Drug payment cuts to 340B hospitals spur debate on best path forward

The recent U.S Court of Appeals for the District of Columbia Circuit ruling that 340B hospitals will now be subject to Medicare cuts in outpatient drug payments by nearly 30% essentially gives the Trump Administration and HHS the legal authority to reduce payment for Medicare Part B drugs to 340B hospitals. HHS Secretary Alex Azar said the action means patients will pay less out-of-pocket for drugs in the Medicare Part B program. However, providers said the decision will hurt hospitals and patients in vulnerable areas. Hospitals that serve large numbers of Medicaid, Medicare and uninsured patients, many of which are in the red or operating on thin margins, were using the pay gap in the price difference to cover operational expenses. HHS deemed it inappropriate that these facilities would use Medicare to subsidize other activities and initiatives, and the appeals court agreed. Actions by the pharmaceutical industry are also adding to the complication. A recent statement from America’s Essential Hospitals alleges that recent actions by pharmaceutical manufacturers “hinder access to affordable medications for millions of people who face financial hardships and defy clear statutory requirements that they provide drugs to 340B Drug Pricing Program covered entities.” The manufacturers have threatened punitive actions—including withholding 340B drugs to contract pharmacies—for failing to comply with reporting requirements.