December 26, 2024

Meena Seshamani, MD, PhD
Deputy Administrator and Director of the Center for Medicare
Centers for Medicare and Medicaid Services
7500 Security Boulevard
Baltimore, Maryland 21244

Subject: Medicare Transaction Facilitator for 2026 and 2027 under Sections 11001 and 11002 of the Inflation Reduction Act (IRA) Request for Collection of Information under the Paperwork Reduction Act (PRA) (CMS-10912)

Dear Dr. Seshamani:

On behalf of our nearly 5,000 member hospitals, health systems and other health care organizations, as well as our clinical partners – including more than 270,000 affiliated physicians, 2 million nurses and other caregivers – and the 43,000 healthcare industry leaders who belong to our professional membership groups, the American Hospital Association (AHA) appreciates the opportunity to share our comments on the Centers’ Information Collection Request (ICR) for Medicare & Medicaid Services (CMS) regarding the Medicare Transaction Facilitator (MTF) and the Medicare Drug Negotiation Program. We remain concerned that the process established by CMS may undermine Congressional and agency goals to reduce drug prices for patients and providers.

ROLE OF THE MEDICARE TRANSACTION FACILITATOR

We appreciate the agency’s efforts to balance the interests of a diverse set of stakeholders by designing a mechanism that would allow distribution entities to access negotiated Maximum Fair Prices (MFPs). We also appreciate that the agency is addressing hospitals’ concerns about sharing data directly with pharmaceutical companies by establishing a third-party, neutral MTF to facilitate data exchange and payment between administering entities, plan sponsors and pharmaceutical companies. We remain concerned, however, that CMS’s approach will allow each pharmaceutical company to establish a single process, thereby creating significant burden and uncertainty for hospitals and other distribution entities.

Although the agency requires pharmaceutical companies to participate in the MTF Data Module (DM), it does not require them to participate in the MTF Payment Module (PM). As a result, each pharmaceutical company can set up its own payment process, forcing hospitals and other distribution entities to manage countless different arrangements. This not only creates enormous costs and operational burdens, but it will also complicate hospitals’ ability to know whether they have actually been paid within the 14-day payment period and whether they have paid the full amount due. Hospitals report that tracking this information across multiple different systems would be technologically expensive and extremely time-consuming for staff, because in many cases it would have to be done manually. If these obstacles prevent hospitals from identifying and remedying late payments, they could face cash flow and budgetary constraints. To avoid these problems, we urge CMS to require pharmaceutical companies to participate in the MTF PM to standardize the payment process among pharmaceutical companies and allow dispensing entities to track reimbursement receipts in a less burdensome and faster.

Additionally, CMS appears to allow pharmaceutical companies to unilaterally change the scope of any other payment method, provided they provide 90 days’ notice. This could create challenges for hospitals and other distribution entities that may have established annual or longer-term contracts with third-party providers and administrators that assist them in processing claims. Therefore, not only may hospitals and other dispensing entities be unable to adapt to certain changes, but the ability of pharmaceutical companies to make changes introduces more uncertainty into the process. We urge the agency to prohibit pharmaceutical companies from unilaterally changing alternative payment arrangements once established and approved by CMS.

IMPLICATIONS FOR THE 340B PROGRAM

From the start of the program, participating entities have purchased covered outpatient drugs at a discounted upfront price, allowing them to generate price savings that are used to support a range of patient programs and services, such as behavioral health, medication-assisted treatment and diabetes education. We are deeply concerned that the agency’s October 2 final guidance on the Medicare Drug Negotiation Program allowed pharmaceutical companies to wrongly justify fundamental changes to the 340B program, moving it from an initial discount to a retrospective discount.¹

In its final guidance, CMS recognizes the potential implications for access to 340B pricing as pharmaceutical companies may choose to make MFP access available prospectively or retrospectively; however, the agency does not address this issue further. Given the concerns described below, we urge the agency to ensure that prospective access to 340B rates is maintained to avoid unintended harm to 340B hospitals and their patients.

