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DC Circuit Upholds 340B Cut – So CMS Cuts Deeper

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Original story posted on: August 19, 2020

The 340B Drug Pricing Program and the related Prime Vendor Program, or PVP, provides discounts on the purchase of outpatient drugs to certain providers.

For many nonprofit and rural providers, the 340B program is a lifeline, providing drugs that are often given out to patients that can’t afford to pay their bill.

It appears that Medicare’s big concern is that participating providers may benefit by buying the drugs at a discount, then benefit again when the drugs that are separately billable are paid by Medicare for Medicare patients. 

Here is a guide to which types of hospitals qualify for 340B:

Back in January 2018, Medicare slashed payments for certain drugs under the 340B program. Medicare specifically cut payments for “separately billable” drugs, from 6 percent over the standard average sales price (SASP) to 22.5 percent less than the SASP.

The American Hospital Association (AHA) filed suit, and surprisingly won a rate-setting battle when a district court ruled that Medicare had exceeded its authority and made the cuts without underlying data to support the computation.

On July 31, the District of Columbia Circuit Court of Appeals overturned the lower court ruling, allowing the cut from 2018 to stand.  

In the proposed rule for 2021, Medicare is driving the knife in deeper by further reducing the payment, from SASP minus 22.5 percent to SASP minus 28.7 percent. 

It is not clear whether or not the Centers for Medicare & Medicaid Services (CMS) is wringing out the profit on these “separately payable” drugs or creating a situation in which providers are losing money when they provide these drugs. It does seem that part of the move may be designed to punish hospitals for disputing rate cuts by making further cuts.

Programming Note: Maureen Testoni, CEO for 340B Health, will be the special guest on Monitor Mondays, Monday, Aug. 24, 10-10:30 a.m. EST. Register to listen.

Timothy Powell, CPA CHCP

Timothy Powell is a nationally recognized expert on regulatory matters, including the False Claims Act, Zone Program Integrity Contractor (ZPIC) audits, and U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) compliance. He is a member of the RACmonitor editorial board and a national correspondent for Monitor Mondays.

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