Mid-week update

The FEHBlog listened to a good chunk of this morning’s Senate Homeland Security and Governmental Affairs hearing on the President’s government reorganization plan. The witness before the Committee was OMB Deputy Director for Management Margaret Weichert. The FEHBlog learned that OMB’s top reorganization priority is to move employee background checks from OPM to the Defense Department. Other top priorities include growing the cybersecurity workforce, implementing a customer service initiative, and creating an advance research institute. Ms. Weichert expects to identify by summer’s end ten to twelve initiative that the executive branch can implement without new Congressional action. Sen. Lankford (R Okla.) mentioned that he and Sen. Heitkamp (D N.D.) plan to hold an OPM oversight hearing in the next few weeks. Those Senators are the chair and ranking member of the Committee’s Subcommittee on Regulatory Affairs and Federal Management. Sen. Lankford added that the hearing will concern, among other topics, federal retirement issues.

On Sunday, the FEHBlog mentioned that the Senate Health Education Labor and Pension Committee planned to hold a hearing yesterday on controlling health care costs. Here’s a link to an interesting Health Data Management article coming out of that hearing on this important topic.

The FEHBlog has been noticing many articles about Medicares “340B Program.” The FEHBlog, however, is unfamiliar with the Program’s specifics. He read a July 17, 2018, D.C. Circuit decision on the Program which explained

[T]he so-called “340B Program,” which allows certain hospitals to purchase outpatient drugs from manufacturers at or below specified prices. See Public Health Services Act § 340B, 42 U.S.C. § 256b. When hospitals treat Medicare beneficiaries with these drugs, they are reimbursed through [Outpatient Prospective Pricing System] OPPS [which is part of Medicare Part B].

In setting the annual reimbursement rates for drugs obtained through the 340B Program, the Secretary must use either the “average acquisition cost” of the drug, taking into account “hospital acquisition cost survey data,” or, if those data are unavailable, the “average price” of the drug, as established under different provisions of Medicare. 42 U.S.C. § 1395l(t)(14)(A)(iii). The relevant cross-referenced provision fixes payment rates at 106% of the average sales price. See id. § 1395w-3a(b). If the average-price metric is used, this 106% figure may be “adjusted by the Secretary as necessary for
purposes of [OPPS].” Id. § 1395l(t)(14)(A)(iii)(II). The Secretary does not have acquisition cost survey data, so he historically has set the OPPS reimbursement rate for drugs purchased through the 340B Program at 106% of the average sales price, without any adjustments. See Hospital OutpatientProspective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs, 77 Fed. Reg. 68,210, 68,382–86 (Nov. 15, 2012). 

The current brou-ha-ha stems from the fact that the current HHS Secretary Alex Azar cut the 340B reimbursement rate to 77.5% of the average sales price, “cit[ing] various studies indicating that hospitals participating in the 340B Program are able to buy covered drugs at amounts significantly below the average sales price.”  This legal challenge to Secretary Azar’s decision was dismissed on the ground that it was not predicated on Medicare Part B claim decision as the Medicare judicial review law requires. The legal battle of course will continue. The FEHBlog appreciated gaining this information on the 340B Program.