OPA's appropriation likely to be frozen or reduced.
August 2, 2011—Federal Medicare reimbursement to health care providers, payments to state Medicaid programs, and spending to administer the 340B drug discount program could be significantly curtailed under a 10-year deficit reduction bill that President Obama signed into law today.
The Senate voted 74-26 to approve the bill this morning after the House passed it 269-161 the day before. The President and congressional leaders of both parties hammered out the agreement this past weekend. Fiscal conservatives had insisted on deep cuts in federal spending as a condition for raising the federal debt limit. Final approval came just hours before the government was due to default.
The measure's first stage of spending cuts would reduce discretionary federal spending by $917 billion over 10 years by imposing annual spending limits on most federal agencies and programs. Medicare and Medicaid would be spared from this first round of cuts. However, the Centers for Medicare and Medicaid Services' (CMS) administrative budget would be cut as would those of the Office of Pharmacy Affairs (OPA), which administers the 340B program, and its parent agency, the Health Resources and Services Administration (HRSA).
OPA has a $4.4 million budget for the fiscal year that ends Sept. 30, twice the amount it received in fiscal 2010. Despite the increase, OPA Director Krista Pedley recently said her office lacks money to implement a mandatory dispute resolution process for 340B and a related system of civil monetary penalties for manufacturers that violate 340B pricing agreements, as required under health care reform. OPA also says funding constraints forced it to curtail its technical assistance program in March.
The Obama administration has proposed financing OPA through a 0.1 percent fee on all 340B drug purchases. Its plan might gain momentum in light of the new spending restraints.
Second Stage of Cuts
The deficit reduction plan's second stage would create a bipartisan, 12-member joint committee of Congress tasked with writing legislation to achieve another $1.5 trillion or more in deficit reduction by Thanksgiving. This time, Medicare and Medicaid spending would be on the table. Democrats and Republicans disagree whether the committee would be able to recommend tax increases. The panel's bill would be subject to up-or-down, no-amendment votes in both chambers.
If the committee fails to develop a bill or if Congress fails to pass its recommendations by December 23, automatic spending cuts totaling $1.5 trillion would be triggered. Half would come from defense spending and half from non-defense spending. Medicaid would be exempt if across-the-board cuts are triggered, and cuts to Medicare would be limited to no greater than 2 percent of that program's costs. According to a Senate Democratic fact sheet, providers and insurance plans would bear the burden of the Medicare reductions.
It is unclear whether the spending reductions might also impact the drug industry. Congressional Democrats, for example, have proposed expanding the Medicaid drug rebate program to "dual eligible" beneficiaries.
Finally, the plan would require the House and Senate to vote before the end of this year on a proposed constitutional amendment requiring the federal budget to be balanced. It is unlikely that such a measure would pass.