Oppose H.R. 4392 | Council For Citizens Against Government Waste

Oppose H.R. 4392

Letters to Officials

November 28, 2017

U.S. House of Representatives
Washington, D.C.  20515

Dear Representative,

On Wednesday, November 14, 2017, H.R. 4392 was introduced by Rep. David McKinley (R-W.Va.) and Rep. Mike Thompson (D-Calif.).  The bill would reverse a November 1, 2017 Centers for Medicare and Medicaid Services (CMS) Hospital Outpatient Prospective Payment System (OPPS) final rule.  The rule would reduce the Medicare Part B payment rate for certain drugs purchased by hospitals through the 340B drug discount program.

According to CMS Administrator Seema Verma, the rule change is being taken to “lower the costs Medicare patients pay for certain drugs in the hospital outpatient setting.  Medicare beneficiaries would benefit from the discounts hospitals receive under the 340B Program by saving an estimated $320 million on copayments for these drugs in 2018 alone.”  On behalf of the more than 1 million members and supporters of the Council for Citizens Against Government Waste (CCAGW), I ask that you not support this legislation.

CCAGW has had concerns with the 340B drug discount problem for some time.  Created in 1992, and expanded under the Patient Protection and Affordable Care Act (ACA), the program provides heavily discounted drugs to certain “covered entities,” such as disproportionate share hospitals (DSH), critical access hospitals, children’s hospitals, and other safety net providers, such as federally-qualified health centers, which serve uninsured, low-income people that do not qualify for Medicaid or Medicare.  The 340B program, overseen by the Health Resources and Services Administration (HRSA), has drifted from its original mission to help the uninsured poor get access to low-cost pharmaceuticals and distorted the healthcare marketplace, particularly in regard to cancer care.

The new CMS rule changes the Medicare Part B payment rate for drugs purchased under the 340B program from the average sales price (ASP) plus 6 percent to ASP minus 22.5 percent.  A March 2016 Medicare Payment Advisory Commission (MedPac) report notified Congress that “discounts across all 340B providers (hospitals and certain clinics) average 34 percent of ASP, allowing these providers to generate significant profits when they administer Part B drugs.”

The rule change is budget neutral.  While Medicare beneficiaries will see a reduction in copays, the Medicare Part B savings will be “reallocated equally to all hospitals paid under the OPPS. Children’s hospitals, certain cancer hospitals, and rural sole community hospitals will be excepted from these drug payment reductions for 2018.”

The rule must be upheld.  Numerous government studies have highlighted problems with the 340B program, including a February 4, 2014, Health and Human Services (HHS) Office of Inspector General (IG) report; a May 2015 MedPac report; a June 2015 Government Accountability Office report; and, a November 2015 HHS IG report.  These reports found weak HRSA oversight; diversion of drugs to ineligible patients and duplicate discounts utilizing 340B prices and Medicaid rebates, which are both illegal; higher drug spending at 340B hospitals than non-340B hospitals; and, that the program has created an incentive for hospitals to purchase oncology physician practices and convert them to more costly, profit-making outpatient departments.

The Energy and Commerce Committee has also expressed concerns about the 340B drug discount program.  In a June 1, 2017, letter to HRSA, the committee asked for audit documents from the last two fiscal years, cited “multiple concerns with the program,” and noted that, “Given the program’s ability to generate revenue for covered entities, HRSA has a vested interest in ensuring that those funds are used to benefit patients.  The committee is concerned about reports that uninsured and underinsured patients at 340B hospitals often pay the full list price for a drug while the hospital receives that same drug at a severely discounted price.”

While this new rule will help return the 340B drug discount program to its original purpose of helping uninsured, low-income patients get access to discounted pharmaceuticals, congressional action will be required as well, like clarifying the definition of a 340B eligible patient, a well-defined description of charity care that would make a hospital eligible for the 340B program, and more transparency on how hospitals utilize the 340B savings.

None of these objectives would be achieved under H.R. 4392.  It is time to move forward, not backward, with reforms of the 340B program.  I again urge you to not cosponsor H.R. 4392.


Tom Schatz
President, CCAGW

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