MedPAC Report Endnote Sheds Light on Hospital Losses Due to CMS 340B Drug Payment Cuts

Your 340B Report for Friday June 19, 2020

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How much money are hospitals losing due to CMS’s nearly 30 percent cut in Medicare Part B reimbursement for 340B-acquired drugs? If you take data from a report MedPAC just issued and data from a report MedPAC issued last year and do the math, it looks like hospitals lost $1.54 billion in 2018.

MedPAC Report Endnote Sheds Light on Hospital Losses Due to CMS 340B Drug Payment Cuts

The 340B program is barely mentioned in the Medicare Payment Advisory Commission’s (MedPAC) latest report, delivered to Congress on June 15, appearing only in an endnote on page 176 of the 227-page document.

That fleeting reference, though, supplies part of the answer to a question that has been nagging some 340B stakeholders for more than two years: Exactly how much money are hospitals losing due to the Centers for Medicate & Medicaid Services’ (CMS) decision to slash by almost 30 percent Medicare Hospital Outpatient Prospective Payment System (OPPS) reimbursement for “separately payable non-pass-through drugs” (SPNPTDs) bought through the 340B program?

MedPAC doesn’t answer the question precisely. But when you combine what it says in this report with findings in a report it issued last year, the picture becomes clearer.

The MedPAC report endnote about 340B, in a chapter on SPNPTDs (defined as “relatively high-cost drugs that are already established in the drug market”) says total OPPS spending and beneficiary cost sharing on SPNPTDs in 2018 was $12.9 billion. That was the year that CMS began reducing hospital reimbursement through OPPS for 340B-purchased drugs from average sales price (ASP) plus 6 percent to ASP minus 22.5 percent.

“We estimate that if the OPPS payment rate for SPNPT drugs” obtained through the 340B program “had been ASP + 6 percent in 2018, combined program spending and beneficiary cost sharing would have been $14.8 billion in 2018,” MedPAC said.

That’s a $1.9 billion difference. MedPAC didn’t separate beneficiary cost sharing from OPPS program payments in the endnote in this week’s report. Fortunately, its 2019 Data Book does separate them, but for all outpatient services covered, not just for SPNPTDs. According to that document, beneficiary cost sharing was about 19 percent of all spending on all services covered by OPPS in 2018.

If you deduct the 19 percent figure taken from the 2019 Databook from the $1.9 billion figure taken from this week’s report, you come up with $1.54 billion in losses to 340B hospitals in 2018. That’s pretty close to the $1.6 billion figure in this 340B Health infographic. 

The CMS 340B drug reimbursement cuts continued in 2019 and are in place this year. Hospitals have sued to get the cuts reversed, and a federal appeals court decision is expected at any time. If CMS loses the case, it might issue a proposed OPPS rule that reimburses hospitals for 340B drugs for 2018 through this year based on net average acquisition costs and maybe set future payment rates on net average acquisition costs, too. Reimbursement on that basis likely would be much worse for hospitals than reimbursement at ASP minus 22.5 percent. CMS also has said that, if it loses the case, it might set OPPS reimbursement for hospitals’ 340B-acquired drugs at ASP plus 3 percent for 2018, 2019, and 2020 if the court limits “the size of the payment adjustment the agency may permissibly apply.”


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Merck Says it Has to Keep Rationing Bladder Cancer Drug in Short Supply

Drug manufacturer Merck says demand for its bladder cancer drug TICE BCG “now outpaces our maximum supply,” forcing it “for the foreseeable future” to continue allocating available supply via wholesalers and distributors based on health care providers’ historical purchasing patterns. “The same allocation procedure applies to both 340B covered entities and non-340B covered entities,” it said. Merck began rationing TICE BCG in January 2019.

Merck made the announcement in a public notice this week on the U.S. Health Resources and Services Administration (HRSA) website. The company also said it will stop providing preservative-free saline with orders of TICE BCG.


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Administration Can’t Force Pharma to Disclose Prices in Ads, Appeals Court Agrees

A federal appeals court in Washington, D.C., has upheld a lower court ruling striking down the Trump administration rule requiring drug manufacturers to include their list prices in advertisements. The administration had hoped this requirement would be one of its signature drug pricing accomplishments.  A federal district judge ruled in July 2019 that Congress had not authorized the U.S. Health and Human Services Department (HHS) to mandate the drug price disclosures.

The U.S. Court of Appeals for the District of Columbia is expected at any time to hand down a decision about another element of the administration’s drug pricing blueprint: CMS’s deep cuts to 340B hospital drug reimbursement. (See today’s top story.) The administration says the cuts help save older Americans money because they lower Medicare beneficiaries cost sharing obligations for Part B drugs. Hospitals counter that the cuts don’t actually save patients money since 86 percent of Medicare beneficiaries have third party co-pay coverage and since the rule is budget neutral, they are offset by higher co-pays on non-drug items.


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Nearly 90 Percent of Americans Are Worried Pharma Will Use COVID-19 to Hike Drug Prices

A new study by West Health and Gallup has found that nearly nine in 10 U.S. adults are "very" (55 percent) or "somewhat" (33 percent) concerned that the drug industry will leverage the COVID-19 pandemic to raise drug prices. Sixty six percent of Democrats, 52 percent of independents, and even 49 percent of Republicans say they are very concerned. The poll was conducted May 11-22.

The poll found that deep concern about rising drug costs due to COVID-19 crosses gender, racial, and income lines. Fifty seven percent of women and 52 percent of men said they are very concerned the pharmaceutical industry will take advantage of the current COVID-19 pandemic to increase drug prices. So did 59 percent of non-white and 52 percent of white Americans. Stratified by income, 57 percent of Americans with annual incomes below $40,000, 51 percent with incomes from $40,000 to $100,000, and 56 percent with income above $10,000 agreed.

West Health and Gallup also said Americans are concerned, but to lesser extent, about rising health insurance premiums and the cost of care generally. Overall, they said, 79 percent are very or somewhat concerned about their health insurance premiums rising and 84 percent are very or somewhat concerned about the cost of care generally rising.

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