Hospitals Could Get Walloped by 340B Drug Reimbursement Cut

When CMS issued the final outpatient prospective payment system rule last week it etched into regulation what had only been proposed: significant Medicare reimbursement cuts to hospitals for pharmaceuticals. In response, national hospital groups are considering legal challenges against CMS over the cut.

The so-called 340B drug pricing program requires drug manufacturers to provide drugs to eligible healthcare organizations at reduced prices. Only non-profit hospitals that care for a high percentage of public payer patients are eligible for the program. The new outpatient rule means CMS will reimburse hospitals for drugs purchased through the 340B program at the average sales price minus 22.5%, as opposed to the previous standard of average sales price plus 6%. Although CMS will implement the cuts in a budget-neutral manner by increasing payments (and beneficiary out-of-pocket costs) for non-drug items and services, the cuts to the 340B program threaten access to prescription drugs for low-income patients. While the intent behind the cut was to address the high cost of pharmaceutical drug prices, CMS stated that the new payment will reduce Medicare reimbursement to hospitals that serve larger percentages of public patients by $1.6 billion a year.

The American Hospital Association, America's Essential Hospitals, and the Association of American Medical Colleges announced their intention to explore litigating the payment cuts and urged CMS to focus instead on what they said is the real problem – out-of-control cost increases for drugs.