Proposed CMS cuts to 340B will have negligible impact, Walgreens says

DEERFIELD, Ill. — Walgreens Boots Alliance met with various investors to clarify its participation in the U.S. Health Resources and Services Administration 340B drug pricing program.



For the first nine months of fiscal 2017, prescriptions related to the 340B program represented less than 1% of the Retail Pharmacy USA division’s prescription volume, Walgreens noted. The division has around 1,200 340B contracts. During the first nine months of fiscal 2017, 340B prescriptions were filled at approximately 6,100 of the division’s pharmacies.



The Centers for Medicare & Medicaid Services earlier this month proposed for calendar year 2018 to significantly cut payment of drugs purchased through the 340B drug pricing program from average sales price plus 6% to ASP minus 22.5% "to address recent trends of increasing drug prices, for which some of the cost burden falls to Medicare beneficiaries." ASP minus 22.5% is the Medicare Payment Advisory Commission’s estimate of the average minimum discount eligible hospitals received for drugs acquired under that program.



Applicable drugs not purchased under the 340B drug program would continue to receive ASP plus 6% payment, CMS noted.



"The proposal from the U.S. Centers for Medicare and Medicaid Services seeks to address how Medicare pays hospitals for drugs acquired under the 340B program, but does not propose eliminating the program altogether," Walgreens stated. "The hospital market represents slightly more than half of the Retail Pharmacy USA division’s overall 340B prescriptions. As required by law, 340B drug inventory is owned by the covered entity, not by the pharmacy."



On a pro forma basis, for the nine months ended May 31 2017, had the proposed changes to the program been in place throughout the period, the company estimates that the net impact on Retail Pharmacy USA divisional adjusted gross profit dollars would have been less than 0.5%.