MedPAC backs recommendation to cut 340B drug payments

Change could benefit Medicare beneficiaries

The Medicare Payment Advisory Commission (MedPAC) on Thursday voted 14-3 in favor a draft recommendation that would reduce Medicare Part B drug payments to hospitals that participate in the 340B Drug Pricing Program.  

Why hospitals are worried about a new 340B ruling


The federal 340B program requires drug manufacturers to provide outpatient drugs to eligible health care providers at discounts ranging from 20% to 50%. The program, created by Congress in 1992 and expanded via the Affordable Care Act, focuses on hospitals with disproportionately low-income patient populations. About 40% of U.S. hospitals are eligible to participate in the program, which saved providers about $3.8 billion in medication costs in 2013, according to the Health Resources and Services Administration (HRSA).

However, the program has come under scrutiny, with some questioning the amount of charity care participating hospitals are providing.

Proposal details

Last year, Congress asked MedPAC to review the program.

On Thursday, MedPAC proposed reducing Part B payments for hospitals participating in the program by 10% of the drug's average sales price. The panel estimates the change would yield an estimated $300 million in savings, which it recommended be put toward the uncompensated care pool that is funded by Medicare.


In a statement, the American Hospital Association (AHA) voices opposition to the payment cut.

AHA Executive Vice President Tom Nickels says, "We are disappointed MedPAC has ventured so far afield from their mission, especially in the face of such strong opposition by several commissioners." He adds, "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."

MedPAC member David Nerenz, director of the Center for Health Policy and Health Services Research at Henry Ford Health System, questions what issues the proposal would solve, telling MedPage, "I'm not sure we need to be doing this at all." Nerenz voted against the proposal.

Herb Kuhn, a member of MedPAC and CEO of the Missouri Hospital Association, who voted against the proposal, tells MedPage Today he does not think 340B falls under MedPAC's jurisdiction.

MedPAC Chair Francis Crosson argues that while HRSA, not CMS, oversees 340B, the program is a Medicare expenditure, which allows MedPAC to propose recommendations.

Crosson says that about one in five Medicare beneficiaries would see direct savings as a result of the proposed changes (Firth, MedPage Today, 1/14; Dickson, Modern Healthcare, 1/14; Commins, HealthLeaders Media, 1/18).

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