On July 29, 2019, the Centers for Medicare & Medicaid Services (CMS) released its annual proposed update to the hospital outpatient prospective payment system (Proposed Rule).

The Proposed Rule provides for a 60-day comment period ending on September 27. 2019. The finalized changes will appear in the final rule typically published in early November, effective January 1, 2020.

Under the Proposed Rule, reimbursement for pharmaceuticals covered under Medicare Part B would remain at the Average Sales Price (ASP) for such drug plus a 6% add on if the drug costs more than the packaging threshold or has pass through status. The packaging threshold will go up slightly to $130/day; drugs with a cost below the packaging threshold amount are not separately reimbursed unless they have pass through status, and instead the payment for drugs below the threshold without pass through status will be bundled with reimbursement for an associated procedure. New pharmaceuticals that are separately reimbursable under Medicare Part B would be reimbursed at Wholesale Acquisition Cost (WAC) plus a 3% add on.

One curious note: the Proposed Rule reduces reimbursement for separately payable covered outpatient drugs and biologicals (other than vaccines) that were purchased under the 340B Program to ASP minus 22.5% despite the issuance of a permanent injunction preventing CMS from implementing such reimbursement methodology. Arent Fox's Health Care Counsel has previously analyzed the injunction here. The Administration has appealed the District Court ruling granting the injunction and the case is currently working its way through the US Court of Appeals for the DC Circuit. CMS also seeks comments on an alternative reimbursement formula for drugs purchased under the 340B Program in the Proposed Rule.