340Buzz November

November 340Buzz: No relief for covered entities

This month, we take a look at how the newly finalized 2020 OPPS ruling impacts covered entities, follow the progress of House Speaker Nancy Pelosi’s plan to reduce drug prices and review how different states handle the challenge of avoiding paying out duplicate discounts for Medicaid and 340B drugs.

CMS persists with slashing 340B reimbursements

There has been a flurry of news about 340B payment cuts in the past several weeks, relating to the original Medicare Part B reimbursement reductions as well as outpatient clinic cuts.

Outpatient clinics

On October 21, a federal judge reaffirmed her previous order for CMS to vacate cuts to Medicare payments for hospital outpatient services provided in off-campus provider-based departments grandfathered under the Bipartisan Budget Act of 2015 that were included as part of the agency’s outpatient prospective payment system (OPPS) final rule for calendar year 2019.

The judge’s original ruling vacated the $380 million in cuts to off-campus providers that went into effect Jan. 1, 2019, as part of the OPPS. The recent Oct 21 ruling rejected CMS’ motion asking the judge to reconsider.

However, when the 2020 OPPS rule was finalized just 11 days later, on November 1, it revealed that the second year of CMS’ two-year phase-in of the site-neutral cuts will continue, despite the judge having vacated those very same cuts for the previous year.

Beth Feldpush, senior vice president of policy and advocacy at America’s Essential Hospitals, blasted CMS for “plowing ahead with damaging cuts to hospitals in the 340B Drug Pricing Program and ignoring clear congressional intent by expanding cuts to grandfathered provider-based outpatient clinics.”

Part B cuts

The new OPPS rule also revealed that “CMS will push ahead with its ongoing 22.5% payment rate cuts” for 340B drugs, Health Leaders notes, even though those cuts have twice been ruled unlawful.

Oral arguments in the ongoing litigation for these Part B cuts were heard November 8. CMS argued that hospitals overcharge taxpayers and Medicare beneficiaries for 340B drugs and don’t pass savings down to patients, while AHA argued that “CMS inappropriately used information on the large discrepancy between hospitals’ acquisition costs for drugs and their 340B reimbursements to justify the payment formula changes,” Modern Healthcare reports. The AHA has asked the court to decide the case before January 1.

In the meantime, the new OPPS rule means that covered entities will not get any relief from the unlawful Medicare Part B cuts or the outpatient clinic cuts until at least 2021, while the government continues to appeal previous court decisions.

Following Pelosi’s drug pricing plan

On October 17, the House Energy & Commerce Committee approved the drug price bill championed by House Speaker Nancy Pelosi. The bill has been sent to the full House for a vote.

The bill previously contained some language that could negatively impact covered entities that take part in the 340B program. It said that for each year a negotiated price is applied, the drug shall “not be considered a covered outpatient drug subject to an agreement under 340B.” That language has since been removed from the bill.

Several other Republicans, including Brad Wenstrup (R – Ohio) and Michael Burgess (R – Texas) attempted to pass amendments that would change the purpose of the 340B program from providing safety net hospitals with the resources they needed to passing the savings directly to patients by way of copay costs. All such amendments failed to pass.

Lawmakers had hoped to get the Pelosi bill passed before the latest continuing resolution expired on November 21 but were unable to do so. As of the time of this publication, no date has been set for the full House vote for the Pelosi bill.

In the meantime, Congress passed and the White House signed a short-term spending bill on November 21, extending government funding through December 20, 2019, which includes FQHC funding and delay of DSH reductions.

Interplay between 340B and Medicaid

On October 15, professional services firm Manatt Health released a report titled, “Comprehensive 50-State Survey: State Medicaid Programs and 340B.” As Manatt Health notes, “The report summarizes laws, regulations and sub-regulatory guidance that govern how Medicaid programs in all 50 states reimburse for both 340B and non-340B drugs, and how Medicaid programs ensure that those drugs are not also subject to a Medicaid rebate.”

Under the provisions of the 340B law, covered entities (CEs) may not both receive a drug at the 340B discount rate from drug manufacturers and receive rebates from Medicaid on the same drug; it must be one or the other. To avoid these “duplicate discounts” state Medicaid programs set up guidelines that differ from state to state on how covered entities who choose to use 340B drugs for Medicaid patients must identify and separate the 340B drugs from those for which they request Medicaid rebates.

To help overcome this challenge, the Office of Pharmacy Affairs (OPA) requires that—if a CE chooses to use drugs received at 340B discount for Medicaid patients—the CE must provide OPA with an identifying number to be added to the OPA Medicaid Exclusion File. This helps state Medicaid programs identify which CEs are using 340B drugs with Medicaid populations, so the Medicaid program can separate those drugs out (“carve out”) from rebate requests.

However, due to concerns about the accuracy of the Medicaid exclusion file, some states also require covered entities to use specific claims-level identifiers when they submit claims to Medicaid for 340B drugs, so that the Medicaid program can exclude those drugs from its rebate requests.

The Manatt survey found that 12 states rely solely on the federal OPA Medicaid Exclusion File, 22 other states rely solely on claims-level identifiers, and other states rely on a combination of both. The survey also found that there is significant inconsistency in how state Medicaid programs identify 340B drugs dispensed by contract pharmacies.

Another year ending

With only one month left in 2019 and a few more congressional recesses still to come in that time, the fate of 340B continues to hang in the balance. Next month, we’ll review all that’s happened with the 340B program this year and look to next year. Until then, we wish you all a safe and happy Thanksgiving.