CMS Proposes Payment Rate Change for 340B Program

Proposed change to the payment rate under the 340B program for certain Medicare Part B drugs would cut reimbursement rate in attempt to address rising drug costs.

Reform may be coming to the controversial 340B Drug Discount Program, which requires drug companies to provide discounts to hospitals, clinics, and covered entities that include freestanding cancer centers.

In January 2017, the Health Resources and Services Administration (HRSA) within HHS had finalized a rule that would set the 340B ceiling price and allow HRSA to fine manufacturers up to $5000 for each incident of knowing and intentional overcharging of 340B hospitals for drugs purchased through the program. However, the rule was pulled back when the new administration came into the White House.

Now, the Trump administration has proposed its own change to the payment rate for certain Medicare Part B drugs purchased by hospitals through the 340B program.

According to CMS Administrator Seema Verma, “the proposed rule takes a critical step towards fulfilling President Trump’s promise to lower the cost of drugs, particularly for Medicare beneficiaries.”

The proposal gained immediate support from the Community Oncology Alliance (COA), which has previously called out abuses taking place in the 340B program. The program was created with good intentions, COA has argued, but has morphed into an opportunity for hospitals to make tremendous profits by buying deeply discounted drugs and selling them to patients at full price.

“Community oncology practices across the country will tell you that hospitals have been strong-arming them to sell or close because of the tremendous profits they make from the 340B program and higher billing rates,” Jeff Vacirca, MD, president of COA and CEO of NY Cancer and Blood Specialists in Long Island, NY, said in a statement.

The proposal would implement a new payment methodology for Medicare Part B reimbursement for 340B drugs, which would cut reimbursement by close to 30%. The rule would allow entities to purchase discounted 340B drugs at the average sales price (ASP) minus 22.5% rather than the ASP plus 6%. The Medicare Payment Advisory Commission estimated that this was the average minimum discount that eligible hospitals could receive for drugs purchased through the 340B program.

The comment period for the rule will be open through September 11, 2017, and the proposed rule would take effect January 1, 2018.

“We applaud HHS Secretary Price and CMS Administrator Verma for taking this bold step in curtailing hospital abuse of the 340B program and further addressing site payment parity,” said Ted Okon, executive director of COA. “These proposals represent a good first step, but the administration and Congress must take additional steps to address the alarming consolidation of cancer care that is fueling drug prices and driving up costs for seniors and taxpayers.”