Hospital trade groups have lodged strong objections to CMS's proposal to maintain deep Medicare Part B reimbursement cuts, while PhRMA is suggesting even further 340B reforms.

Hospitals Urge CMS To Abandon Medicare Part B Cuts While PhRMA Presses For More Action

Hospital trade groups are lodging strong objections to maintaining steep cuts in Medicare Part B drug reimbursement as part of the Fiscal Year 2022 final rule for the hospital outpatient prospective payment system (OPPS), while the trade group for brand name pharmaceutical manufacturers is suggesting even further reforms.

The groups’ comments were part of the over 1200 letters that the U.S. Centers for Medicare & Medicaid Services (CMS) received by its September 17th deadline on its proposed rule that takes effect on January 1, 2022.  Hospitals that participate in the 340B program are particularly concerned CMS may keep intact a nearly 30% cut in Medicare Part B reimbursement first enacted in 2018. Since that time, drugs acquired through the 340B program are reimbursed at the average sales price (ASP) minus 22.5%. Prior to 2018, the reimbursement rate was ASP plus 6%.

Although the controversial cuts were enacted during the Trump administration, the Biden administration surprised hospitals when CMS proposed to keep the cuts in place in its proposed regulation.

The American Hospital Association (AHA) said it “continues to oppose the agency’s deep OPPS payment cuts to 340B hospitals. These cuts directly harm 340B hospitals and their ability to care for their patients, contravening Congress’ “intent” in establishing the program.  “For more than 25 years, the 340B program has helped participating hospitals stretch scarce federal resources to reach more patients and provide more comprehensive services. The continuation of this harmful policy, especially as the COVID-19 pandemic continues, will undoubtedly result in the continued loss of resources for 340B hospitals and exacerbate the strain on these hospitals and the patients they serve.”

AHA also reminded CMS that “these cuts are the crux of the legal issue the U.S. Supreme Court will review in its upcoming term.  The AHA sued the government over the reimbursement cuts and the court recently announced it has scheduled oral arguments on November 30.  AHA is the lead plaintiff in the suit.  However, a high court decision is not expected until sometime in the late winter or spring of 2022.  This will be months after the Biden administration determines whether to retain the cuts.

Impact on People of Color

America’s Essential Hospitals (AEH), which represents over 300 metropolitan safety net hospitals, also weighed in.  “The steep cuts….., coupled with the cuts to off-campus provider-based departments, will impede the ability of essential hospitals to remain financially solvent and continue to serve as the primary point of care for underserved communities, including people of color disproportionately affected by public health crises such as the COVID-19 pandemic” the group said.  “CMS’ inequitable policy to reduce Part B drug payments to hospitals treating disproportionate numbers of low-income patients already has severely impacted essential hospitals; it undermines these providers’ ability to offer heavily discounted drugs to patients in the face of rapidly increasing drug prices.”

The American Association of Medical Colleges (AAMC), which represents academic teaching hospitals, told CMS that the agency is going after the wrong target. “We continue to believe CMS has wrongly targeted the 340B Program as the driver of high drug prices, rather than other factors such as prices imposed by pharmaceutical manufacturers. The proposals to continue the payment cuts to 340B hospitals undermine this important program and are counterproductive in addressing access to affordable medication and other programs that 340B has enabled hospitals to undertake for their communities,” the organization said. “It is the AAMC’s belief and position that CMS made drastic cuts without legal authority.” AAMC, along with AEH, are co-plaintiffs in the Supreme Court case.

PhRMA: 340B Creates “Peverse Incentives”

Meanwhile, the Pharmaceutical Research and Manufacturers of America (PhRMA) voiced its support for keeping the payment cuts intact.  “PhRMA 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.”

Moreover, PhRMA cautioned that “perverse incentives” – such as hospitals overprescribing pricey drugs – would remain in place even if the payment cuts were made permanent. “Specifically, 340B hospitals will still be able to profit from the spread between 340B acquisition price and reimbursement for medicines covered through insurance”. 

“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.

CMS is expected to publish its final rule in October or November.

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