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340B hospitals are happy that CMS has decided to end a deep cut in the hospitals' Medicare drug reimbursement. Private oncology practices call the decision "“an outrageous dereliction of duty."

Hospital Groups Cheer, Private Cancer Docs Deplore CMS’s Decision to End Deep Cut in 340B Hospitals’ Drug Payments

Groups that represent 340B hospitals praised the Biden administration’s decision Friday to end a deep cut in the hospitals’ Medicare Part B drug reimbursement in place since 2018. They urged the government to swiftly make 340B hospitals whole for their losses, which totaled an estimated $1.6 billion a year for five years.

Private oncology practices that compete with 340B hospitals called the Centers for Medicare and Medicaid Services’ (CMS) hospital outpatient prospective payment system (OPPS) proposed rule for 2023 and its decision to end the payment cut for 340B hospitals “an outrageous dereliction of duty by an agency responsible for the financial health of the country’s Medicare program.”

Trade associations for for-profit hospital chains and pharmaceutical manufacturers, which both had backed the nearly 30% cut in 340B hospitals’ Part B drug payments, did not immediately respond to requests for comment about CMS’s OPPS proposed rule.

Background

The cut in 340B hospitals’ Part B drug reimbursement from average sales price plus 6% to ASP minus 22.5% began under President Trump and continued for two years under President Biden. CMS said during both administrations that the lower payment rate more closely reflected 340B hospitals’ drug acquisition costs. Cutting the payment rate had the added benefit of reducing some Medicare beneficiaries’ Part B drug copayments, CMS said. 

Due to Medicare budget-neutrality requirements, CMS spread the money saved from cutting 340B hospitals’ Part B drug payments among all hospitals in OPPS in the form of higher non-drug payments. 340B hospital groups argued that patients actually did not get a financial break since their co-pays increased on non-pharmaceutical products and procedures.

Groups whose members include 340B hospitals said the cuts were illegal, sued CMS, and won last month in U.S. Supreme Court. The court struck down the cuts for 2018 and 2019. It sent the case back to a federal appeals court to devise a remedy.

CMS on Friday said it “fully anticipate[s]” paying hospitals ASP plus 6% next year for 340B-purchased drugs but is “still evaluating how to apply the Supreme Court’s recent decision to prior calendar years.” It invited the public to comment “on the best way to craft any potential remedies affecting cost years 2018-2022 given that the Court did not resolve that issue.” Comments are due on Sept. 13. CMS said it will issue the OPPS final rule for 2023 in early November.

Hospital Groups’ Comments

American Hospital Association Executive Vice President Stacey Hughes said in a July 15 statement that “ending [the] unlawful cuts to 340B hospitals in next year’s Medicare outpatient payment … will help 340B hospitals provide comprehensive health services to their patients and communities.”

“Having now recognized what 340B hospitals are owed under the law, we urge the administration to promptly reimburse those hospitals that were affected by these unlawful cuts in previous years,” Hughes said. “Additionally, we continue to urge [CMS] to ensure the remainder of the hospital field is not penalized for their prior unlawful policy, especially as hospitals and health systems continue to deal with rising cost for supplies, equipment, drugs and labor.”

America’s Essential Hospitals Senior Vice President of Policy and Advocacy Beth Feldpush said on July 15, “We are pleased the Centers for Medicare & Medicaid Services clearly has stated its intention to fully restore payments for 340B-acquired drugs in the calendar year 2023 Outpatient Prospective Payment System (OPPS) proposed rule.”

“This is an important step toward reversing the damage caused by deep cuts to payments for outpatient drugs acquired through the 340B Drug Pricing Program—cuts the U.S. Supreme Court unanimously found unlawful,” Feldpush said. “We now must turn to a timely remedy that reinstates payments critical to essential hospitals’ efforts to advance access and improve health equity.”

Senior Vice President of Government Affairs Soumi Saha of group purchasing organization Premier said it “is pleased that CMS has committed to return to the ASP + 6% payment for 340B drugs for CY 2023, rather than continuing to implement cuts that the Supreme Court ruled were unlawful.”

“Arriving at a remedy to address past reimbursement shortfalls based upon the outcome of the Court’s decision is essential to support hospital and patient access to high-quality pharmaceuticals,” Saha said.

Opposing Views

Executive Director Ted Okon of Community Oncology Alliance, which represents private oncology practices, said CMS was turning “a blind eye to the extreme mark-ups that 340B hospitals charge patients with commercial insurance, as well as those Americans without insurance.”

“Abuse of 340B has allowed large health systems to acquire independent physician practices, including community oncology clinics, consolidate our health care system, reduce patient choice, and dramatically drive-up health care spending,” Okon said. Due to budget neutrality, increased Part B drug payments to 340B hospitals “will have to come from lower payment rates to all hospitals, especially those struggling smaller and rural hospitals, and those without 340B drug discounts,” Okon said.

The Federation of American Hospitals (FAH), which backed CMS in the lawsuit over the 340B hospital cuts, did not respond to a request for comment yesterday.

Last year in its comments on CMS’s OPPS proposed rule for 2022 it offered “full support” for CMS’s intention to continue the ASP minus 22.5% payment rate for 340B hospitals and spread the savings among all hospitals in OPPS.

“If further judicial review of that policy were to result in a retrospective reversal of the policy, the Medicare Act does not permit CMS to make any prospective offsets to achieve actual or retrospective budget neutrality, nor does it permit any recoupment of payments made for nondrug items and services in prior years,” FAH said.

Pharmaceutical Research and Manufacturers of America (PhRMA) did not respond to a request for comment yesterday. 

Last year in its comments on CMS’s OPPS proposed rule for 2022, PhRMA said it “supports aligning OPPS payments for biopharmaceuticals more closely with hospitals’ acquisition costs for drugs purchased under the 340B program. We also encourage CMS to develop a consistent framework for setting OPPS payments based on acquisition costs for 340B medicines.”

“While we recognize solutions to problems with the 340B program generally fall outside of CMS’s authority, this program requires reforms to ensure it is benefiting needy patients and true safety net providers,” PhRMA added. “In its current state, the program has grown into a major profit center for for-profit pharmacies and wealthy hospitals that provide minimal levels of charity care and in some cases engage in predatory billing practices. We urge policymakers to consider additional steps to establish oversight and integrity in this important program and ensure it is delivering benefits to the vulnerable patients and underserved communities it is intended to help,” the organization said.

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