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  • Washington Highlights

    OIG and MedPAC Review Medicare Payments for 340B Drugs

    Jason Kleinman, Senior Legislative Analyst, Govt. Relations
    Tannaz Rasouli, Sr. Director, Public Policy & Strategic Outreach

    The Department of Health and Human Services (HHS) Office of Inspector General (OIG) Nov. 24 released a report on Medicare Part B payments for drugs purchased through the 340B Drug Pricing Program. The report evaluates three scenarios to redirect 340B savings to the Medicare program, but it does not examine the impact on covered entities’ continued participation in the program or their ability to continue to serve their community.

    The report estimates that 340B covered entities spent $2.2 billion to acquire Part B drugs in 2013 and were reimbursed $3.5 billion for these purchases by Medicare. The report assumes all Part B drug claims submitted by covered entities represent drugs purchased at the 340B discounted price.

    OIG notes, “Congress intended for the savings from these discounted prices to enable covered entities ‘to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.’” However, the report adds that some critics “suggest that affected Federal insurance programs (i.e. Medicare and Medicaid) and their beneficiaries should share in the benefits of the discounted prices.”

    In the report, OIG proposes three alternative payment scenarios that could redirect an estimated $162 million to $1.1 billion in 340B savings from covered entities to the Medicare program. However, OIG acknowledges that this study “does not examine the impact these changes would have on covered entities’ ability to provide services to their communities.” Additionally, it notes that any payment changes would have to provide enough incentives for covered entities to continue participating in the 340B Program. The report adds, “Without such incentives, it may be more financially advantageous for covered entities to dispense non-340B drugs to Medicare patients, depriving both the entities and Medicare of the benefits of the 340B Program.” The report does not factor into its estimates how the proposed Medicare savings may be reduced if covered entities opt out of 340B pricing.

    Among these limitations, the report also describes the administrative complexity that would be associated with operationalizing any of the evaluated scenarios, because Medicare claims do not include the necessary identifiers.

    In a similar discussion, during its Nov. 5 meeting, the Medicare Payment Advisory Commission (MedPAC) estimated that covered entities saved $1 billion on Part B drugs in 2014. The commission discussed several options for sharing these savings with Medicare and its beneficiaries and will continue the discussion during its March 2016 meeting.

    MedPAC released a standalone Report to the Congress on 340B in May [see Washington Highlights, May 29].