Some Crying Foul over 340B Drug Program Cuts

The Centers for Medicare and Medicaid Services (CMS) released a new rule in November 2018 that will increase 340B drug program cuts by expanding 2018 changes to off-campus provider-based hospital outpatient departments paid under the Physician Fee Schedule. These new changes went into effect January 1, 2019.

What Is Changing?

Congress established the 340B Drug Discount Program (also known as the 340B Program) in 1992. The program allows certain providers, considered “safety net providers,” and typically nonprofit hospitals and federally funded clinics, community health centers, family planning clinics, and specialized clinics treating cases of tuberculosis or HIV, to receive reduced rates on certain medications prescribed at those locations.

In 2018, Medicare reimbursed 340B drugs dispensed by certain participating hospitals at a rate of the drug’s average sales price (ASP) minus 22.5%. Before then, 340B drugs were reimbursed at a rate of ASP plus 6%. In 2019, the Medicare reimbursement cuts for 340B drugs are expanded to additional off-campus clinical locations of hospitals subject to the payment cuts in 2018, said Emily Cook, a partner at the global law firm McDermott, Will & Emery.

Cook, an expert in the 340B program as well as other Medicare reimbursement programs, said the 2019 changes allow for the above entities to continue to prescribe and dispense medications as needed for patient care, but expand the scope of the hospital locations subject to the Medicare payment cuts. “To the people who are prescribing the medications, these changes do not have a direct impact,” said Cook. “But the amount of payments that the hospitals receive for the drug is lower.” Patients may not see a meaningful difference in how much they pay for the medications, either.

But the entities who aren’t happy with 340B all have voiced their disapproval in the past. “There are competing interests, data, and ideas about who should get the benefits of the discounts,” said Cook.

Concerns from Oncology

While few physician groups have voiced feedback about the 340B changes slated for 2019, community oncologists have spoken out. According to recent congressional testimony about the 340B Program, one Texas-based oncologist submitted testimony that detailed her concerns that the 340B program might have unintended consequences that don’t necessarily serve the at-risk patients it is supposed to benefit. “Unfortunately, the lack of transparency, oversight, and accountability within the 340B program has led to unintended consequences, including excessive growth of the program, expansion of its reach, closure of private oncology practices, and the shift to a much more expensive site of service in hospitals,” said Debra Patt, MD, MPH, MBA, in a July 2018 meeting of an Energy and Commerce Health Subcommittee meeting. Dr. Patt, a vice president of Texas Oncology and a practicing clinician based in Austin, also represented the Community Oncology Alliance in her comments. “When cancer care is shifted from private practices to the hospital outpatient department, the cost of care doubles,” she added.

This is one component of a larger discussion about drug pricing in America. We anticipate the 340B program will continue to be brought up in this discussion, though it remains to be seen where the conversations will go. —Emily Cook

Where Does the Money Go?

Congress and CMS have said that the intent of the program is to enable participating entities to “stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services,” according to the U.S. Health Resources and Services Administration website detailing the 340B Program.

But there have been concerns about whether the money saved on 340B medications is directly affecting patients or is being retained by hospitals and clinics for their own use. “Because of the lack of transparency, oversight, and accountability, we can observe tremendous variability across the country in the philanthropic commitment of 340B hospitals in using additional revenue to enhance care for vulnerable patient populations,” Dr. Patt stated in her testimony. “Because spending incremental 340B revenue on vulnerable patients is not mandated, some hospitals use these funds to build lavish new towers and enhance executive compensation.”

But ultimately, said Cook, the discussion over 340B program cuts is just one part of a bigger issue. “This is one component of a larger discussion about drug pricing in America,” said Cook, who has represented hospital and other healthcare entities participating in the 340B program for more than a decade. “We anticipate the 340B program will continue to be brought up in this discussion, though it remains to be seen where the conversations will go.”

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Cheryl Alkon is a freelance medical writer based in Massachusetts.