CMS’s silence on this issue appears to have been seen by drug companies as a “green light” to pursue a $340 billion rebate model in which drug companies will make the $340 billion price available retrospectively, similar to the $340 billion discount process. the agency to make the negotiated MFP available. via the MTFs DM and PM. To date, we have seen four pharmaceutical companies (Johnson & Johnson, Eli Lilly, Bristol Meyers Squibb, and Sanofi) attempt to establish a 340 billion rebate model, and we expect more pharmaceutical companies to follow a similar approach.²

The 340B statute only authorizes the Secretary to approve any model modifying access to 340B pricing for covered entities. Although the Secretary has not approved any of these rebate models and the Health Resources and Services Administration has informed these companies that their efforts violate 340B, the four companies have sued the federal government in an effort to continue their discount model. Each of the four companies cited CMS’s October 2 final guidance as a reason for establishing a $340 billion rebate model.

We cannot emphasize enough the damage a 340 billion rebate model would have on 340 billion hospitals and the patients they serve. A 340B shed model:

1. Create access issues for patients who might not have access to certain 340B medications because the hospital is unable to stock them. By requiring hospitals to purchase the drug at a higher price, many hospitals have reported that this could lead to the inability to purchase certain drugs in the quantities required to meet patient demand.
2. Require 340B hospitals to subsidize millions of dollars to pharmaceutical companies by purchasing certain outpatient drugs at a higher price (e.g., bulk acquisition cost). Some hospitals have indicated that this alone could result in additional costs of more than $10 million. Shifting this type of financial responsibility to organizations operating at low or negative margins and on the front lines of serving our most vulnerable populations, including millions of Medicare beneficiaries, could have a direct impact on their ability to meet patient needs – which is not only dangerous for patients. access to care, but also directly compromises the objective of the 340B program.
3. Creating a huge administrative burden on 340 billion covered entities who would have to establish the necessary programs to provide claims data elements to pharmaceutical companies or risk not getting paid. Some hospitals have indicated that this is not only costly to establish, but that some of the data required by pharmaceutical companies may be impossible to provide in the required time frame, which would only exacerbate the problems associated with moving millions of dollars to pharmaceutical companies without any insurance. receive the rebates due under the law. Additionally, the 340B remittance models proposed thus far are each significantly different, requiring different data elements and creating different deadlines for 340B covered entities. If implemented, this measure will create an additional layer of burden and uncertainty for 340 billion hospitals.

An unapproved 340B rebate model not only violates the law, but also undermines the purpose of the 340B program and the benefits it provides to patients across the country. It wrests oversight of the program from the Department of Health and Human Services and places it in the hands of interested pharmaceutical companies, in a way that neither Congress nor the department anticipated. We strongly urge CMS to review its guidance and clarify that pharmaceutical companies cannot abuse their obligations under the IRA to create an illegal rebate pattern in the 340B program.

We appreciate the opportunity to provide feedback to the agency on this critically important program. It is of the utmost importance to us that the agency implements a policy that balances the interests of Medicare patients who may benefit from access to lower-cost drugs, as well as those of dispensing entities, manufacturers, taxpayers and the government. We believe the only way to achieve these interests is in a manner that does not unintentionally increase the burden on providers and undermine the vitally important 340B program. We welcome the opportunity to discuss our comments or any other aspects of this important program in more detail. Please contact me if you have any questions, or feel free to have a member of your team contact Bharat Krishnamurthy, AHA Director of Policy and Analytics, at [email protected].

Sincerely,

/s/

Ashley Thompson
Senior Vice President
Analysis and development of public policies

1. https://www.cms.gov/files/document/medicare-drug-price-negotiation-final-guidance-ipay-2027-and-manufacturer-effection-mfp-2026-2027.pdf
2. For example, see the model proposed by Sanofi: