Is the Trump Administration Blueprint to lower drug costs really about reducing drug prices or reducing drug spending? According to President Trump, “Prices will come down.” Alex Azar further explains,
“When it comes to the cost of prescription drugs, our healthcare system faces four major challenges: high list prices for drugs; seniors and government programs overpaying for drugs due to lack of the latest negotiation tools; high and rising out-of- pocket costs for consumers; and foreign governments free-riding off of American investment in innovation.”
One of the contributing problems is listed as expansion of the 340B drug discount program that has shifted the burden of rising prices to consumers. Consider this explanation from the blueprint: “The loss of patent exclusivity on successful products, new ACA taxes, and requirements to extend higher rebates and discounts to a markedly increased Medicaid and 340B population created an estimated $200 billion of downward pressure on pharmaceutical industry revenues—during a five-year period when innovation was decreasing. International price controls and delayed global product launches exacerbated the problem. Absent new products to launch and the ability to increase revenue through volume, and in the face of a more sophisticated PBM industry demanding higher rebates and restricting access to markets, the industry turned to its remaining tool to drive growth: increasing price. Prices soared on certain advanced small molecule drugs and new specialty drugs. Meanwhile, PBMs exploited new utilization management tools and “price protection” contracts to extract even higher rebates, further widening the gap between list and net prices. Each increase in list prices satisfied the drug industry’s need to grow revenue and increased administrative fees paid to PBMs, but also boosted the prices paid by payers and, especially, consumers.”
This has led the Trump administration to believe it is time to realign the system in four ways: increasing competition, improving government negotiation tools, creating incentives for lower list prices, and bringing down out-of-pocket costs for consumers. When reading through the details, much of the Administration’s focus is on reducing drug spending, rather than drug prices, particularly related to costs incurred by federal health care programs and beneficiaries. As such, many of the proposals would affect Medicare payments to health care providers.
The Baker Donelson Health Law Group on-line publication summarized that CMS proposes to continue payment cuts that first went into effect January 1, 2018, which reduced Part B drug reimbursements under the OPPS to certain 340B hospitals by nearly 30 percent, from ASP plus six percent to ASP minus 22.5 percent. CMS also proposes to extend the payment cuts further to cover 340B drugs administered in new off-campus departments that are subject to reduced site-neutral payments. CMS estimates that extending the payment cuts to these additional locations would save Medicare $48.5 million. CMS has also signaled plans to reduce how much Medicare pays hospitals and physicians for new drugs that do not have ASP data when they first come on the market. In the 2019 Medicare Physician Fee Schedule (PFS) proposed rule, published in the Federal Register on July 27, 2018, Medicare proposed to reduce Part B drug payments to physicians for single-source drugs without ASP data from WAC plus six percent to WAC plus three percent. Similarly, in the 2019 OPPS proposed rule, CMS proposes to reduce Part B payments to hospitals for drugs without ASP data from WAC plus six percent to WAC plus three percent. In both cases, CMS notes concern that the six percent add-on payment could incentivize providers to use more expensive drugs than necessary to take advantage of a higher add-on payment.
In response to these proposals, providers may want to share examples of new drugs that have recently come to market and the exorbitant costs providers have incurred to purchase these products and ensure patients have access to the latest therapies. Comments in response to the Medicare PFS proposed rule are due by September 10, 2018.
Providers that are currently paid by Medicare Part B for drugs administered in outpatient areas should closely monitor the Administration’s proposals to address drug prices, as the proposals have the potential to significantly impact provider reimbursement. These policies are particularly relevant to the administration of high-cost infusion products, such as specialty treatments for cancer, rheumatoid arthritis, and multiple sclerosis, among other conditions.
Of particular relevance to providers is one of the policy rationales put forward by the Administration to support its proposals to reduce drug costs. The Administration notes that, because beneficiary coinsurance obligations under Medicare Part B are based on a percentage of the Medicare payment amount for a drug, reducing drug reimbursement to providers would reduce out-of-pocket expenses for beneficiaries. However, while reducing the drug payment rate may lower beneficiary costs, the change would also lower reimbursements to providers, potentially impacting their ability to treat patients. Comments in response to the OPPS proposed rule are due by September 24, 2018.
Hospitals subject to the 340B payment reduction should consider evaluating the financial impact the proposed payment changes would have on their institutions, if finalized. In particular, hospitals may want to identify whether they are administering 340B drugs in non-excepted off-campus HOPDs and, if so, quantify how much payment would be reduced if CMS finalizes its proposal to extend payment reduction to these locations.
- According to 340B Health’s 2017 survey “Evaluating 340B Hospital Savings and Their Use in Serving Low-Income and Rural Patients,” cuts to payments to 340B Hospitals or restrictions on eligibility would have a significant negative impact on care and communities:
- All responding hospitals indicated that cuts to reimbursement or limits on eligibility for 340B would harm access to care for the low-income and rural patients and communities they serve.
- Three-fourths of hospitals (75%) reported they would have to cut back on the amount of uncompensated care they provide.
- Nearly as many (70%) reported they would have to look for ways to cut costly but often underpaid services.
- Nearly 40 percent of hospitals also reported that cuts in 340B program savings would hurt their ability to provide discounted and/or free drugs to patients in need.
In addition to evaluating the financial impact of proposed payment changes, be prepared to quantify how program savings are being used according to 340B program intent to help the under-served in your community. The following Apexus tool is available to help: Apexus 340B Savings and Community Benefit Template and consider creating an impact profile, examples are posted on 340B Health’s website.