Screws Tighten on 340B Program

A MedPAC recommendation to reduce by 10% Medicare payment rates for 340B hospitals' separately payable Part B drugs has been greeted with a chorus of boos from hospital trade associations.

Pressure continues to build to reform the 340B Drug Pricing Program.

The Medicare Payment Advisory Commission last week voted 14–3 to send on to Congress a list of recommendations that includes reducing Medicare payment rates for 340B hospitals' separately payable Part B drugs by 10% of the average sales price.

MedPAC also recommended that the savings be redirected to the Medicare-funded uncompensated care pool, which would help hospitals providing care for the uninsured. 

That recommendation was greeted with a chorus of boos from hospital trade associations. Tom Nickels, executive vice president and lead lobbyist for the American Hospital Association, called MedPAC's actions "misdirected."

"MedPAC is penalizing hospitals and the patients they serve instead of addressing the real issue, the skyrocketing cost of pharmaceuticals," Nickels said in prepared remarks.

He also questioned whether MedPAC "has ventured so far afield from their mission" in its call to redirect funding from the 340B program, which is administered by the Health Resources and Services Administration.

Pricing of Prescription Drugs Debated

"Making a recommendation that penalizes hospitals for their participation in a non-Medicare, public health program that is designed to increase patient access to care is outside of MedPAC's scope, and is inappropriate," he said.

Bruce Siegel, MD, president and CEO of America's Essential Hospitals, said the changes recommended by MedPAC "would produce negligible savings for beneficiaries, while putting vulnerable patients and the hospitals on which they depend at risk."

"In fact, most of the $70 million in estimated beneficiary savings would not go directly to beneficiaries, as 86% have supplemental insurance, according to MedPAC figures," Siegel said in prepared remarks.

Siegel said the commission went forward with its "ill-advised recommendation" without researching the potential effects on 340B hospitals and their patients.

"It is unclear to us why the commission would recommend an inequitable policy, one at odds with congressional intent and destined to reduce support to a select group of hospitals that serve our most vulnerable patients, while ignoring the larger issue of ballooning drug costs," he said.

340B Health, an association of more than 1,000 hospitals that participate in the drug discount program, said in a letter to MedPAC Chairman Francis J. Crosson, MD, that the proposal would fundamentally change the 340B program and there has not been enough analysis about how hospitals would be affected.

"340B hospitals provide significantly more uncompensated care than non-340B hospitals," the advocacy group said in prepared remarks. "The proposal would harm hospitals that provide high levels of care to Medicaid patients even though Congress set the 340B eligibility criteria to explicitly include high-volume Medicaid hospitals. This is not the time to make fundamental changes to the 340B program, especially as 340B hospitals struggle to meet the needs of their low-income and underserved populations in an era of rapidly increasing drug costs."

Even the Pharmaceutical Research and Manufacturers of America did not agree with MedPAC's recommendations. "While it is evident the 340B drug discount program is growing at unsustainable levels and thoughtful reform is needed, this proposal is not the right approach," PhRMA said in prepared remarks. The drug makers lobby declined to provide more acceptable approaches.

In the opposite corner, Ted Okon, executive director of the Community Oncology Alliance, a trade association for independent oncology services providers, says MedPAC's recommendations don't go far enough.

"Frankly, Congress is going to have to do more and specifically in terms of defining who is an eligible patient for 340B and also requiring more transparency and accountability," Okon says.  "No one wants to create more bureaucracy on any provider, but 340B has become a black hole on the hospital side and it's not clear that it's the patients who are benefitting. I am a little mystified at why the hospitals wouldn't want to do that proactively so they would be in control of the modifications of 340B and showing how it is benefitting patients as opposed to letting policymakers make those modifications."

MedPAC also recommended that Congress tell the Department of Health and Human Services to: 

• Update inpatient and outpatient payments by the amount specified in current law, which is projected to be about 1.75%
• Distribute all uncompensated care payments using data from the Medicare cost reports' worksheet S-10. The use of S-10 uncompensated care data should be phased in over three years.

The 340B program has come under increasing scrutiny from the federal government in the past year.

In December, the Office of the Inspector General at the Department of Health and Human Services found that Medicare Part B and its beneficiaries paid $3.5 billion for 340B drugs in 2013, about 58% more than the statutorily based 340B ceiling that year, which allowed those beneficiaries to keep about $1.3 billion because the 340B statute does not restrict how those funds are used. 

OIG said in its report that some form of a shared-savings program "would have resulted in Medicare Part B savings of $162 million to $1.1 billion in 2013 while still providing covered entities with incentives to purchase those drugs through the 340B Program."

The Government Accountability Office issued a report on 340B in June 2015 and found that 12% of 340B disproportionate share hospitals were among those "providing the lowest amounts of charity care across all hospitals in GAO's analysis."

GAO further found that "per beneficiary, Medicare Part B drug spending, including oncology drug spending, was substantially higher at 340B DSH hospitals than at non-340B hospitals. This indicates that, on average, beneficiaries at 340B DSH hospitals were either prescribed more drugs or more expensive drugs than beneficiaries at the other hospitals in GAO's analysis. For example, in 2012, average per beneficiary spending at 340B DSH hospitals was $144, compared to approximately $60 at non-340B hospitals." GAO said the differences could not be explained by the hospital characteristics or patients' health status.

MedPAC issued its own report on the 340B Program in May, 2015 and noted that the number of hospitals participating in the program had more than tripled from 2005 to 2013, as had the money spent by "covered entities."

Assessing Payment Adequacy and Updating Payments by HLMedit