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CMS Payment Rule Undercuts Key Program Supporting Access to Affordable Prescription Drugs

November 02, 2017

The Centers for Medicare & Medicaid Services (CMS) finalized a payment regulation that will undermine efforts to ensure access to affordable prescription drugs by dramatically cutting payments for drugs acquired under the 340B Drug Pricing Program.

The 340B Drug Pricing Program is an essential tool in supporting health care organizations that care for large numbers of uninsured and low-income patients, serve rural communities, and offer vital services to cancer patients and children in managing the increasingly high cost of pharmaceuticals. These 340B hospitals receive discounted medications from pharmaceutical manufacturers and then are able reinvest those savings to reach more patients and provide more comprehensive services.

Earlier this year, as part of the proposed hospital outpatient prospective payment system (OPPS) rule for calendar year (CY) 2018, CMS issued a new payment policy that would significantly undercut the benefit of the program. The policy pays for drugs purchased through the 340B program at the average sales price (ASP) minus 22.5 percent, rather than the current rate of ASP plus 6 percent. In September, HAP issued a comment letter urging CMS to abandon the misguided policy.

bipartisan letter, signed by 228 members of the U.S. House of Representatives, including ten from the Pennsylvania delegation, urged CMS to reconsider the policy proposal. U.S. Senator Bob Casey (D-PA) joined a similar letter cosigned by 57 Senators.

Despite strong push back by health care stakeholders and lawmakers, CMS finalized the policy in the final payment rule issued yesterday. A CMS Fact Sheet outlines the policy.

Under the final rule, payments for separately payable, non-pass-through drugs (other than vaccines) purchased through the 340B program will be cut by $1.6 billion. That amount will be redistributed to other non-drug services. Sole community hospitals in rural areas, PPS-exempt cancer hospitals and children's hospitals will be exempt from the policy for CY 2018.

HAP will join with national health care stakeholder organizations in working with Congress to address the payment cuts. National hospital organizations—American Hospital Association, Association of American Medical Colleges, America's Essential Hospitals—are pursuing legal action to prevent the policy from moving forward.

In a recent hearing before the U.S. House Energy & Commerce Oversight and Investigations Subcommittee, health care providers testified to how the 340B Drug Pricing Program helps them expand and improve access to care. Pennsylvania hospitals have pointed to using the savings to:

  • Provide clinical pharmacy services, such as disease management programs or medication therapy management
  • Fund other medical services, such as obstetrics, diabetes education, cancer services, and other ambulatory services
  • Establish additional outpatient clinics to improve access
  • Create new community outreach programs
  • Offer free vaccinations for vulnerable populations

For additional information about the payment policy, please contact Jolene Calla, HAP’s vice president of health care finance and insurance. Questions regarding federal advocacy may be directed to Laura Stevens Kent, HAP’s vice president, federal legislative advocacy.

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