Hospital Groups to OMB: Quash 340B Hospital Drug Acquisition Cost Survey

Hospital Groups to OMB: Quash 340B Hospital Drug Acquisition Cost Survey

Groups representing 340B hospitals urged the White House yesterday to quash a planned survey due to start March 23 of what 340B hospitals pay for drugs administered to Medicare patients. They say the survey would harm patients, violate the law, and create a huge paperwork burden.

Under the Paperwork Reduction Act, the Centers for Medicare & Medicaid Services needs the Office of Management and Budget’s blessing for the forms it needs to administer the 340B hospital drug acquisition cost survey. Yesterday was the deadline for public comments to OMB on CMS’s request.


In 2018, CMS cut hospitals’ Medicare Part B reimbursement for 340B-purchased drugs by almost 30 percent. A federal district court struck the cuts down, partially because CMS didn’t collect the data needed to base payments on acquisition costs. A federal appeals court ruling on the matter is expected at any time. CMS announced last September that, if it lost in court again, it would start collecting drug acquisition cost data from 340B hospitals and might base the hospitals’ Part B payments on those costs.

CMS is now paying hospitals Average Sales Price minus 22.5 percent for 340B-purchased drugs. Aggregate Part B payment cuts for 340B hospitals probably would be deeper if CMS moves to acquisition cost reimbursement. For example, any sub-340B ceiling price discounts hospitals get through the 340B Prime Vendor program would be factored into the new reimbursement rate.

The Trump administration points to the existing 340B hospital cuts as evidence that it is lowering drug costs for patients (the cuts reduce Medicare patients’ cost-sharing obligations, which are based on what Medicare pays for their drugs). Given that, OMB is expected to approve CMS’s request. If that happens, the hospitals groups suing CMS will probably ask a federal district judge to block the survey, now scheduled for March 23 through April 10. It is also possible the administration could delay the survey due to the COVID-19 epidemic.

There was an earlier round of comments on CMS’s proposal, with submissions due last Nov. 29. Hospital groups’ comments to OMB yesterday echoed their previous comments.

Association of American Medical Colleges comments

The Association of American Medical Colleges (AAMC) said CMS’s desire to base Medicare drug payments to 340B hospitals on what the hospitals actually pay to buy the drugs runs counter to the 340B program’s intent.

“Congress did not design the 340B Program to pay hospitals at acquisition costs,” AAMC said. “Rather, the program allows eligible hospitals to purchase covered drugs at a discounted rate below the reimbursement rate—whether the payer be Medicare or in the case of non-Medicare beneficiaries, a commercial insurer—and use the difference to generate funds that will be used to reach vulnerable patients by making more services available to them. Consistent with the intent of the program safety-net hospitals invest their 340B savings in a wide variety of programs to meet the needs of their local communities and help vulnerable patients at no cost to taxpayers.”

AAMC also said it was concerned that the survey is aimed solely at 340B hospitals. It said CMS would need to engage in new rulemaking if it tries to set payment rates based on the survey results. To collect the data CMS wants, AAMC said, hospitals “will likely be forced to redirect financial resources that would otherwise be used to care for low-income patients.”

American Hospital Association comments

“CMS’s plan to collect actual acquisition cost data from only 340B hospitals suggests that the agency intends to continue down a policy path to abrogate the program, undermining the 340B statute,” the American Hospital Association said. AHA said the survey “does not conform to the statutory requirements established by Congress.” It called the survey’s three-week timeframe “untenable for most hospitals” and the burden of completing the survey potentially “insurmountable” for financially struggling 340B hospitals. It also said non-disclosure provisions in hospitals’ drug purchasing contracts with wholesalers and manufacturers “may prevent 340B hospitals from sharing any drug pricing information with any entity not party to the contract and therefore make it impossible for 340B hospitals to complete the survey.”

“CMS’s OPPS 340B payment policy is unlawful and will severely undermine the 340B program at the detriment of vulnerable communities and place undue burden and cost on hospitals,” AHA concluded. “This survey of 340B hospital acquisition cost data is part of another attempt by the agency to curtail the program. CMS should reconsider, and instead support, the role that the 340B program plays in allowing hospitals to better serve their patients and communities. The agency should abandon its damaging OPPS 340B payment policy and withdraw this survey.”

America’s Essential Hospitals comments

America’s Essential Hospitals said the survey would impose additional resource-intensive reporting requirement on 340B hospitals, “which already operate on narrower margins than others.” It also said the planned survey exceeds CMS’s authority under the Medicare statute; the proposed survey instrument “lacks clarity” and will not “produce data of appropriate quality”; and the survey is “unnecessary to the performance of CMS’s functions.”

