The proposal to reduce the rates by 10% of the average sales price of the drugs was first raised in November by the congressional advisory panel. It would generate an estimated $300 million in savings that would be funneled to hospitals with some of the neediest patients.
MedPAC panel members peppered the commission's staff with questions Thursday about the proposal's logistics. Some even wondered if MedPAC could make such a request, since the drug-discount program is overseen by the Health Resources and Services Administration and not the CMS.
“The fundamental issue is that this is a public health services program, and we're a Medicare payment advisory commission,” said Herb Kuhn, panel member and CEO of the Missouri Hospital Association. “I'm just worried about mission creep a little bit.”
Others were concerned about a separate but related proposal that would require Medicare to distribute uncompensated-care payments made under the disproportionate-share hospital program based on data from Schedule S-10 of a hospital's Medicare cost report, where hospitals outline uncompensated-care spending.
The CMS currently distributes the funds based on Medicaid and Medicare Supplemental Security Income data. However, MedPAC feels the S-10 provides a more accurate way of estimating a hospital's uncompensated-care costs.
Some panelists viewed the change as too big of a departure from how things are done now. “I have serious concerns. This goes beyond a minor tweak,” said David Nerenz, a panel member and director of the Center for Health Policy and Health Services Research at Henry Ford Health System in Detroit.
MedPAC Chairman Dr. Francis Crosson said he would bring back the 340B proposal with changes for discussion during the panel's next meeting in January. But he doubted even a modified proposal would attract enough votes to pass the recommendation.
“Some of the issues that have been brought up, are, I would say, more in the philosophical arena and we're not going to be able to resolve those,” said Crosson, a former physician and executive at Kaiser Permanente.
The American Hospital Association immediately slammed the 340B proposal after Thursday's meeting.
“It is completely inappropriate for a Medicare commission to be recommending changes to a public health program designed by Congress and implemented by HRSA,” said Joanna Hiatt Kim, vice president of payment policy for the AHA.
Since 340B already goes to hospitals that have a high amount of uncovered and low income patients, taking money from some to pay others could prevent those hospitals from adequately serving underserved patients, according to Jeff Davis, counsel for 340B Health, a not-for-profit organization of more than 1,100 hospitals and health systems participating in the federal 340B drug pricing program.
Congress created the 340B drug-pricing program in 1992 to help hospitals that serve disproportionately large numbers of low-income patients. The program, which was expanded under the Affordable Care Act, has seen a stark rise in the number of covered organizations over the past decade. One-third of all hospitals now participate, and the Government Accountability Office has estimated that 40% of hospitals are eligible.
According to MedPAC, the 340B-covered entities spent more than $7 billion on drugs under the program in 2013, three times what was spent in 2005.