May 24, 2010 – The U.S. House is expected to consider a tax bill perhaps as soon as tomorrow that would create a dramatically downsized version of the inpatient drug discount sought by safety net hospitals and other 340B providers.
The new voluntary program, which sources say might be named 340B-1, would be separate from the existing 340B outpatient drug discount program and have its own rules and guidelines. If enacted, the program would take effect with the start of the new year.
In a major break from the outpatient program, the new one would offer discounts only on drugs administered to patients without insurance or for which a hospital receives no compensation. There also would be no discounts on drugs for Medicaid or Medicare patients.
It also would be much tougher for safety net hospitals to qualify for the new discount. Eligibility would be limited to those with a Medicare disproportionate share (DSH) adjustment above 20.2 percent, or 8.45 percentage points higher than the outpatient program’s 11.75 percent threshold. Put another way, it is estimated that two out of every three safety net hospitals that currently qualify for the outpatient discount might not qualify for the inpatient price break.
Three types of rural hospitals just added to the outpatient program would have an easier time accessing the inpatient discount. All critical access hospitals enrolled in 340B would be eligible to participate in the new program without regard to their Medicare DSH adjustment percentage and sole community hospitals and rural referral centers would be eligible with an 8 percent DSH adjustment.
Orphan Drug Ban Loosened
The tax bill, officially titled The American Jobs and Closing Tax Loopholes Act of 2010 (H.R. 4213), is also expected to ensure that free-standing children’s hospitals can continue to access 340B discounts on outpatient “orphan” drugs. The health care reform law enacted in March prohibited them and the new classes of 340B covered entities from accessing 340B discounts on these specialty pharmaceuticals.
Safety Net Hospitals for Pharmaceutical Access (SNHPA), which represents DSH hospitals in the 340B program, says it was not involved in negotiations over the new inpatient program and did not have a hand in drafting the bill language. “We are withholding judgment on whether our members should support this legislation,” the group says, adding that it has concerns “about the program’s limited scope and the added burdens it would place on hospitals.”
For example, SNHPA says that while it is pleased that children’s hospitals would be exempted from the orphan drug prohibition, it will keep working to repeal the entire prohibition. But if the new program becomes law, it says it will work closely with the Health Resources and Services Administration (HRSA) “to ensure that hospitals can maximize its benefits with as little administrative burden as possible.”
If the House passes H.R. 4213 it would go directly to the full Senate for a vote. House Democratic leaders have described the far-ranging tax bill as “must-pass” legislation.