A renewed focus on the future of the 340B program

On Thursday, July 13, 2017, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule that updates the payment rates and policy changes in the Hospital Outpatient Prospective Payment System (OPPS). In the provisions, CMS proposes to change the payment rate for certain Medicare Part B drugs purchased by hospitals through the 340B program.

The proposed changes include adjusting the applicable payment rate for drugs acquired under the 340B program from average sales prices (ASP) plus 6 percent to ASP minus 22.5 percent. This potentially represents a significant reduction to how much Medicare pays 340B hospitals for Part B drugs under OPPS.

In a statement on the proposed rule, Tom Price, secretary of the Department of Health and Human Services (HHS), said, “This proposal has the potential to reduce drug costs for seniors, by at least an estimated $180 million per year.  If it is adopted, Medicare would pay hospitals for drugs purchased through the 340B discount program at a price more consistent with the actual cost hospitals and other providers pay to acquire those drugs.  Seniors would see those savings passed on to them in the form of lower copays.” Price described the proposed change in 340B policy as part of an effort by the Trump Administration to address prescription drug prices.

CMS is accepting comments on the proposed rule until 5:00 pm ET on September 11, 2017. CMS said it would publish a final rule on or about November 1, 2017. If implemented as proposed, CMS would apply the new payment policy effective January 1, 2018 to all separately payable, non pass-through drugs (other than vaccines) that a hospital identifies as being purchased within the 340B program.

Following the release of the proposed rule, on July 18th the House Energy and Commerce Committee held a hearing to examine Health Resources and Services Administration’s (HRSA) oversight of the 340B drug pricing program. As expected, debates ensued surrounding the CMS proposed rule, including the impacts it may have on drug prices for the population and the effect it may have on hospitals’ reimbursements. However, much of the discussion focused on potential improvements to 340B program oversight. Most of the committee, including both Republicans and Democrats, expressed support for the program; however both sides also raised questions regarding program operations and controls.

Several key themes emerged as the hearing continued, including:

  • Increasing transparency on 340B ceiling pricing for improved payment accuracy as well as transparency on how the savings are utilized by hospitals
  • Providing additional regulatory oversight capabilities to HRSA to enforce and monitor covered entities’ 340B program compliance
  • Clarifying the definition of “patient,” hospital eligibility criteria, and the overall intent of the program

The committee also discussed a future potential hearing that would include 340B hospitals, as well as another hearing that more closely examines drug prices.

Deloitte is monitoring the proposed change in payment policy, as well as where things may go following the hearing, and will provide further updates as developments arise.

Authors:

Anne Phelps
Principal | Deloitte Risk and Financial Advisory
US Health Care Regulatory Leader
Deloitte & Touche LLP
Latest conversations from Anne Phelps on Twitter

Karolyn Woo
Principal | Deloitte Risk and Financial Advisory
Deloitte & Touche LLP

Daniel Esquibel
Senior Manager | Deloitte Risk and Financial Advisory
Deloitte & Touche LLP

Tony Lesser
Senior Manager | Deloitte Risk and Financial Advisory
Deloitte & Touche LLP

This article contains general information only and Deloitte is not, by means of this article, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This article is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

Deloitte shall not be responsible for any loss sustained by any person who relies on this article.

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