A drug discount program that helps safety net providers save millions could be significantly weakened under new regulations proposed by the Trump administration. (Associated Press/The Minnesota Star Tribune)

A drug discount program that helps safety net providers save millions could be significantly weakened under new regulations proposed by the Trump administration.

Apart from looking at higher drug costs, hospitals and clinics say the biggest hit will come to programs and services for low-income or vulnerable patients.

That's because the safety net providers are required to use the savings earned from discounted drug purchases to invest in programs, such as extending clinic hours, giving free or discounted medications to the uninsured or providing mental health treatment.

Little known outside health care circles, the so-called 340B program requires drugmakers to discount sales of medications to providers that serve a high percentage of low-income or uninsured patients. The prices are set according to a federal formula and vary by drug, but the discounts range from 20 to 50 percent, according to some studies.

"This is an opportunity for facilities to stretch their scarce dollars," said Charles Cooper, 340B program director for Minneapolis-based Fairview Health Services. "It is a way to be able to provide services that they feel are needed for their unique settings and populations."

One study found that in 2013, qualifying providers spent $7 billion on medications under the program, which yielded savings of $3.8 billion. Only drugs used or dispensed in outpatient or emergency room settings are eligible for the discounts.

In July, the federal Centers for Medicare and Medicaid Services, which runs the two large health care programs for the elderly and the poor, proposed a new rule that would, in essence, erase the savings that come with the discount.

Under the rule, the Medicare program would impose a nearly 30 percent decrease in the reimbursements it pays providers for outpatient drugs they purchase using 340B, making the insurance payments closer to the price providers paid for the drug.

Federal officials said the change would help Medicare beneficiaries because it would lower the 20 percent co-pay that they make under the Medicare Part B program.

"The proposed rule takes a critical step toward fulfilling President Trump's promise to lower the cost of drugs, particularly for Medicare beneficiaries," said Seema Verma, administrator of the Centers for Medicare and Medicaid Services.

But critics say most seniors won't see reduced costs because many have a supplemental insurance policy that picks up the co-payment. Others are also enrolled in the Medicaid program, which has no drug co-pays.

The federal government is expected to make a final decision on the proposed rule later this year, but advocates fear it could change other reimbursement policies if enacted.

"The private sector often follows their lead when it comes to reimbursement, and it would be a double whammy if we get hit by Medicare slashing payments, but then suddenly commercial insurers [do it, too]. That would be traumatic," said Ted Slafsky, chief executive of 340B Health, a Washington-based lobbying group.

At St. Paul-based Regions Hospital, the change could mean that its 340B drug savings, which run about $12 million a year, would be shaved by $2 million to $3 million.

"We take the savings from that program and subsidize the care for patients who are vulnerable," said Heidi Conrad, chief financial officer at Regions. "It is obviously a critical program in allowing us to continue to be the safety net provider that we are."

Hennepin County Medical Center in Minneapolis has used savings to create a program where pharmacists work closely with patients to help them comply with medication schedules and prevent emergency room visits. They've also used the program to help build new clinics and extend clinic hours.

Altogether, HCMC saved $17 million in 2016 from the program, using $3 million of that savings to help patients fill prescriptions for free or at discounted prices.

Fairview reaps benefits from the program at several of its hospitals, with the savings invested back into each local operation.

Fairview Range Medical Center in Hibbing used program savings to expand behavioral health care, including adding patient beds and creating an enhanced outpatient program.

"They were able to expand behavioral programs up there and they are the only behavioral health providers in a 75-mile radius," said Cooper, the program manager.

But shrinking the pot of savings, should the Medicare cutbacks get enacted, could also lead to cutbacks, he said.

"This would probably result in some significant staff reductions, scale back hours of service, limiting patient access, possibly scale back scope of services and potentially curtail programs," Cooper said.

Glenn Howatt • 612-673-7192