The Centers for Medicare and Medicaid Services' focus on lowering drug prices now includes the contentious 340B drug pricing program.
On Wednesday, CMS Administrator Seema Verma told the Pharmacy Quality Alliance that the agency's change in the 340B payment rate to qualifying hospitals would save Medicare beneficiaries $320 million this year.
Under 340B, hospitals that serve a large number of vulnerable patients are able to buy drugs from manufacturers at discounted prices. However, Verma said Wednesday, "these discounts were not being passed on to our beneficiaries. So, CMS reduced the amount that beneficiaries and the federal government will pay hospitals for drugs that they acquire through this program."
Medicare beneficiaries will save a total of $320 million in drug spending this year from the change, Verma said.
On Tuesday, a Senate health committee got involved when members questioned why a rule that would set ceiling prices on drugs in the program has been delayed five times.
The final rule would impose monetary penalties for manufacturers that charge more than the ceiling price for an outpatient drug and imposes other restrictions.
340B hospitals want to see the rule enforced.
The Government Accountability Office will be looking into the issue and the work of the Health Resource and Services Administration, the agency which manages the program and is responsible for the latest delay in implementation of the final rule until July 2019.
The problem is that states and providers do not know the ceiling prices. Confidentiality rules prevent the HRSA from sharing ceiling prices with states or 340B providers.
Because of this, 340B hospitals don't know what they ought to be paying for discounted drugs, according to Ann Maxwell, assistant inspector general for evaluation and inspections for the Office of the Inspector General, speaking before the Senate Committee on Health, Education, Labor and Pensions.
This lack of transparency prevents ensuring that 340B providers are not overpaying pharmaceutical manufacturers and that state Medicaid programs are not overpaying 340B providers, Maxwell said.
The 340B drug pricing program debate pits the hospitals that benefit from the discounted prices of the program against organizations that contend these providers are taking advantage of the financial incentive.
The 340B program, established in 1992, generates savings for certain safety-net providers by allowing them to purchase outpatient drugs at discounted prices.
Opponents of 340B say seniors get none of the benefit and pay full price and that the disproportionate share hospitals that get the discount take advantage of the financial incentive by buying larger quantities of drugs and more expensive drugs.
HRSA reported that total 340B sales in 2016 amounted to approximately $16 billion, or about 3.6 percent of the U.S. drug market.
The Alliance for Integrity and Reform of 340B, or AIR340B released a new report with analytics by the Berkeley Research Group on Medicare Part B hospital outpatient reimbursements that found in 2016, 340B hospitals accounted for nearly two-thirds of Medicare Part B reimbursements – while only representing slightly more than half of all Medicare hospital outpatient revenue.
"Medicare patients treated in 340B hospitals have disproportionately high outpatient drug spend as compared to patients treated at non-340B hospitals," AIR340B said
PhRMA said it was encouraged to see the Senate HELP Committee continuing to take a closer look at issues within the 340B program.
The New England Journal of Medicine concluded that financial gains for 340B hospitals have not been associated with clear evidence of expanded care or lower mortality among low-income patients, PhRMA said.
340B also drives a shift of treatment to more expensive hospital settings for physician-administered medicines, PhRMA said.
Hospitals and proponents say the 340B drug pricing program is one of the few federal programs to curb drug costs that is working.
"Sadly, the administration's policy proposals would erode that progress and just put more money into the pockets of pharmaceutical companies," 340B Heath said. "The administration's proposals are based on a faulty understanding of the 340B program and the pharmaceutical market. The notion that 340B discounts are raising drug prices is simply false. Drug companies set the prices for their products and they, alone, decide how high those prices go."
Hospitals participating in the 340B program account for 60 percent of all uncompensated care in the U.S. and serve a high proportion of low-income patients on Medicaid, 340B Health said.
"There is a clear history of manufacturers overcharging 340B providers. Delaying enforcement of this rule will have a tremendous adverse impact on hospitals, clinics and health systems caring for low-income and rural patients," said Maureen Testoni, interim president and CEO of 340B Health.
America's Essential Hospitals said federal scrutiny of manufacturer pricing practices has found overcharges in the 340B drug pricing program.
"These overcharges undermine the program's ability to make drugs affordable for vulnerable patients and increase costs for their hospitals, which already operate with thin margins," the group said.