05 Sep Opinion: Proposal to Raid Drug Discount Funds from Hospitals Must Be Stopped

This summer, the Centers for Medicare & Medicaid Services (CMS) proposed a new rule for outpatient care that would slash payments for drugs to certain health care providers who qualify for the 340B Drug Discount Program (which is named for a section of the Public Health Service Act).

This CMS proposal to significantly reduce drug reimbursements to certain hospitals and other providers threatens the ability of more than 1,900 hospitals and tens of thousands of medical professionals to provide lifesaving prescription drugs and comprehensive health services to the communities they serve, particularly our vulnerable populations.

Created in the early 1990s and signed into law by President George H.W. Bush, the 340B Drug Discount Program has been instrumental in expanding access to care. It is an essential component of our healthcare safety net and absolutely vital to providing affordable care in an era of skyrocketing drug costs. Its impact is particularly profound in rural areas, many of which are economically depressed and have high poverty levels.

Under the 340B program, pharmaceutical manufacturers participating in the Medicaid drug programs must sell outpatient drugs at discounted prices to health care organizations that care for a disproportionate share of Medicaid, Medicare, uninsured and low-income patients. This includes community health centers, children’s hospitals, free-standing cancer hospitals, hemophilia treatment centers, sole community hospitals, rural referral centers, and public and nonprofit hospitals.

These institutions, in turn, use their drug cost savings under the 340B Drug Discount Program to enhance access to care in many ways, including: providing financial assistance to those who cannot afford prescription drugs on their own; providing services such as obstetrics, diabetes education, and oncology care; and offering free vaccinations for vulnerable populations.

Under the recently proposed CMS rule, key groups of drugs (other than vaccines) purchased through the 340B Drug Discount Program would be reimbursed at the average sales price (ASP) minus 22.5 percent, rather than ASP plus 6 percent. This amounts to Medicare raiding these funds from the Hospitals serving disproportionate numbers of low-income patients and giving it to Hospitals who do not. CMS estimates this would reduce Medicare Part B drug payments by as much as $900 million.

CMS says it would implement the policy in an overall budget neutral way, which means that money currently going to vulnerable 340B hospitals could be distributed to all hospitals paid under the outpatient payment system generally. CMS’s proposal massively cuts funding for the facilities serving our most vulnerable populations and redistributes it to health providers who already have a much more favorable mix of payors.

Bottom line: the CMS proposal would punish those nearly 2,000 safety-net hospitals while doing absolutely nothing to attack the root problem of mushrooming pharmaceutical costs.

Patients across the country will feel the harmful impacts of this proposal. A study by 340B Health (an organization of public and private nonprofit hospitals and health systems participating in the 340B drug pricing program) of its 1,200 member hospitals revealed that almost 3/4 of the surveyed hospitals would be forced to cut staff without 340B savings. In fact, without 340B savings, 41% of the surveyed hospitals anticipate that they would have to close one or more clinics.

Congress needs to ask many hard questions about the CMS proposal. The biggest is very basic:
How would Medicare beneficiaries themselves be affected? CMS claims that it wants to reduce Medicare beneficiaries’ drug copayments when seeking care at 340B hospitals. But the fact is that, already, many of those patients are not responsible for their own copayments.

An analysis by MEDPAC (the Medicare Payment Advisory Committee, an independent body established by Congress) shows 86 percent of all Medicare beneficiaries have supplemental coverage where their copayments are paid by others – and of that, 30 percent have their copayments paid for by a public program, such as Medicaid, or by their Medigap plan. So it is clear that the CMS plan would have no positive impact on many Medicare beneficiaries.

Clearly, slashing the 340B Drug Discount Program would hurt access to healthcare for all Americans, especially vulnerable patients, and increase costs to the government. At its core, this proposal is a 30% cut to 340B. Many hospitals would be forced to close — particularly in rural areas, cutting many people off from vital care. Federal, state and local governments would have to make up hundreds of millions dollars in funding for safety net and rural hospitals to be able to continue to provide care.

Comments to CMS on the proposal must be received by close of business on September 11, 2017. Please act now and urge CMS to reject this plan. Click here to submit comments to CMS and be sure to reference file code CMS-1678-P when responding.