Hospitals Slam Proposal to Deepen Medicare Payment Cuts for 340B Drugs
National hospital associations slammed the Trump administration’s proposal Tuesday to deepen Medicare Part B drug reimbursement cuts for 340B hospitals, saying the move would defy congressional intent and threaten patient care during the COVID-19 pandemic.
Administrator Seema Verma of the U.S. Centers for Medicare & Medicaid Services (CMS), whose agency wants to cut 340B hospital Part B drug payments by 6.2 percent below the current average sales price (ASP) minus 22.5 percent rate, calls it “part of [the President Trump’s] commitment to lowering drug prices.” CMS and the administration say reducing 340B hospitals’ Part B drug payments reduces Medicare beneficiaries’ out-of-pocket drug costs, which are pegged to the hospital payments. Hospitals argue that patients are not benefiting since most already have their co-pays waived and the payments are offset with higher payments in other parts of the Medicare system.
Meanwhile, an attorney who represents health care providers on 340B matters says he is hearing from hospitals that, if CMS ultimately locks in its proposed ASP minus 28.7 percent Part B reimbursement rate for 340B drugs, they will “go underwater” (dispense drugs at a loss) on some products.
Hospital Groups’ Reactions
The American Hospital Association (AHA) said CMS’s hospital Outpatient Prospective Payment System (OPPS) proposed rule for 2021, in which CMS calls for the further decrease in 340B hospital drug reimbursement, “continues to threaten the financial viability of hospitals and health systems and their ability to provide care for patients during the coronavirus pandemic.” AHA, two other hospital associations, and three health systems last Friday suffered a federal appeals court loss to CMS over the current cuts. In its OPPS proposed rule for 2021, CMS left open the possibility of sticking with its current ASP minus 22.5 percent Part B reimbursement rate for hospitals’ 340B-purchased drugs, now that a court has deemed it legal.
“We adamantly oppose the proposed rule’s deepening of cuts in payments for 340B drugs,” AHA Executive Vice President Tom Nickels said. “These cuts decimate the intent of the 340B program and only exacerbate the strain placed on hospitals serving vulnerable communities. These cuts also conflict with Congress’ clear intent and defer to the government’s inaccurate interpretation of the law….Today’s proposal will result in the continued loss of resources for 340B hospitals at the worst possible time.”
America’s Essential Hospitals, one of the other groups that is suing CMS over the cuts, said CMS’s plan to deepen the 340B hospital cuts “takes a bad policy on Part B drug payments and makes it worse.”
“There is no reasonable basis to further reduce payments to hospitals in the 340B Drug Pricing Program—the same hospitals that are now straining under the heavy costs of responding to COVID-19,” America’s Essential Hospitals President and CEO Bruce Siegel said. “This ill-conceived payment policy flouts congressional intent for the 340B program, undermines program savings for hospitals that operate with little or no margin, and ultimately jeopardizes access to care in underserved communities.”
The Association of American Medical Colleges (AAMC), the third of the three groups that sued CMS, tweeted yesterday:
#340B hospitals play a critical role at all times but especially when our country is facing the #COVID19 pandemic. Patients cannot afford to lose their access to care which likely will happen if CMS cuts payments to 340B providers again.
340B Health said it was “disappointed but not surprised that the administration has chosen to continue its pursuit of this damaging payment policy.”
“Since 2018, these hospitals have been underpaid and forced to make tough decisions on what services to cut to maintain the core of their care for patients in need,” 340B Health President and CEO Maureen Testoni said. “It should go without saying that during a global pandemic, it is foolhardy for the administration to stubbornly push and worsen a Medicare payment policy that hurts safety-net hospitals and their patients.”
Testoni said CMS’s survey this spring of hospitals’ 340B drug acquisition costs, upon which CMS based its deeper proposed cuts, was legally flawed “and its results should be thrown out. We call on the administration to wake up to reality and halt this years-long regulatory assault on the health care safety net.”
CMS Administrator’s Tweet
CMS Administrator Verma tweeted Tuesday about the proposed rule:
Part of @POTUS’s commitment to lowering drug prices, CMS is proposing to reduce the payment rate for drugs purchased through the 340B Program, based on hospital survey data on drug costs, saving #Medicare beneficiaries an additional ~$85 million on out-of-pocket payments in 2021.
Hospitals Could Go Underwater on Some Part B Drugs
Attorney Todd Nova of Hall Render said, “We are hearing already from hospitals that the ASP-28.7% rate could result in a number of drugs being underwater, calling in to question the viability of participating in the 340B program when substantial administrative burdens and costs are considered.”
“One can look to Medicaid carve-out elections as a guide, many of which are driven by hospitals determining that approximated pass-through reimbursement is just not worthwhile,” Nova said. “If CMS does finalize the more drastic cuts, the real winners would be for-profit hospitals under the OPPS (since their OPPS payments for patient services are partially funded by these cuts) and obviously for-profit manufacturers. The losers would be safety-net, nonprofit hospitals who would need to reduce resources devoted to caring for underserved communities.”
