April 18, 2011—The Republican-led U.S. House approved a fiscal year 2012 budget late last week that would turn Medicaid into a block grant system, a proposal that has the potential to undermine the 340B drug discount program.
The April 15 vote came a day after final passage of legislation that keeps the government open through Sept. 30 but reduces total federal spending by $37.7 billion. The bill cut the Health Resources and Services Administration (HRSA) by $1.2 billion, a 16 percent reduction from last year. It is unclear how the Office of Pharmacy Affairs (OPA) factors into the cut.
President Obama, meanwhile, sketched out his plan for future deficit reduction in an April 13 speech, saying “we will cut spending on prescription drugs by using Medicare’s purchasing power to drive greater efficiency and speed generic brands of medicine onto the market.” In his speech, the President rejected the House GOP’s Medicaid block grant plan and its related proposal to transform Medicare into a voucher system. The Democratic-led Senate is also expected to reject the House budget.
Drug manufacturers currently need to sign 340B pharmaceutical pricing agreements with the Secretary of Health and Human Services in order to get Medicaid to cover their drugs. Health care providers fear that the 340B requirement would be dropped in a block grant system. Providers are also concerned about what might happen to their prescription drug reimbursement if federal Medicaid and Medicare spending is cut sharply.
The President has indicated that he wants to reach a deficit reduction deal with House Republicans and Senate Democrats by the end of June. The deadline, however, might arrive even sooner given that the Treasury Department recently warned Congress that the government’s debt ceiling will be reached in mid-May. Raising the limit is considered must-pass legislation. Some lawmakers have indicated that they will press for even more budget cuts as a condition for voting to lift the ceiling.
Congress returns to work after a two-week recess on May 2.