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MedPAC Recommends Congress Cut Part B Reimbursement for 340B Entities

Surabhi Dangi-Garimella, PhD
A proposal to reduce Medicare Part B payment rates for hospitals participating in the 340B Drug Pricing Program has been approved 14-3 by the Medicare Payment Advisory Commission.
A proposal to reduce Medicare Part B payment rates for participants in the 340B Drug Pricing Program has been approved 14-3 by the Medicare Payment Advisory Commission (MedPAC). A non-partisan agency, MedPAC provides policy advice to the Congress on issues that affect the Medicare program.

With today’s vote, the Commission recommended the Congress to:

  • Reduce Medicare Part B drug reimbursement for 340B hospitals by 10% of average sales price, which would cut the amount a hospital saves on a Part B drug by about 30%, and results in savings to the tune of $300 million
  • Transfer the savings into the Medicare-funded hospital uncompensated-care pool
  • Distribute payments from the pool on the basis of data from the Medicare cost report’s worksheet S-10, phased in over 3 years 
Initiated in 1992, the 340B Drug Pricing Program requires pharmaceutical manufacturers participating in the Medicaid Drug Rebate Program to negotiate a drug pricing agreement with HHS—the manufacturer will provide specified discounts on “covered outpatient drugs” to government-supported facilities. The program enables covered entities to stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.

"MedPAC’s decision to address the 340B drug discount program is yet another signal that the program is unsustainable and putting profits ahead of patients. The MedPAC decision follows work by government watchdogs OIG and GAO in documenting the excesses of 340B in the hospital sector," Ted Okon, executive director of the Community Oncology Alliance, told The American Journal of Managed Care. "However, in order to ensure that 340B is being used as a true safety net by hospitals, Congress will have to act way beyond the MedPAC recommendations. Legislation is needed to better define patient eligibility and to require transparency and accountability of how hospitals are using 340B profits. 340B needs to be about patients in need, and not letting them fall between the treatment cracks, rather than about making money off of what has become an enormous government loophole."

Just last week, the American Hospital Association (AHA) had urged MedPAC to withdraw its draft recommendation to cut payment rates to the 340B-participating hospitals. “This recommendation is outside of the scope of MedPAC’s mission, lacks a clear purpose and penalizes certain hospitals for their ability to obtain discounts on the items and services they purchase,” wrote Ashley Thompson, AHA senior vice president for public policy analysis and development, in the letter.

In reaction to the vote, 340B Health, a not-for-profit organization of over 1100 public and private hospitals and health system said in an e-mail, “We are concerned about MedPAC’s recommendation to Congress on the 340B program approved by the panel this morning. MedPAC’s 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 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.”

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