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From Health Law Daily, January 20, 2016

Industry groups unhappy with MedPAC’s recommended 340B cuts

By Mary Damitio, J.D.

The Medicare Payment Assessment Commission (MedPAC) is recommending that Congress reduce the Medicare Part B drug payment rates paid to hospitals participating in the 340B Drug Pricing Program. MedPAC’s recommendations, which propose to reduce the rates by 10 percent of the average sales price of the drugs, were met with harsh criticism from health care industry groups who say that the reductions would harm hospitals that provide care to the neediest patients.

340B program. The 340B program was created to assist hospitals that serve a disproportionate number of uninsured and low-income patients. Through the program, providers can get significant discounts from manufacturers on outpatient drugs. The acquisition costs of such drugs are often significantly lower than Medicare payment rates, which leaves funds that are intended to be used by the hospitals to provide other needed services.

In addition to the payment reduction, MedPAC recommended that the estimated $300 million in savings be redistributed to hospitals providing uncompensated care. MedPAC also proposed a change to the method of making uncompensated care payments through the disproportionate share hospital (DSH) program. Under its proposal, the payments would be distributed based on data acquired from hospitals’ Schedule S-10s contained in their Medicare cost reports, rather than based on Supplemental Security Income data. The proposed change would be phased in over three years.

Industry reaction. The American Hospital Association (AHA) criticized the recommendation as “misdirected,” and its Executive Vice President Tom Nickels said, “MedPAC is penalizing hospitals and the patients they serve instead of addressing the real issue, the skyrocketing cost of pharmaceuticals.”

The American Society of Health-System Pharmacists (ASHP) also stated that it is “extremely disappointed” in the recommendation and added that MedPAC did not assess the impact that it could have on the most needy patients. Additionally, 340B Health, which is an association of hospitals that participate in the 340B program, criticized the recommendation, which it says comes at a time when hospitals are struggling to provide care for the low-income population as drug prices are on the rise.

MedPAC’s recommendations will be formally presented to Congress in March.

Companies: The American Hospital Association; American Society of Health-System Pharmacists; 340B Health

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