Hospitals Fight to Keep Medicare Drug Subsidies
Trump administration proposal would curb lucrative payments to some facilities
By
Melanie Evans
July 19, 2017 2:36 p.m. ET
wsj.com
Fresh from battling the White House and Republicans in Congress over a now-sidelined repeal of the Affordable Care Act, the nation’s hospitals are ramping up for a new fight to keep lucrative pharmaceutical subsidies.
A Trump administration proposal that could take effect in 2018 would cut a subsidy Medicare has given certain hospitals for drugs they buy and administer to patients, such as cancer medications. The subsidy is designed to help hospitals that serve a large number of uninsured patients. The Trump administration said the cut would reduce what Medicare and its enrollees pay for drugs by an estimated $900 million annually, according to a draft of the regulation published last week.
The American Hospital Association and industry executives argue the loss would harm many hospitals currently eligible for the subsidy, including rural and cancer hospitals, which rely on the money to help finance operations.
“This is a drastic cut,” said Roy Guharoy, chief pharmacy officer for Ascension, the nation’s largest nonprofit hospital operator, with 141 hospitals and operations across 22 states. Ascension’s advocacy team will coordinate efforts to lobby Congress by executives at 42 Ascension hospitals that qualify for the subsidy, he said. Mr. Guharoy also contacted the American Society of Health-System Pharmacists within a day of the proposal’s release to coordinate lobbying efforts, he said.
The subsidy program, known as 340B and created in 1992, is one of several ways the federal government pays for health care for the uninsured indirectly through entitlements. Hospitals eligible for the program buy drugs from pharmaceutical companies at a steep discount, and are reimbursed by Medicare at a rate a certain percentage above what would be the average sale price. Hospitals keep the difference, which they use to finance operations or expand services to patients, said Tom Nickels, executive vice president for government relations and public policy at the American Hospital Association.
But critics of the program say the significant margin on the drugs incentivizes hospitals to overuse certain drugs or choose high-priced options. A Government Accountability Office report in 2015 found substantially higher drug spending per Medicare beneficiary at hospitals that received the subsidies.
Under the new proposal, hospitals would still be able to buy the drugs from pharmaceutical companies at the discounted price, but Medicare would make a steep cut to the price it pays to reimburse hospitals.
Because Medicare beneficiaries pay a percentage of what Medicare itself pays for the cost of their drugs, the proposed price cut means their out-of-pocket costs would drop, the Trump administration said, estimating Medicare beneficiaries would ultimately save $180 million annually.
“We are proud to be working to ensure the Medicare program provides the drugs seniors need at a price they can afford,” said Health and Human Services Secretary Tom Price, announcing the proposal.
Adam Fein of Philadelphia-based Pembroke Consulting, which tracks drug distribution, agreed the proposal would lower costs for seniors and other Medicare patients. Sales of drugs eligible for subsidies totaled $16.2 billion in 2016, though that number excludes some spending, Mr. Fein reported in May.
The AHA blasted the proposal as “misguided” in an email to its members last week. America’s Essential Hospitals, which represents public and nonprofit hospitals, denounced it in a statement as “deeply damaging.” Cuts threaten critical services at hospitals in medically underserved communities, said Bruce Siegel, president and chief executive of America’s Essential Hospitals.
The Affordable Care Act expanded the number of hospitals eligible for the subsidy, helping boost participation in the already-expanding 340B program.
Because of that growth “we believe it’s timely to re-examine the appropriateness” of the subsidies, the administration said in its proposal, citing recent federal audits and reviews of the 340B program. The administration is concerned the program could lead to unnecessary use of drugs, the proposal said. |