“Payment reductions to 340B hospitals have negative consequences for essential hospitals and their patients,” the group said. It urged CMS to restore 340B hospitals Part B drug reimbursement rate to ASP plus 6 percent. “Preserving the intent of the 340B program will better serve low-income Medicare beneficiaries and the Medicare program at large.”

340B Health comments

Hospital group 340B Health said, “CMS’s survey proposal comes at a time when hospitals must dedicate their full attention to diagnosing, isolating, and treating patients potentially infected with COVID-19. CMS should not divert hospital staff away from patients during this critical time, which is precisely what CMS’s survey would do.”

The group said the survey “would not benefit the public, but instead would harm safety-net hospitals and their patients”; “will not produce useful data to accurately calculate average drug acquisition costs for 340B hospitals; “would fail to generate a statistically significant estimate of hospitals’ average acquisition costs in violation of the Medicare statute”; would place “a massive burden on 340B hospitals”; and would violate the Medicare statute.

Pharmaceutical Research and Manufacturers of America said it did not submit comments to OMB. We are waiting to hear back from the biotech trade group BIO about whether it commented.

COVID-19 Prompts Health Centers Group NACHC to Cancel National Policy Forum in D.C.

(Update March 11, 2020) STAT reports that Pharmaceutical Research and Manufacturers of America has closed its Washington, D.C., headquarters, located about a mile from the White House, for the rest of this week after someone exposed to COVID-19 entered PhRMA’s office on March 5. PhRMA staff who attended a meeting with the person were asked to self-quarantine until March 20. Also, according to an attendee tweet this morning, 340B Health is holding its DC Policy Workshop as scheduled.)

Conferences are a big feature in the 340B landscape. People attend them to learn, to schmooze, to get ready to lobby, and more. They also can be a big source of trade association revenue—or loss, if registration or exhibitor metrics sag or if the sponsoring group finds itself on the hook for guest rooms not booked, meals not eaten, and other sunk costs.

This week, the COVID-19 epidemic claimed as a victim what may be its first 340B-related conference. The National Association of Community Health Centers announced the cancellation of its March 16-19 Policy & Issues Forum in Washington, D.C., “out of concerns” for the health and safety of members, staff, vendors, and others. “We did not make this decision lightly,” NACHC said. The event, which is the nation’s largest gathering of health center executives, will not be rescheduled and NACHC is refunding all registration fees. Click here for a FAQ with more information.

America’s Essential Hospitals is holding its Spring 2020 Policy Assembly in Washington, D.C., as scheduled today and tomorrow, March 10-11. As of earlier today, 340B Health said on its website it intended to proceed as scheduled with its DC Policy Workshop and Hill Day tomorrow and Thursday, March 11-12.  Many health systems have enacted travel bans for their staff except for essential travel.

Modern Healthcare (registration required) reports that America’s Health Insurance Plans cancelled its National Health Policy Conference and National Conference on the Individual and Small Group Market, both of which were to have been held in Washington March 18-20. Also, the American College of Healthcare Executives canceled its 2020 Congress on Healthcare Leadership, which was scheduled to take place March 23-26 in Chicago.

While it is too early to determine whether upcoming late spring and summer events will be cancelled, a number of trade associations and conference companies are starting to plan for the possibility they may need to either modify their event to a live-streaming format, postpone, or cancel altogether. We’ll keep you informed.

Shifting Osteoporosis Drug to Specialty Distribution Won’t Affect 340B Entities, Manufacturer Says

Drug manufacturer Radius Health says its decision to move its osteoporosis drug Tymlos into the specialty drug distribution channel “does not restrict the ability of eligible 340B entities to obtain Tymlos at the 340B price.” Radius announced the change this week on the Health Resources and Services Administration (HRSA) Office of Pharmacy Affairs (OPA) Manufacturer Notices to Covered Entities webpage.

Tweets of Note

@HowardsDrug: 340b and PBMs operate on the same premise, and should both be eliminated, or at least seriously reigned in line to be in line with the law. It is no surprise that a law written to limit PBM harms also affect 340b… in both only a few benefit (insiders), and many are harmed.

@bruceymonkey: Actually, the 340B discount is going to hospitals/FQHCs. We, in CA, dealt with that when we carved out the drugs. The folks putting up most resistance to Not paying for Rx? 340B providers.

@InHealthPolicy: HRSA Says It Has Limited Authority To Enforce 340B Guidance

@AIR340B: Some nonprofit hospitals are more profitable than for-profit hospitals, while providing less charity care. What are they doing with this revenue? Evidence suggests they might not always be reinvesting back into their communities. Read more:

@AIR340B: In fact, our #2019CharityCareReport found that 63% of #340B hospitals – all of which are nonprofits – provide less charity care than the national average. With greater transparency, we can ensure patients, not hospitals, are benefiting most from programs like 340B.

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