A change in Medicare Part B payment status for "an unusually high" number of drugs in 2019 led to "substantially" lower payments to 340B hospitals, congressional Medicare advisers said this week.

Medicare’s 340B Drug Reimbursement Cuts in 2019 Were Exacerbated by Change in Drugs’ Payment Status

Medicare Part B drug payments to 340B hospitals “declined substantially” in 2019 because the payment status of “an unusually high number of drugs” changed that year, congressional Medicare advisers said in a report yesterday.

The change—from “pass-through status” to “separately payable non-pass-through status”—meant that more drugs in 2019 than the year before were subject to the U.S. Centers for Medicare & Medicaid Services’ (CMS) nearly 30 percent reduction in Part B drug reimbursement for 340B disproportionate share hospitals, urban sole community hospitals, and rural referral centers.

Hospital groups have asked the U.S. Supreme Court to declare the cuts illegal. The groups say they are costing affected hospitals $1.6 billion per year. In yesterday’s report, MedPAC did not put a dollar figure on how much worse the cut was in 2019 versus 2018 due to the high number of pass-through drugs becoming separately payable non-pass-through (SPNPT) drugs. MedPAC also did not say exactly how many drugs’ status changed in 2019.

According to a presentation given at the ASHP Midyear Clinical Meeting last December, 46 drugs will either keep or gain pass-through status during 2021, while pass-through status expired for 28 last year and will expire for 26 this year. 

To be granted pass-through status, drugs have to be relatively expensive and new to the market. The status lasts for only two to three years. SPNPT status is for older high-cost drugs that are not bundled for payment with an associated service. Part B reimbursement for 340B-purchased pass-through drugs is average sales price (ASP) plus 6 percent. For 340B-purchased SPNPT drugs in 2019, it is ASP minus 22.5 percent.

The Trump administration touted the Part B payment reductions for 340B hospitals as one of its main achievements to make prescription drugs more affordable. It said the cuts lowered beneficiaries’ copayments; hospital groups counter that most beneficiaries have supplemental policies that cover those payments. The Biden administration has not yet said what its plans are for the hospital reimbursement cuts. CMS normally releases its proposed rule announcing its planned Part B drug reimbursement rates for the coming year in July.

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