HOSPITALS CONCERNED ABOUT IMPACT OF CUTTING PROGRAMS

counts to pad profits — not to help indigent patients.

Stephen Ubl, president of the drug industry group PHRMA, said the program “needs fundamental reform” and that the latest rule change is merely a good first step. His group, which has deep pockets and an advertising campaign geared at pinpointing the program’s flaws, has a list of changes that Congress and the Trump administration could tackle. Those include limiting which hospitals should be eligible for 340B price breaks and making sure needy patients benefit when hospitals buy discounted drugs.

The day after the hospital groups filed suit, Joe Grogan, director of health programs at the White House’s Office of Management and Budget, called 340B “really screwed up,” according to Politico, and said the Trump administration isn’t afraid to take on the program. “We are not wimps.” Grogan led a White House task force last summer that proposed scaling back the program.

The hospitals — often the biggest employers in a congressional district — are ready for a fight. The American Hospital Association launched an advertising campaign. And hundreds of members of Congress signed a letter defending the program. On Nov. 14, two House lawmakers introduced a bill that would prevent CMS from implementing the proposed rule.

Under 340B, named after the section of the Public Health Service Act that authorizes it, eligible hospitals buy drugs at a discount from the pharmaceutical companies and then are reimbursed for those purchases from Medicare. The drugs are purchased under the Part B program, which covers expensive chemotherapy and other treatments in a hospital, doctor’s office and clinics.

The hospitals make money on the spread, using it to improve the financial stability of the hospital.

In comment letters to federal officials, a range of hospitals from St. Cloud, Minn., to Kalamazoo, Mich., said the new rule would cost them hundreds of thousands of dollars.

Yet, even as concerns arise around the impact of the cuts and a legal battle plays out, Congress has heightened scrutiny of the program. The House Energy and Commerce Committee held two hearings over the past few months, examining how hospitals use money made on 340B drugs. A key question for lawmakers was how much the patients benefited.

The new rule, according to CMS Administrator Seema Verma, addressed that concern — albeit indirectly.

While the actual price of drugs will not be lower under the rule, Verma said beneficiaries will save an estimated $320 million a year on copayments. Medicare patients typically are responsible for a percentage of coinsurance on their prescriptions. The lowered Medicare reimbursement means that an enrollee’s coinsurance would be lower at 340B hospitals because Medicare would pay hospitals less for the drug.

In one example the administration provided, if Medicare reimburses a participating hospital $2,000 a month for an individual drug, a beneficiary would save over $100 on their out-ofpocket share.

Dr. Peter Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center in New York, agreed.

“If Medicare reduces the reimbursement amount, that will directly reduce what the patients pay,” Bach said. “Patients will see lower prices.”

Allan Coukell, senior director for health programs at the Pew Charitable Trusts, said the change in how Medicare spends its money may have broader, unintended consequences for the health care system. Patients may change providers, seeking lower copays. Or, conversely, hospitals may drop out of the program because of lower reimbursements.

“The long-term impact of such a shift is unknown,” Coukell said, adding that one thing is certain: Fewer hospitals participating in the program simply “transfers the 340B revenue from the provider to the manufacturer.”

The 340B program wasn’t always so controversial. The bill, signed by Republican President George H.W. Bush in 1992, once had bipartisan support.

“Everyone loved the program. That’s why Congress expanded it on three separate occasions,” recalled William von Oehsen, who helped lobby for the initial law and is a founder of the hospital group 340Bhealth. Most recently, the program was expanded under the Affordable Care Act in 2010.

“There was never any concern about its size until, basically, pharma decided it had gotten too big and started investing in a public relations and lobbying campaign to reform it,” von Oehsen said, adding, “We just don’t have the money they have, and it’s kind of discouraging.” KHN’S coverage of prescription drug development, costs and pricing is supported by the Laura and John Arnold Foundation.