November 14, 2018

CMS Finalizes More Cuts to 340B in Medicare Rulemaking

In the recently released CY2019 Medicare Outpatient Prospective Payment System (OPPS) final rule, CMS finalized further cuts to the 340B Drug Pricing Program by slashing payment to nonexcepted off-campus provider-based departments (PBDs) and biosimilar products without pass-through status.

For background, PBDs form when hospitals acquire physician offices. A non-excepted PBD is one that does not meet at least one of the following exceptions:

  • Located on campus
  • Grandfather status – billing for services prior to November 2, 2015
  • Furnishes services through a dedicated emergency department

Reimbursement for services at PBDs has been a source of debate because Medicare payment for hospital-based services and physician-based services is different. There are also studies that show 340B hospitals make a larger margin on drugs that are dispensed under the 340B program. CMS first inquired about this issue during the rulemaking period for the 2014 OPPS regulation.

Starting on January 1 of next year, reimbursement for drugs acquired under 340B that are furnished by PBDs, will be reduced to the average sales price (ASP) minus 22.5 percent under the Medicare Physician Fee Schedule (MPFS). This is consistent with cuts finalized in the CY2018 OPPS final rule. Drugs provided at PBDs have traditionally been reimbursed at ASP plus 6 percent.

CMS initially declined to reduce payment for 340B drugs provided by off-site PBDs in the 2018 rule because they are reimbursed under the MPFS. However, given their hospital affiliation, CMS has extended the cuts to off-site PBDs. Vulnerable populations receiving care at children’s hospitals, select cancer hospitals and rural community hospitals will still be exempt.

CMS also changed payment for non-pass-through biosimilars furnished under 340B to ASP minus 22.5 percent of the biosimilar’s ASP, not that of the reference product.

In the accompanying press release, CMS notes that extending payment changes to the off-campus PBDs will help Medicare beneficiaries pay less in coinsurance. Key groups like the American Hospital Association (AHA), Association of American Medical Colleges (AAMC), America’s Essential Hospitals (AEH) and others strongly object the payment reduction.

This latest payment rule by CMS is the most recent action taken by the Trump Administration as it seeks to reign in, what it views, as inappropriate costs for the 340B program.

About Brittany McCullough

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