CMS Proposed Rule Cuts 340B Payments

The Centers for Medicare & Medicaid Services (CMS) announced a proposed rule to cut Agency payments to hospitals under the program. 

The 340B Drug Pricing Program requires drugmakers that participate in Medicaid to provide discounts on pharmaceuticals to hospitals that serve a high volume of uninsured or low-income patients. CMS currently reimburses hospitals for drugs purchased through Medicare at the average sale price plus and additional 6%. Qualifying hospitals usually use this additional revenue to fund other programs for low-income patients within the hospital; however, 340B does not regulate how hospitals spend the money generated through the program.

Under the proposed rule, CMS would reimburse hospitals at 22.5% less than a drug’s average sale price, a total reduction of 28.5% of payments made under the current law. 

In a recent statement from the American Hospital Association, Tom Nickels, JD, executive vice president of the AHA said that this rule will hurt be detrimental to low-income hospitals. 

“Cutting Medicare payments for hospital services in the 340B program is not based on sound policy,” he said. “Additionally, this proposed rule punishes hospitals for a policy outside of CMS’ jurisdiction. It is unclear why the Administration would choose to punitively target 340B safety-net hospitals serving vulnerable patients, including those in rural areas, rather than addressing the real issue: the skyrocketing cost of pharmaceuticals.”

The CMS noted in a press release that this procedure is an attempt to lower the cst of drugs for Medicare beneficiaries. 

“CMS is committed to transforming the Medicare program and updating our policies to provide high-quality and affordable patient-centered care,” Seema Verma, MPH, administrator of the CMS, said. “These changes require innovative strategies, and we look forward to receiving stakeholder comment and incorporating new ideas in our final rule this fall. Additionally, the proposed rule takes a critical step towards fulfilling President Trump’s promise to lower the cost of drugs, particularly for Medicare beneficiaries.”

Mr Nickels argued that this proposed rule will do little to change the cost of drugs in the United States. 

“CMS repeatedly cites the fact that Medicare expenditures on drugs are rising due to higher drug prices as an impetus for its proposal,” he said. “Yet, its proposed 340B policy change does nothing to directly tackle this issue. We strongly urge CMS to abandon its misguided 340B proposal and instead take direct action to halt the unchecked, unsustainable increases in the cost of drugs.” —David Costill