340B is not a topic that pulls people together. If I post about it on LinkedIn, I immediately get comments from covered entities saying that they do help patients. And I know they do — some entities are amazing and do so much for patients because of their 340B status but others don’t. And they don’t have to because they aren’t required to. But that’s not what this post is about, not really, but maybe a little.
Onward to Section 5 of the President’s Executive Order (EO) on drug pricing – this one gets us to 340B. You have been waiting for this one, right?!?
The title of this section is “Appropriately Accounting for Acquisition Costs of Drugs in Medicare”, and it instructs the head of Health and Human Services (HHS) to do a survey to find out the hospital acquisition cost for covered outpatient drugs in hospital outpatient departments.
What does that mean? So with the 340B program, covered entities (including many hospital outpatient departments) are able to purchase drugs at a reduced rate and then get reimbursed at their normal contracted rates. For Medicare, that is the Average Sales Price (ASP) plus six percent. The intent of the 340B program has been debated (is it for general revenue for these hospitals, it is to be used directly for patient care?) but the idea here is that the government wants to show that 340B covered entities are receiving a huge benefit from these discounts and that Medicare is paying too much.
Back in 2018, the Centers for Medicare & Medicaid (CMS) cut Medicare reimbursement to ASP minus 22.5% for these entities. This worked its way through the courts and ultimately the Supreme Court ruled that the cuts were unlawful because CMS did not do a survey of the acquisition costs as required by statute. So…ta-dah. We have a survey!
None of this will be quick; the survey will take time and then it will all go through rulemaking with its notice and comments. The whole thing has to be budget neutral so while Medicare might spend less here, more will be spent elsewhere.
Of course, while this train is moving along, on a parallel track we have 340B reform that might go through Congress. Just today Senator Cassidy released a report on 340B that has a bunch of findings that make the problems with the program pretty clear. It does NOT touch on Medicare reimbursement. But maybe because that isn’t the big problem with 340B – because there are way bigger fish to fry. The recommendations focus more on transparency, seeing how patients benefit and defining some of the core concepts of the program – like eligible patient.
I am so here for this.
