340B Drug Discount Program – big change for hospitals

Earlier this month, Centers for Medicare and Medicaid Services (CMS) announced significant changes to how Medicare will pay safety net hospitals enrolled in the 340B drug discount program. The 340B program requires manufacturers to sell drugs to certain safety net hospitals at a discount. Hospitals are not required to pass the discount on to payers; rather there is an expectation that they will use the savings for other programs designed to provide care to indigent or underinsured patients.

However, this will change on January 1, 2018 unless hospital efforts to prevent or postpone the action are successful. According to new regulations, safety net hospitals will be paid the Average Sales Price (ASP) minus 22.2% for outpatient drugs instead of the current ASP plus 6%. CMS estimates that the value of the 340B discount to participating hospitals is at least $1.3 billion in Medicare payments per year. This reduction in payment for 340B hospitals may benefit allergists/immunologists that administer IVIG in their offices since competing 340B hospitals will no longer have a competitive advantage. The new policy does not apply to sole community hospitals, certain cancer hospitals and children’s hospitals.

Hospitals are seeking an injunction to prevent the rule from taking effect. They are also lobbying Congress to place a moratorium on the rule for two years.

Advocacy Issue: 
Billing, Coding & Payments