Under the Hospital Outpatient Prospective Payment System (HOPPS) Proposed Rule for CY 2018 that was released on July 13, 2017, the Centers for Medicare & Medicaid Services (CMS) is proposing to reduce Medicare Part B reimbursement for most separately payable drugs that are purchased by hospitals under the prescription drug discount program established under Section 340B of the federal Public Health Service Act (the 340B program) from average sales price (ASP) plus six percent to ASP minus 22.5 percent. Drugs with pass-through status (which by statute have special payment requirements) and vaccines (which are excluded from the 340B program) would be excluded from this proposal. The amount of the proposed reduction is based on a 2015 report by the Medicare Payment Advisory Commission (MedPAC), which estimated that, on average, hospitals that participate in the 340B program receive a minimum discount of 22.5 percent of ASP for drugs paid for under the HOPPS.

CMS is proposing that the savings generated as a result of this payment reduction be budget neutral; that is, that such savings be re-distributed to increase payment amounts for other Part B services. In order to enable CMS to identify which drugs are acquired through the 340B program under HOPPS, CMS is proposing to establish a modifier, effective January 1, 2018, that hospitals would be required to use when submitting claims for separately payable drugs that were not acquired under the 340B program.

CMS is soliciting comments on several aspects of this proposal, such as: (i) whether the 22.5 percent discount is the appropriate discount; (ii) whether there should be a phase-in period for implementing this provision; (iii) whether to apply budget neutrality broadly or to specific services or entities; and (iv) whether exceptions should be granted for certain types of drugs and/or certain types of entities.

CMS is also considering a longer term approach which, instead of applying an average payment discount to all 340B drugs, would set a payment rate based on acquisition costs for 340B drugs. Since CMS does not have information on the actual acquisition costs for 340B drugs, CMS is soliciting comments on whether 340B hospitals should be required to report their acquisition costs in addition to charges for each drug on the Medicare claim.

Comments on the HOPPS proposed rule are due September 11, 2017 no later than 5 p.m. EST.