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Where the 340B Program Currently Stands

By Jack O'Brien  
   May 31, 2018

Critics and advocates are debating several policies to improve the effectiveness of the federal discount drug pricing program. 

May has been an eventful month for the 340B Drug Pricing program, as numerous policy proposals and decisions affecting the federal program have been debated by both critics and advocates.

Earlier this year, CMS reduced the amount 340B hospitals are reimbursed for prescription drugs under Medicare Part B by $1.6 billion. Though rural community hospitals, children's hospitals, and OPPS-exempt cancer hospitals were exempted from the change, 340B hospital advocates challenged the decision in federal court, citing concerns about how the cuts would financially impact hospitals.

S&P Global Ratings released a report Tuesday stating that federal cuts to the program will impact non-profit hospitals by weakening their "operating performance at a time of already tightening margins." The rating agency also said health systems could see their ratings negatively impacted if "hospital-specific funding reductions were material" and not offset by other management actions.

The 340B program, which critics allege is rife with profiteering and abuse, is also at the center of the Trump administration's recent efforts to lower prescription drug prices as well as private and federal studies about its effectiveness.

Below are four recent developments regarding the oft-discussed federal program:

1. Funding cuts challenged

  • The CMS cuts are being challenged in federal court by a long list of healthcare organizations, including the American Hospital Association, the Association of American Medical Colleges, and America’s Essential Hospitals.

  • The most recent hearing was held in early May, as the federal government seeks to have the case dismissed while advocates push for a review of the cut, citing the effect it could have on hospitals in need.

  • Additionally, a joint letter authored by Families USA and cosigned by numerous healthcare organizations on May 14, urged congressional leadership to oppose policies that "diminish the 340B program's proven ability to help serve vulnerable patients and communities."

2. GAO report on improvement efforts

  • The U.S. Government Accountability Office (GAO) released a report on May 15 that reviewed the actions taken by the Health Resources and Services Administration (HRSA) to improve oversight of 340B since its 2011 report on the program.

  • GAO found HRSA followed two of its four recommendations; initiating audits of covered entities and clarifying guidance for manufacturers, though it hasn't clarified guidance on the definition of an eligible patient and hospital eligibility criteria.

  • However, despite two recommendations being enacted, GAO said HRSA only audits 2% of covered entities in the program.

3. American Patients First plan eyes reforms

  • Earlier this year, CMS Administrator Seema Verma enacted a policy change aimed at reducing how much 340B beneficiaries and the government pay hospitals for prescription drugs through the program.

  • In a May 16 speech at the Pharmacy Quality Alliance annual meeting, Verma said the move is expected to save Medicare enrollees $320 million in 2018, with those savings directed to hospitals which require funding.  

  • During his drug pricing speech, Trump said the Department of Health and Human Services is looking to eliminate incentives for physicians to write high-price prescriptions, while reducing out-of-pocket spending by consumers through reforms to the program.

4. HRSA delays ceiling prices implementation

  • In early May, HRSA announced another delay in the implementation of a final rule on 340B until July 2019, the fifth delay for the federal program.

  • The final rule imposes monetary penalties for manufacturers that "knowingly and intentionally" charge more than ceiling price for an outpatient drug, clarifies the requirement to calculate that price every quarter, and requires penny pricing for each unit of a drug when the ceiling price is zero.

  • The American Hospital Association, the Association of American Medical Colleges, the Catholic Health Association of the United States, America’s Essential Hospitals, the Children’s Hospital Association, and 340B Health, submitted comments opposing the proposed delay on May 22.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.

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