CMS Slashes 340B Payments to Hospitals

The CMS announced it would significantly cut Medicare payments made to hospitals for drugs purchased under the 340B program, according to a press release from the Agency.

The 340B program works by allowing hospitals to purchase drugs from manufacturers at a significant discount. Medicare then reimburses these purchases to the hospitals at a rate that is 6% above the national average price. Hospitals typically use the surplus money gained through the 340B program to fund health services for low-income and uninsured patients in the community.

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The new final rule, the “Hospital Outpatient Prospective Payment System Rule,” would reduce the amount that Medicare reimburses hospitals for drugs purchased through 340B to 22% lower than the average sale price. The CMS claims that the cuts to 340B will save the Medicare program and Medicare enrollees nearly $1.6 billion—by passing the savings directly to enrollees.

“As part of the President’s priority to lower the cost of prescription drugs, Medicare is taking steps to lower the costs Medicare patients pay for certain drugs in the hospital outpatient setting,” Seema Verma, MPH, administrator of CMS, said in the press release.

“Medicare beneficiaries would benefit from the discounts hospitals receive under the 340B Program by saving an estimated $320 million on copayments for these drugs in 2018 alone.”

However, hospital groups are arguing that cuts to 340B could impact access to hospital services for low-income patients.

“CMS’s decision in today’s rule to cut Medicare payments to hospitals for drugs covered under the 340B program will dramatically threaten access to health care for many patients, including uninsured and other vulnerable populations,” Tom Nickels, executive vice president of the American Hospital Association, said in a press release. “It is not based on sound policy and punishes hospitals and patients for participation in a program outside of CMS’s jurisdiction.”

The CMS final rule also notes that “rural sole community hospitals, PPS-exempt cancer hospitals, and children’s hospitals will be excepted from this policy for 2018.”

—David Costill

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