New HHS Rule Seeks to Cut Drug Prices for Medicare Beneficiaries

The Department of Health and Human Services has introduced a new rule to prevent hospitals from inflating prices on discounted drugs for Medicare beneficiaries, aiming to save $1.1 billion next year. This regulation targets hospitals participating in the 340B program, which allows them to acquire outpatient prescription medications at reduced costs to aid low-income patients. However, current billing practices enable these hospitals to charge insurers and patients higher rates, escalating costs.

Under the proposed rule, the Centers for Medicare & Medicaid Services (CMS) would adjust reimbursement calculations for these hospitals. This initiative seeks to cut patient expenses and uphold affordability within the healthcare system, though its overall financial impact remains uncertain due to the complex nature of healthcare pricing dynamics.

The American Hospital Association has voiced concerns, emphasizing that the financial strain on member hospitals could increase. Ashley Thompson, Senior Vice President for Public Policy Analysis and Development, stated, "These proposals will undermine the ability of hospitals to maintain essential services and protect affordable access to care for those who depend on the 340B program."

Initially designed to help healthcare providers maximize limited federal resources, the 340B program remains a contentious point between hospitals and pharmaceutical companies, both vying for regulatory advantages. The White House anticipates that Medicare Part B seniors could witness an annual reduction in co-payments by roughly $800 each, contributing to an overall saving of $1.1 billion for enrollees. Over a decade, projected total savings might reach approximately $20 billion.

A policy draft highlighted an example involving the prostate cancer drug Lupron Depot, where hospitals pay about $700 per dose under the program yet receive $4,000 in Medicare reimbursements, plus an additional $1,000 in patient co-payments. The rule aims to decrease these reimbursement rates by about 40% for hospitals in the 340B program.

This proposal revisits initiatives first attempted in 2018, invalidated by the Supreme Court in 2022. The new measure proposes adjusting reimbursements to the average sales price minus 33.4% for drugs purchased under the 340B program, following a presidential directive to scrutinize hospital drug spending. If enacted, this policy would take effect next year.