CHA News Article

Proposed State Budget Includes Changes to 340B Drug Pricing Program

In January, Gov. Brown released his proposed budget for state fiscal year 2017-18, which included the Department of Health Care Services’ (DHCS) proposal to clarify statutory provisions related to the use of and reimbursement for drugs purchased under the 340B program in Medi-Cal. Existing statute requires 340B entities that provide drugs to Medi-Cal beneficiaries to use only drugs purchased under the 340B program and bill at their actual 340B acquisition cost, plus any applicable dispensing fee.

DHCS proposes to introduce budget trailer bill language that explicitly applies these requirements to both Medi-Cal fee-for-service and Medi-Cal managed care programs. While the bill language is not yet in print, DHCS has indicated the proposal will be included in the May revise of the state budget. If the proposed language is included in the final version of the Governor’s budget, the change would be effective July 1.

Over the past several months, CHA has worked with its 340B workgroup to evaluate this proposal’s  financial implications on hospitals. On average, hospitals report the annual loss in 340B savings would be approximately $2 million — which translates to hundreds of millions in lost savings for 340B hospitals across the state. CHA has met with DHCS, as well as members of the Legislature and consultants for the budget subcommittee, to ensure they understand the significant impact this would have on hospitals. CHA will continue its advocacy efforts and once the budget trailer bill language is in print, 340B participating hospitals will be asked to contact their legislators.