monday urged the Centers for Medicare & Medicaid Services to withdraw a proposal to drastically cut Medicare drug payments to hospitals that participate in a federal drug discount program.

The agency issued a proposed rule in August indicating it would pay hospitals 22.5% less than the average sales price for some drugs purchased under the 340B program, which requires drug manufactures to provide outpatient drugs to eligible healthcare organizations and covered entities at significantly reduced prices. Hospital groups were dismayed by the announcement because the program reduces drug costs for hospitals that serve a disproportionate share of low-income and rural patients. Hospitals use the savings to waive co-pays and provide drugs and other services for free or reduced costs to low-income patients.

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340B hospitals said the CMS proposal would undermine their ability to continue providing these services. 340B Health, which represents more than 1,300 public and private nonprofit hospitals and health systems in the drug pricing program, said in a statement that savings would be offset by increased Medicare spending for other services and higher beneficiary copays.

"The proposal would not lower costs for our patients, but would make it much more difficult for us to provide necessary cancer drugs to our patients who are insured by Medicare or Medicaid plans," Scott Wegner, M.D., medical director for Cancer Services at Genesis Healthcare in Zanesville, Ohio, said in the announcement.

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In a letter (PDF) to CMS Administrator Seema Verma, the 340B Health organization said the proposal would also violate both the 340B and Medicare statutes. The group urged CMS to continue to reimburse hospitals in the program for separately payable drugs at 6% more than the average sales price, the same rate it pays to non-340B hospitals.

The American Hospital Association, which represents nearly 5,000 hospitals, health systems and other healthcare organizations, expressed similar concerns in a letter (PDF) to Verma. “CMS lacks statutory authority to impose such a drastic reduction in the payment rate for 340B drugs, effectively eviscerating the benefits of the program,” wrote AHA Executive Vice President Tom Nickels. The trade group urged the agency to redirect its efforts to stop the “unchecked, unsustainable increases in the price of drugs.”

But not everyone is against the CMS proposal. The Community Oncology Alliance, a nonprofit organization dedicated to advocating for community oncology practices and the patients they serve, said it supports the plan because it will reduce drug costs for seniors by an estimated $180 million per year and will help to “stop outrageous hospital abuses” of the program.

“CMS’ proposal is a great first step in reforming 340B and reducing drug costs for seniors, but more is needed. Now it time for Congress to step up and do its part to fix the 340B program. This should include changes that introduce more transparency, accountability, and common-sense,” said Ted Okon, executive director of COA. “Countless studies have shown the enormous and unsustainable growth, low charity care levels, cost to patients and taxpayers, and negative impact on the nation’s cancer care system that the current program is having. We can’t afford to put off fixing the 340B program any longer.”