Preserving Critical Support for Vulnerable Patients: The 340B Drug Pricing Program

The Issue

Congress created the 340B program in 1992 under the Public Health Service Act to protect safety net hospitals from escalating drug prices. The program was designed to allow certain safety net hospitals and other covered entities to purchase outpatient drugs at a discount from drug manufacturers “to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” The program provides vulnerable patients and communities access to life-saving services at no cost to taxpayers because the financial support hospitals receive is derived from drug manufacturer discounts.  

Despite bipartisan support from a majority of representatives and senators, in the Calendar Year (CY) 2018 Outpatient Prospective Payment System (OPPS) final rule, the Centers for Medicare and Medicaid Services (CMS), cut Medicare payments for drugs provided by 340B safety net hospitals from average sales price (ASP) plus 6% to ASP minus 22.5%. This amounts to a cut of $1.6 billion a year to 340B hospitals, beginning in 2018.

This policy change will not help curb high prescription drug prices. While it is critical that policymakers take steps to make prescription drugs more accessible and affordable, reducing Medicare payment rates for prescription drugs in the 340B program is not a solution to this important issue. According to the agency that administers the program, the Health Resources and Services Administration (HRSA), 340B sales are less than three percent of the total U.S. drug market.

Examples of how hospitals utilize savings under the 340B program to provide services to low-income and uninsured patients include: 

  • Subsidizing an outpatient clinic, where nearly half of the people have no insurance.  Clinics like these provide basic and much-needed services including treatment for addiction, primary, pediatric, and OB/GYN care, and free and low-cost medications.
  • Funding community grants that improve the effectiveness of neighborhood clinics that serve more than 750,000 low-income individuals each year.
  • Providing mobile clinics staffed by bilingual nurse practitioners, nurses, and social workers to bring free health care to children and their families in vulnerable communities, providing well-child and immunization clinics, preventive medical and dental care, and other social services
  • Creating a substance use intervention program that brings together a team of physicians, nurses, social workers, and substance use professionals to identify patients with substance use or psychiatric issues who could benefit from behavioral health interventions during hospitalization or after discharge
  • Developing nutrition education and obesity prevention programs for elementary and middle school students in areas where 75% of students are eligible for free or reduced lunch programs
  • Providing transportation services to help local cancer patients participate in life-saving clinical trials

The Response

The AAMC has been working with Congress to protect the 340B Program and is urging policymakers to rescind the Medicare cuts through legislation. In November, Representatives David McKinley (R-W.Va.) and Mike Thompson (D-Calif.) introduceded a bipartisan bill in the House (H.R. 4392) that would overturn the cut. The AAMC supports this bill.

Related Resources

Congress Must Rescind CMS Rule That Cuts Payments to Safety Net Providers
A one page summary of the potential impact of CMS's action in the CY 2018 OPPS final rule and why Congress should rescind the policy.

Hospital Groups File Lawsuit to Stop Significant Payment Cuts for 340B Hospitals (November 13, 2017)
A joint statement by the AHA, AAMC, and America's Essential Hospitals upon the filing of a suit against HHS in response to CMS's action on 340B in the CY 2018 OPPS Final Rule

AAMC Statement on Cuts to Safety Net Providers in OPPS Final Rule (November 1, 2017)
AAMC President and CEO Darrell G. Kirch, MD, issued a statement regarding the provisions in the CY 2018 OPPS final rule from CMS affecting HRSA’s 340B Drug Pricing Program.

AAMC Comment Letter on CY 2018 OPPS Proposed Rule (September 11, 2017)
The AAMC submitted a comment letter in response to the CY 2018 OPPS proposed rule from CMS.

AAMC Statement on 340B Provisions in OPPS Proposed Rule (July 13, 2017)
AAMC President and CEO Darrell G. Kirch, MD, issued a statement regarding HRSA’s 340B drug pricing program provisions in the CY 2018 OPPS proposed rule from CMS.