Department of Health and Human Services, Centers for Medicare & Medicaid Services: Medicare Program; Hospital Outpatient Prospective Payment System: Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years 2018–2022

B-335745

November 20, 2023

The Honorable Ron Wyden
Chairman
The Honorable Mike Crapo
Ranking Member
Committee on Finance
United States Senate

The Honorable Cathy McMorris Rodgers
Chair
The Honorable Frank Pallone, Jr.
Ranking Member
Committee on Energy and Commerce
House of Representatives

The Honorable Jason Smith
Chairman
The Honorable Richard Neal
Ranking Member
Committee on Ways and Means
House of Representatives

Subject: Department of Health and Human Services, Centers for Medicare & Medicaid Services: Medicare Program; Hospital Outpatient Prospective Payment System: Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years 2018–2022

Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a major rule promulgated by the Department of Health and Human Services, Centers for Medicare & Medicaid Services (CMS) entitled “Medicare Program; Hospital Outpatient Prospective Payment System: Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years 2018–2022” (RIN: 0938-AV18). We received the rule on November 1, 2023. It was published in the Federal Register as a final rule on November 8, 2023. 88 Fed. Reg. 77150. The effective date is January 8, 2024.

According to CMS, the final rule describes the agency’s actions on remand from the United States (U.S.) District Court for the District of Columbia to craft a remedy in light of the U.S. Supreme Court’s decision in American Hospital Association v. Becerra, 142 S. Ct. 1896 (2022), relating to the adjustment of Medicare payment rates for drugs acquired under the 340B Program from calendar year (CY) 2018 through September 27th of CY 2022.

Enclosed is our assessment of CMS’s compliance with the procedural steps required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule. If you have any questions about this report or wish to contact GAO officials responsible for the evaluation work relating to the subject matter of the rule, please contact Shari Brewster, Assistant General Counsel, at (202) 512-6398.

Shirley A. Jones
Managing Associate General Counsel

Enclosure

cc: Calvin E. Dukes II
Regulations Coordinator
Department of Health and Human Services

ENCLOSURE

REPORT UNDER 5 U.S.C. § 801(a)(2)(A) ON A MAJOR RULE
ISSUED BY THE
DEPARTMENT OF HEALTH AND HUMAN SERVICES,
CENTERS FOR MEDICARE & MEDICAID SERVICES
ENTITLED
“MEDICARE PROGRAM; HOSPITAL OUTPATIENT PROSPECTIVE PAYMENT SYSTEM: REMEDY FOR THE 340B-ACQUIRED DRUG PAYMENT POLICY
FOR CALENDAR YEARS 2018–2022”
(RIN: 0938-AV18)

(i) Cost-benefit analysis

The Department of Health and Human Services, Centers for Medicare & Medicaid Services (CMS) estimated the final rule would result in a one-time payment from the federal government to covered hospitals in the amount of $9 billion to make the changes required for years
2018–2022. CMS also estimated a reduction in payments from the federal government in 2023 in the amount of $465 million at a seven percent discount rate or $476.9 million at a three percent discount rate.

(ii) Agency actions relevant to the Regulatory Flexibility Act (RFA), 5 U.S.C. §§ 603–605, 607, and 609

CMS determined the final rule would have a significant economic impact on a substantial number of small entities. CMS stated the analysis required under RFA was included as part of the Regulatory Impact Analysis. CMS also determined the final rule would have a significant economic impact on rural hospitals, leading to approximately $185 million in payments to 245 rural hospitals.

(iii) Agency actions relevant to sections 202–205 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. §§ 1532–1535

CMS stated the final rule does not mandate any requirements for state, local, or tribal governments, or for the private sector.

(iv) Agency actions relevant to the Administrative Pay-As-You-Go-Act of 2023, Pub. L.
No. 118-5, div. B, title III, 137 Stat 31 (June 3, 2023)

Section 270 of the Administrative Pay-As-You-Go-Act of 2023 amended 5 U.S.C. § 801(a)(2)(A) to require GAO to assess agency compliance with the Act, which establishes requirements for administrative actions that affect direct spending, in GAO’s major rule reports. In guidance to Executive Branch agencies, issued on September 1, 2023, the Office of Management and Budget (OMB) instructed that agencies should include a statement explaining that either: “the Act does not apply to this rule because it does not increase direct spending; the Act does not apply to this rule because it meets one of the Act’s exemptions (and specifying the relevant exemption); the OMB Director granted a waiver of the Act’s requirements pursuant to section 265(a)(1) or (2) of the Act; or the agency has submitted a notice or written opinion to the OMB Director as required by section 263(a) or (b) of the Act” in their submissions of rules to GAO under the Congressional Review Act. OMB, Memorandum for the Heads of Executive Departments and Agencies, Subject: Guidance for Implementation of the Administrative Pay-As-You-Go Act of 2023, M-23-21 (Sept. 1, 2023), at 11–12. OMB also states that directives in the memorandum that supplement the requirements in the Act do not apply to proposed rules that have already been submitted to the Office of Information and Regulatory Affairs, however agencies must comply with any applicable requirements of the Act before finalizing such rules.

In its submission to us, CMS stated the Act does not apply to the final rule because it meets one of the Act’s exemptions; the direct spending increase is less than $100 million in any one of those 10 fiscal years.

(v) Other relevant information or requirements under acts and executive orders

Administrative Procedure Act, 5 U.S.C. §§ 551 et seq.

CMS published a proposed rule on July 11, 2023. 88 Fed. Reg. 44078. CMS received comments and addressed them in the final rule.

Paperwork Reduction Act (PRA), 44 U.S.C. §§ 3501–3520

CMS determined the final rule does not contain information collection requirements subject to PRA.

Statutory authorization for the rule

CMS promulgated the final rule pursuant to sections 1302, 1395l, and 1395hh of title 42, United States Code.

Executive Order No. 12866 (Regulatory Planning and Review)

CMS stated the final rule had been reviewed by OMB and that the final rule is significant under the Order.

Executive Order No. 13132 (Federalism)

CMS determined that the final rule will not have a substantial direct effect on state, local, or tribal governments, preempt state law, or otherwise have a federalism implication.