The Centers for Medicare and Medicaid Services (CMS) just announced the clawback of $78 billion in Medicare drug payments 10 years earlier than its original intended date. In addition to this sped up timeline, CMS also intends to survey hospitals about their drug costs, which could give the Trump Administration more leverage to recover more Medicare funds.
The 340B Drug Program
The 340B Drug Program is a provision of the Public Health Services Act that mandates drug manufactures participating in Medicaid to sell outpatient pharmaceuticals at a discounted price for unsupported or low-income patients. For 340B hospitals, this allows them to offer a wider breadth of healthcare for more patients; free vaccines, mental health services, and general care are all offered under the 340B program.
Opposition to 340B hospitals demand scaling back the extent of benefits these eligible patients receive. Much of the concern lies in the fact that qualified hospitals for drug discounts do not necessarily have to utilize excess funds for patient care services. While intended for charity care, a study found that hospitals that applied for 340B status in 2004 or after were actually found to treat less low-income and more health insurance-covered individuals than non 340B hospitals. It was shown that the 340B hospitals enjoyed the benefits of discounted drug prices more so than the intended beneficiaries. In addition to the possible redirection of funds, the higher the drug costs, the larger the discounts. Medicare pays 340B hospitals at the same rate as other hospitals (106% of average sales price) for their outpatient drugs, but 340B hospitals receive a greater discount on drugs which grants them large profit meant to be reinvested in patient care. Another concern is the lack of oversight on the 340B program, however the American Hospital Association counters this by emphasizing the significant supervision by the Health Resource and Services Administration.
The Trump administration tried to combat 340B in the past by attempting to cut Medicare’s payment to hospitals for their outpatient drugs. The standard was formerly the average sales price (ASP) plus 6% to cover the costs of transportation and other unforeseen variables. However, the Trump administration felt that Medicare gave inflated reimbursements to 340B hospitals, which already received discounted prices on drugs. To amend the payments, Trump moved to alter the payment for ASP minus 22.5%, though the Supreme Court ruled against it due to procedural failures in accounting for hospitals’ acquisition costs.
This time, the CMS is intent on passing cuts towards Medicare by complying with the Court’s ruling by paying “...$9 billion in lump-sum payments to account for drug cuts from previous years…” In order to recoup the lump-sum payments the CMS is making, to maintain budget-neutrality, they had planned to clawback $7.8 billion that came from the costly non-drug services. This was originally planned for 2041, though now has been pushed forward to 2031, and is applied to all hospitals, 340B or not.
The Backlash on This Plan
Critics of this clawback are claiming that it “...punishes 340B hospitals for the agency’s own mistake in implementing a policy that a unanimous Supreme Court held to be unlawful.” Ashley Thompson, the senior AHA Vice President, is a strong opponent to this callback of Medicare funds, claiming it is still “unlawful” and “unwise.” She also displayed strong concerns about the drug cost surveys set to span the hospitals across the nation, as this could also be another factor the Trump administration uses in degrading 340B hospitals. As the administration continues to place obstacles for 340B hospitals, many see it as a way to achieve their original goal of cutting the Medicare outpatient drugs. This could mean intense legal backlash for the Trump administration who already ignored the Supreme Court ruling once before; a second time could be more detrimental on a legal front.
Retrieving $7.8 billion from Medicare in an attempt to alter the 340B plan would be detrimental to the low-income and uninsured patients who depend on this free or discounted healthcare. Already receiving limited federal resources, lessening the funding amount could significantly curb the outreach of this program, prevent lifesaving drugs from reaching patients, and block the very individuals this program was created for.