​Medicare will dramatically cut what it pays for certain drugs under the 340B drug discount program starting next year, CMS said in a final rule late last week. CMS officials carried through on their July proposal to pay for physician-administered drugs at a rate that's 22.5 percent less than the average sales price, rather than the 6 percent discount currently applied. According to CMS, the new Medicare rate is more in line with what hospitals actually pay for the drugs. Rural and sole community hospitals, certain cancer and childrens' hospitals will be exempt from the policy.

CMS officials said in the final rule "it is inappropriate for Medicare to subsidize other activities through Medicare payments for separately payable drugs." Medicare beneficiaries stand to pay $320 million less on copayments for these drugs next year alone, CMS Administrator Seema Verma said in a statement. The agency finalized a rate increase projected to increase providers' pay by 1.4 percent under the rule in 2018. That's slightly lower than the 2.0 percent overall impact on pay that CMS proposed in July, and should translate to roughly $690 million in additional Medicare spending compared with the prior year.

AHA released the following statement:

For 25 years, the 340B Drug Pricing Program has been critical in helping hospitals stretch scarce federal resources to expand access to lifesaving prescription drugs and comprehensive health care for our nation’s most vulnerable patients. The program constitutes less than 2.8 percent of the $457 billion in annual drug purchases made in the U.S. and does not cost the government or taxpayers a single penny. CMS’s decision to cut Medicare payments to hospitals for drugs covered under the 340B program will dramatically threaten access to health care for many patients, including uninsured and other vulnerable populations. It is not based on sound policy and punishes hospitals and patients for participation in a program outside of CMS’s jurisdiction. Contrary to the Administration’s claims, this policy does nothing to address the stated goal of reducing the cost of pharmaceuticals. In fact, the agency’s new policy would actually cause increases in Medicare beneficiaries’ out-of-pocket costs for non-drug Part B benefits.  We will strongly urge CMS to abandon its misguided 340B rule, and instead take direct action to halt the unchecked, unsustainable increases in the cost of drugs.

In the meantime, the AHA will work with Congress to address this issue. We also will be joining the Association of American Medical Colleges, America’s Essential Hospitals and our members to pursue litigation to prevent these significant cuts to payments for 340B drugs from moving forward. Key Under 340B, hospitals and outpatient clinics that serve a disproportionate share of low-income and uninsured patients currently purchase outpatient drugs at the heavily discounted rates, but those savings do not have to be passed on to patients. Hospitals have been criticized — mostly by the drug industry — for taking advantage of the 340B program to receive those discounts without making it clear how the saved money is used.