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Health Centers Plan Their Next Move in Response to 340B Executive Order
The National Association of Community Health Centers (NACHC) is planning its response to President Trump’s July 24 executive order requiring the U.S. Health and Human Services Department (HHS) to condition health centers’ future federal grants on making insulin and injectable epinephrine available at the 340B discounted price to low-income individuals who have a high cost sharing requirement for those products, have a high unmet deductible, or have no health care insurance.
“We are working with our legal team to further investigate the options that community health centers have to preserve the ability to provide drugs to people in need,” a NACHC spokesperson said yesterday. “Every minute that health centers spend to address this issue takes away time from their critical work on the frontlines of the COVID pandemic, saving lives and trying to keep their doors open. As we’ve noted before, health centers don’t need an EO to make them provide low-income patients with access to affordable medications and other medical services. That’s what they do—and have done—every day since they were created 55 years ago. That’s their mission.”
New York 340B Providers Brace For Losses Under New Medicaid Reimbursement Plan
The New York State Health Department has started laying the groundwork to implement the transfer of Medicaid managed care pharmacy benefits to Medicaid fee for service effective April 2021.
In early April during the height of the state’s COVID-19 outbreak, state lawmakers passed budget legislation shifting the Medicaid drug benefit from managed care to FFS and basing reimbursement for such drugs on actual acquisition cost plus a dispensing fee. The state’s health centers led the public fight against the transfer, saying it would deprive them of millions of dollars in 340B program savings that they cannot afford to lose.
Last month, state health officials published a document describing its implementation strategy and timeline. As required under the budget bill, the department has created an 18-member 340B advisory group representing health centers, hospitals, family planning centers, retail pharmacies, and payers. Its mission is to recommend by Oct. 1 how the state can achieve savings on 340B drugs starting April 1, 2021, the beginning of the new state fiscal year. It is supposed to hold a total of three meetings during this month and September.
The health department said it will “provide all interested stakeholders with implementation updates” monthly, and assemble workgroups and hold meeting every other week on matters including the scope of benefits being transferred, the division of transition responsibilities between the state and its managed care contractors, and value-based arrangements that interact with the pharmacy benefit.
In December, the health department intends to submit its Medicaid state plan amendment about the benefit transfer to the U.S. Centers for Medicare & Medicaid Services (CMS) for approval. It also plans to publish a state Medicaid program update and FAQs about the transfer that month. The state expects to get CMS’s go-ahead in March 2021 and to go live with the change on April 1.
The state’s health centers remain deeply upset about the pharmacy benefit transfer. “The 340B program was developed by Congress to support getting affordable medications into the hands of uninsured and underinsured people and to support the health care organizations providing cost-effective care to communities bearing the burden of health disparities,” said Wendy Stark, Executive Director of Callen-Lourde Community Health Center, which serves LGBTQ communities and people living with HIV in Manhattan, South Bronx, and Brooklyn. “The state effort to carve out the Medicaid pharmacy benefit from managed care will deeply curtail the ability of 340B entities to fulfill these goals, at a moment when our communities are already facing significantly increased job loss and economic insecurity because of the coronavirus pandemic.”
Callen-Lourde has published a four-page document describing how 340B revenue losses due to the benefit transfer will “compromise [its] ability to offer critical unfunded services to Medicaid beneficiaries.”
State Attorneys General Want Feds to Invoke March-in Rights on Remdesivir
The federal government should use its so-called “march-in” patent rights under a 1980 law, or assign those rights to the states, to “ensure that Americans can afford and access a sufficient supply” of the COVID-19 investigational drug remdesivir, a bipartisan group of 34 U.S. state and territorial attorneys general says.
There are no approved medicines to treat or prevent COVID-19. Remdesivir, manufactured by Gilead Sciences, was given an emergency use authorization in May based on evidence it may help hospitalized patients with severe COVID-19. Globally, six vaccines against SARS-CoV-2, the virus that causes COVID-19, are in Phase III or combined-phase trials.
In a Aug. 4 letter to top federal health officials, the state AGs note that although Gilead got millions of dollars in taxpayer monies to develop remdesivir, it cannot guarantee a supply adequate to meet current projected needs. “We believe march-in rights are a necessary step towards addressing this supply chain problem to adequately fulfill market demand,” they wrote. “By exercising these rights and licensing remdesivir to a third party (or multiple third parties), we can and will reach sufficient production rates to mitigate the health and safety concerns.”
The AGs also said Gilead’s decision to charge Medicare, Medicaid, and private insurers $3,120 for a six-vial, five day course of treatment, despite research showing remdesivir “can be manufactured at $0.93 per day or $12.50 per patient,” is more justification for the government to use its march-in rights.
“It is unfortunate that Gilead has chosen to place its profit margins over the interests of Americans suffering in this pandemic,” the AGs said. “If Americans who need remdesivir find themselves unable to afford a treatment course, then federal agencies have sufficient reason to require Gilead to ‘license both the background patents and the patents stemming from the contract work’ under the Bayh-Dole Act.”
In a July 30 press release announcing its financial results for the second quarter and first half of 2020, Gilead said, “to facilitate broad and equitable access, the pricing was set well below the value that Gilead believes it provides to the healthcare system.” The company said it “expects to have manufactured more than two million remdesivir treatment courses by the end of 2020, and several million more treatment courses in 2021.”
