HHS Proposed Significant Cuts to Medicare Payments for 340B Drugs

The U.S. Department of Health and Human Services (HHS) has proposed 2018 updates to the Medicare hospital outpatient prospective payment system (OPPS) to decrease Medicare Part B payments to hospitals for 340B drugs by almost 30 percent. Under the rule, effective Jan. 1, 2018, Medicare payments for all separately payable Part B drugs dispensed to hospital outpatients, with the exception of “pass-through” drugs, vaccines and drugs identified with a to-be-established modifier indicating that the drug was not purchased at the 340B price, would be subject to a reduction in payment from average sales price (ASP) plus 6 percent to ASP minus 22.5 percent. The Centers for Medicare and Medicaid Services derived the proposed reduction from a May 2015 report to Congress from the Medicare Payment Advisory Commission in which the panel found ASP minus 22.5 percent represents the average minimum discount that 340B-participating hospitals receive for separately payable drugs under the OPPS.

According to HHS, the proposed rule is necessary to slow growth in the program shift trends of growing amounts paid by Medicare for outpatient hospital drugs and reduce Medicare beneficiary cost-sharing. Savings are estimated to be approximately $900 million in 2018 and are proposed to be implemented in a budget-neutral manner and redistributed across all other outpatient hospital services covered by Medicare through a 1.4 percent increase in Medicare payments for all other hospital outpatient services.