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Hospital Group Seeks to Beef Up Case for 340B Drug Discount

By Kerry Young, CQ Roll Call

March 25, 2016 -- A group representing hospitals that get the so-called 340B federal discount on drugs is asking its members to publicize how they use their pharmaceutical savings for efforts to aid people living in poverty. The move comes amid a battle over a federal plan to put the first significant rules in place for the decades-old program.

The group 340B Health has in recent weeks been working with hospitals to develop statements that they may eventually post on their websites, said Randy Barrett, a spokesman for the group. Using a template prepared by 340B Health, for example, the Bon Secours Baltimore Health System says the money it saves on prescription drugs allows it to operate mental health and substance abuse clinics and offer services such as teen parenting classes. The "340B in Action" posting for Bon Secours says the discount program also allows the urban hospital system to help patients who receive charity care get their medicines.

"Many of these patients would not get the medications needed to maintain health" without the 340B program, Bon Secours said.

Once fairly obscure, the 340B program is being fought over by two powerful industries. It started in the 1990s as a workaround to allow discount drug sales to hospitals to continue when new Medicaid rules took effect. Hospital groups are seeking to prevent Congress or the Obama administration from making changes that could reduce the savings that accrue from the 340B discount program. Changes to these rules could drive up costs for hospitals that now participate in the program. Hospitals and clinics and other organizations that participate in the 340B program purchased more than $7 billion in discount medicines in 2013, three times what was spent in 2005, according to the Medicare Payment Advisory Commission (MedPAC).

Federal officials are attempting to hash out a new framework for the 340B program. More than 1,200 comments have been posted on a federal web site about the draft guidance issued last year by the Health Resources and Services Administration (HRSA). A HRSA spokesman on Thursday said the agency is still reviewing these comments and there is not an estimated date for the release of the changes for the 340B program. Hospitals are seeking to thwart a bid through the HRSA guidance to limit the application of the discount to prescriptions that patients purchase at retail pharmacies.

Drugmakers have questioned the expansion of the 340B program in recent years, especially following the 2010 health overhaul. The overhaul provided more Americans with health insurance, but also expanded the eligibility criteria for the 340B program. About 2,140 hospital organizations participated in 2014, up from 583 in 2005, according to the Medicare Payment Advisory Commission. 

Hospital officials have dismissed the pharmaceutical companies' complaints largely as bids to end the 340B program, which requires them to offer substantial discounts to hospitals and clinics that serve many people living in poverty. Lawmakers, though, asked MedPAC to take a close look at the program, in which the aggregate discount is estimated at about 34 percent. Hospitals are not required to directly share savings with their customers, and insurers such as Medicare don't necessarily share in the savings.

MedPAC earlier this month recommended that Medicare reduce its payments for drugs purchased through the 340B program by 10 percent of the reported average sales price of these medicines. The Medicare savings would then be directed to a pool of money for covering uncompensated care. The MedPAC recommendation could bolster future attempts by Congress or HRSA to make changes in the program, although it's unlikely to trigger any near-term response.

The commissioners split 14-3 in a January vote on this 340B recommendation, which also included support for maintaining scheduled payment updates for hospital services. Some MedPAC commissioners earlier expressed reservations about changing the 340B program. The program is intended to help nonprofit hospitals that serve significant populations of poor communities, a point noted by Warner L. Thomas, chief executive officer at Ochsner Health System. He was among the MedPAC members who voted against the proposal.

"It's not like they just choose to be in this program," Thomas said at a January meeting. "They have to qualify to be in the program, and yet we're targeting those folks and reallocating their dollars."

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