The Medicare Payment Advisory Commission has backed a controversial proposal to reduce Part B drug payment rates for hospitals participating in the 340B Drug Pricing Program, though members previously signaled they would oppose it.
The panel voted 13-3 on Thursday to reduce the rates by 10% of the average sales price of the drugs. The move would generate about $300 million in savings that would be funneled to hospitals with some of the neediest patients.
The recommendation will be included in the MedPAC's report to Congress in March. Hospital stakeholders in the room immediately criticized the vote and said it sets a bad precedent.
Congress created the 340B program in 1992 to help hospitals that serve disproportionately large numbers of low-income patients. It allows participating providers to get steep discounts from manufacturers on outpatient drugs. Medicare payments, then, often exceed the costs, and the providers have been allowed to use the surplus toward services.
Critics of the program, which has grown substantially in recent years, say many participants aren't using the money to serve the patients the program is intended to help.
During a discussion of the proposal last month, MedPAC members questioned whether the panel could even make such a request since the drug-discount program is overseen by the Health Resources and Services Administration and not the CMS.
On Thursday, MedPAC Chairman Dr. Francis Crosson said that even though the program is overseen by HRSA, 340B is a Medicare expenditure and thus fair game for the panel to address. Further, Crosson said, Congress specifically asked the commission to review the 340B program.
The American Hospital Association issued a strongly worded statement criticizing the MedPAC proposal shortly after the vote. "We are disappointed MedPAC has ventured so far afield from their mission, especially in the face of such strong opposition by several commissioners," AHA Executive Vice President Tom Nickels said in the statement. "Making a recommendation that penalizes hospitals for their participation in a non-Medicare, public health program that is designed to increase patient access to care is outside of MedPAC's scope, and is inappropriate."
The three holdouts on the panel all represent hospitals: Herb Kuhn, CEO of the Missouri Hospital Association, Warner Thomas, CEO of the Ochsner Health System in New Orleans, and David Nerenz, director of the Center for Health Policy and Health Services Research at Henry Ford Health System in Detroit.
Thomas said his vote was swayed in part by a letter to MedPAC from America's Essential Hospitals, a trade group for safety net hospitals. Although the proposal ostensibly would direct additional funding to hospitals with the most low-income patients, the safety net organization contends that some of its members would lose funds they need to care for such patients.
Nerenz said he didn't understand what problem the proposal was supposed to solve. “I'm not sure we need to be doing this at all,” he said. And Kuhn said he still believed 340B falls outside of MedPAC's domain.
Their colleagues provided little insight into why they supported the proposal.
After the vote, hospital stakeholders in the room immediately voiced concern.
“This policy sets a precedent that we're now going to pay 340B hospitals less under the Medicare program, ”Dr. Bruce Siegel, President and CEO of America's Essential Hospitals said. “That's a bad policy, you're paying less to hospitals that care for poor people.”
More concerning is that there appeared to be little analysis performed to determine the potential negative implications of the policy, according to Maureen Testoni, senior vice president and general counsel for 340B Health, a not-for-profit organization of more than 1,100 hospitals and health systems participating in the program.
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.