Court Rules HHS Must Promptly Resolve Harm Caused by 340B Cuts

Posted on May 07, 2019

The U.S. District Court has ruled that the Department of Health and Human Services (HHS) must promptly resolve the harm caused by its unlawful cuts to Medicare reimbursement for certain hospitals enrolled in the 340B Drug Discount Program in 2018 and 2019.

The decision comes after a ruling issued in late December found that the Centers for Medicare & Medicaid Services (CMS) exceeded its authority when the agency implemented a nearly 30% cut to Medicare fee-for-service payment rates for 340B drugs in 2018. Henry Ford Health System and several hospital associations and nonprofit hospitals are plaintiffs in the case, and the MHA and the American Hospital Association filed briefs after the judge ordered supplemental briefs on the question of proper remedy following the ruling.

The new ruling reaffirmed that the 2018 cuts were unlawful and extended that ruling to subsequent 2019 cuts. Owing to the complexity of the Medicare program, the judge gave HHS the first opportunity to craft an appropriate remedy for its unlawful actions and asked for a report from HHS on its progress on or before Aug. 5.

The 340B Drug Discount Program is a federal program to help provide relief from escalating drug prices to safety-net hospitals and other healthcare providers serving vulnerable patient populations, including academic medical centers, children’s hospitals, community hospitals and hospitals serving rural areas. The program makes a meaningful difference in the regions served by participating hospitals and helps ensure patients and communities have access to much-needed care and healthcare services.

The 2018 cuts to 340B hospitals, estimated at $1.6 billion nationally, were included in the 2018 Medicare outpatient prospective payment system (OPPS) final rule and reduced payments for 340B drugs from average sales price (ASP) plus 6% to ASP minus 22.5%. The 2019 Medicare OPPS final rule continued the lower payment rates for 340B outpatient drugs. 

The AHA and the MHA requested that hospitals that received the reduced payments for 340B drugs receive a supplemental payment in an amount that equals the difference between the amount received and the full payment amount plus interest. The court declined to grant the associations’ specific request, instead ordering HHS to consider and adopt an appropriate remedy. The ruling also states that the court may reconsider this decision if the HHS fails to remediate its underpayments in a prompt manner.

The MHA will provide additional information as it becomes available. Members with questions should contact Vickie Kunz at the MHA.

Tags: 340B Drug Pricing Program, prescription drugs, 340B

Posted in: Issues in Healthcare, Member News, Top Issues - Healthcare

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