Judge Contreras of the federal District Court for the District of Columbia has vacated the Department of Health and Human Service’s rule cutting Medicare reimbursement to 340B hospitals for outpatient drugs for 2022. This means that 340B hospitals will be paid at the default Medicare rate of Average Sales Price plus 6% for these drugs through the end of the year.
The case was in the District Court on remand from a unanimous Supreme Court ruling in American Hospital Association et al. v. Becerra that overturned Medicare rules significantly reducing payments to 340B hospitals for outpatient drugs. The issue before the Supreme Court was whether HHS had the authority under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 to pay one category of hospitals – 340B hospitals serving disadvantaged and underserved populations – significantly less than other hospitals for outpatient drugs without conducting a survey of hospitals’ acquisition costs for the drugs. In an opinion based on a close reading of the Act, the Court held that HHS did not have such authority and that it acted unlawfully in adopting the rule.
The issue before the District Court was to determine the appropriate remedy in light of the Supreme Court decision. In its briefing, HHS admitted that the rule’s 340B reimbursement rate is unlawful, but it argued against vacating the rule because of its mandate to maintain budget neutrality and the disruption that vacating the rule would cause. The Court disagreed, stating: “HHS is attempting to use budget neutrality now as a shield to justify ongoing and continuing application of an unlawful reimbursement rate that no amount of reasoning can rehabilitate on remand.” (emphasis in the original). The Court also noted that any “disruption would be minimal, because HHS admits that vacating the 340B reimbursement rate for the remainder of 2022 would account for ‘only  a small sliver of the overall time periods challenged in this action.’”
In a statement applauding the opinion, AHA General Counsel and Secretary Melinda Hatton said that the “AHA appreciates Judge Contreras’ ruling that Department of Health and Human Services must immediately stop unlawful reimbursement cuts for 2022 for hospitals participating in the 340B dug pricing program. Halting these cuts will help 340B hospital provide comprehensive health service to their patients and communities.”
AHA’s motion seeking reimbursement to 340B hospitals for earlier years remains pending before the District Court.
The Court’s opinion is linked here. Whatley Kallas, LLP’s previous article on the Supreme Court decision in American Hospital Association et al. v. Becerra is linked here.
The attorneys at Whatley Kallas will continue to follow the Court’s action as it frames remedies resulting from HHS’s unlawful reduction of payments to 340B hospitals for past years.