The Centers for Medicare and Medicaid Services (“CMS”) published its annual proposed rule detailing changes to the Medicare Outpatient Prospective Payment System (“OPPS”) for the 2020 calendar year. The rule contains the usual proposed payment rates for the upcoming year, but also addresses the ongoing litigation relating to the 2018 and 2019 reimbursement cuts for the 340B Drug Discount Program. CMS maintains that the 340B payments for 2018 and 2019 were appropriate, but also seeks comments on how to manage the fallout if the federal appeals court upholds the lower court ruling that those reimbursement rates were unlawful.
The 340B Drug Discount Program requires drug manufacturers to provide outpatient drugs to enrolled health care organizations and covered entities at significantly reduced prices. As we previously reported, CMS reduced reimbursement of certain 340B Program Drugs from the average sales price (“ASP”) plus 6% to the ASP minus 22.5% for 2018 and 2019. In late 2018, US District Court Judge Rudolph Contreras ruled that this rate cut was unlawful, but did not vacate the 2018 and 2019 rate as this would “likely be highly disruptive” to Medicare’s administration. Rather, Judge Contreras ordered CMS to come up with remedial measures.
CMS has appealed the District Court’s decision. However, should that decision be upheld on appeal, CMS is soliciting comments in the OPPS proposed rule about potential remedies. Specifically, CMS seeks comments on approaches to remedy the 2018 and 2019 rates, and how to best address the 2020 rates. CMS notes that such policies would be proposed in the 2021 rule. Further, due to timing constraints, CMS proposes continuing the ASP minus 22.5% rate for 2020 and then including remedial adjustments for 2020, if required, along with 2018 and 2019 adjustments. CMS also proposes a rate of ASP plus 3% as an appropriate remedial rate. Regarding this proposed remedial rate, CMS notes “[t]o be sure, this amount would result in payment rates that are well above the actual costs hospitals incur in purchasing 340B drugs, and it is being proposed solely because of the court decision. However, to the extent the courts are limiting the size of the payment reduction the agency can permissibly apply, the agency believes it could be appropriate to apply a payment reduction that is at the upper end of that limit … .”
CMS also noted that any proposed remedy is “likely to significantly affect beneficiary cost-sharing” as the relevant items and services “were provided to millions of different Medicare beneficiaries, who, by statute, are required to pay cost-sharing for such items and services, which is usually 20 percent of the total Medicare payment rate.” In addition, any rate adjustment would require a budget neutrality adjustment, which could result in a reduction of approximately $1.4 billion in payment for non-drug items and services for 2020.
The American Hospital Association, which is a plaintiff in the case, is less than enthusiastic about the OPPS Proposed Rule, noting that the “continuation of cuts in payments for 340B drugs only exacerbates the strain placed on hospitals serving vulnerable communities,” and urges CMS “to refrain from doing more damage to impacted hospitals with another year of illegal cuts,” and instead should offer a plan “to promptly restore funds to those affected by the illegal cuts.”
Comments are due by September 27, 2019.