Who wins, who loses under 2018 changes to CMS' 340B drug discount program

Medicare enrollees in New York, California and North Carolina could also see the greatest savings, according to a new report. (jansucko/iStock/Getty Images Plus/Getty Images)

CMS' changes to the 340B drug discount program will hit New York, California and North Carolina especially hard, according to a new analysis. 

Hospitals in those three states would receive the biggest decreases under the program, which was approved by the Centers for Medicare & Medicaid Services in November, according to a new report from Avalere Health. Cuts in those states could be between $62 million and $126 million. 

CMS changed the payment rate for 340B for fiscal year 2018 to 22.5% less than the average sales price of drugs. Previously, under long-standing Medicare policy, the rate was up to 6% more than the average price for a drug. The change would cut $1.6 billion in drug discount payments overall. 

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Avalere predicts that hospitals in three other states—Pennsylvania, Michigan and Georgia—will see cuts to their drug discount payments of at least $50 million. Medicare payment increases in some other areas may offset these decreases somewhat, according to the report. 

New York, California and North Carolina patients, meanwhile, will see the greatest savings, according to the report. Medicare beneficiaries in those three states could save between $15 million and $31 million, and Avalere estimates that beneficiaries in 10 states will see at least $10 million in savings. 

"This payment change represents a significant reduction in drug-related revenue and profitability for some hospitals," Dan Mendelson, Avalere Health's president, said in an announcement.

"At the same time, the payment change also delivers meaningful savings to Medicare beneficiaries who are responsible for paying a portion of their drug costs." 

RELATED: 340B program doesn't increase drug prices, study finds 

Hospitals have vowed to fight the move, and the American Hospital Association, Association of American Medical Colleges and America's Essential Hospital have sued the Department of Health and Human Services to prevent the cuts.  

Avalere found that most hospitals would see a limited impact on their revenues, but the 340B payment cuts could significantly hurt some disproportionate-share hospitals that treat large numbers of low-income patients. It projected that some 60 DSHs could face revenue reductions of 10% or more, which would be financially crippling. 

RELATED: Hospitals, pharmaceutical companies spar over cuts to 340B drug discount program 

340B Health, an association of hospitals and health systems that are enrolled in the 340B program, is calling on Congress to block CMS' cuts.

It asked for legislative action by the end of the year in a letter (PDF) to congressional leaders that was also signed by America's Essential Hospitals, the Children's Hospital Association, The Hemophilia Alliance, the National Association of Counties, the National Alliance of State and Territorial AIDS Directors and the National Rural Health Association. 

"Although the providers we represent are not all directly affected by the payment reduction, we are concerned that this payment cut will take away desperately needed resources that safety net providers use to treat vulnerable patients, inconsistent with the purpose of the 340B program," the letter said. 

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