Last month, the Office of Inspector General (OIG) released the results of a study finding that in 2013, the Medicare Part B program and its beneficiaries paid $3.5 billion for 340B-purchased drugs, and that in the aggregate, Part B payments were 58% more than the statutorily-based ceiling prices that year, allowing covered entities to retain approximately $1.3 billion in excess of their 340B acquisition costs for the drugs. Noting that some policymakers have questioned whether a portion of the 340B savings should be passed on to the Medicare program, the OIG report presented the following three potential shared-savings scenarios that, if implemented, would permit Medicare Part B to share in the cost savings resulting from 340B discounts:

  • Scenario 1: 100% of the average selling price (ASP). Currently, Medicare pays for most Part B drugs at 106% of ASP. If the reimbursement rate were reduced to 100% of ASP for 340B-purchased drugs, Medicare Part B expenditures would have been reduced by $162 million in 2013, and 340B covered entities would have retained $1.1 billion in excess of their 340B acquisition costs for drugs paid for by Medicare Part B.
  • Scenario 2: Equally Shared Savings. If the Part B reimbursement rate for 340B-purchased drugs had been reduced to ASP minus 14.4% in 2013, 340B savings would have been split evenly between 340B covered entities and the Medicare program. Medicare expenditures would have been reduced by $638 million while 340B covered entities would have retained $638 million in excess of their 340B acquisition costs for drugs paid for by Medicare Part B.
  • Scenario 3: 340B Ceiling Price plus 6% of ASP. According to the OIG report, if Medicare Part B paid for 340B-purchased drugs at the 340B ceiling price plus 6 percent of ASP, 340B covered entities would receive approximately the same spread as they would receive on drugs not purchased at 340B prices (i.e., purchased outside of the 340B Program). According to the report, the add-on above the ceiling price would be intended to ensure that 340B covered entities are adequately reimbursed for drug costs and that there is not a disincentive for covered entities to provide 340B-purchased drugs to Medicare beneficiaries. Under this approach, Medicare expenditures would have been reduced by $1.1 billion in 2013, and 340B covered entities would have retained $211 million in excess of their 340B acquisition costs for drugs paid for by Medicare Part B.

The report does not make recommendations as to whether any of the above approaches should be pursued by the Medicare program, and notes that its analysis is entirely financial, and does not examine the effect these changes would have on 340B covered entities' ability to serve their communities. The report also notes that any revised payment methodology would have to provide sufficient financial incentives to ensure that 340B covered entities continue to purchase Part B drugs through the 340B program; otherwise both the Medicare program and 340B covered entities would be deprived of the benefits of the 340B program. Finally, the report notes that currently, Part B claims do not contain identifiers that would enable the Medicare program to determine which drugs were purchased under the 340B program and apply any of the above methodologies.

Click here to read the full OIG report, "Part B Payments for 340B-Purchased Drugs."