Federal Judge Upholds Successful Challenge of 340B Reimbursement Cuts

HHS ordered back to the drawing board – and told to work quickly.

A federal judge has upheld a lower court’s ruling that the U.S. Department of Health and Human Services (HHS) exceeded its statutory authority when it reduced the 2018 Medicare reimbursement rate for drugs covered by the federal 340B Program.

U.S. District Court Judge Rudolph Contreras, sitting in the District of Columbia, issued the ruling Monday in the matter of American Hospital Association v. Alex M. Azar, HHS Secretary, ordering HHS back to the drawing board and warning it to act with haste to make a correction.

“On or before Aug. 5, 2019, the parties shall submit a status report regarding the agency’s progress on remand to remedy the issues raised in this litigation concerning the 2018 and 2019 OPPS (Outpatient Prospective Payment System) Rules,” Contreras concluded in his 22-page decision. “The Court expects that the agency will act expeditiously to resolve these issues.”

The ruling stopped short of vacating HHS’s 2018 and 2019 OPPS rules, “given the havoc … (it) may wreak on Medicare’s administration,” as Contreras put it. And it did not order that hospitals be compensated for 340B payments lost in the past two years.

Maureen Testoni, President and Chief Executive Officer of 340B Health and a repeat guest on Monitor Mondays, the weekly Internet radio broadcast hosted by RACmonitor, nonetheless hailed the decision as a clear win for providers nationwide.

“On behalf of the nearly 1,400 hospitals we represent that participate in 340B, we are pleased that the court has, once again, found that HHS exceeded its statutory authority by cutting what Medicare pays for outpatient drugs delivered to their patients,” Testoni said in a statement. “The cuts made in 2018 and again in 2019 have reduced hospitals’ ability to care for those in need. The sooner this policy is reversed, the better hospitals will be able to serve the needs of patients with low incomes and those in rural communities. HHS must act quickly, as any further delay will only harm patients and the hospitals they rely on for care.”

Healthcare Dive published a report online this week noting that the 340B Program has come under scrutiny from several angles in recent months, “largely prompted by concerted opposition from the pharmaceutical industry’s trade group, PhRMA,” as legislators have called for enhanced transparency and oversight from the Program.

The report also noted that the number of hospitals in the Program has jumped in the past few years, going from 1,465 in 2011 to 2,399 in 2016, according to the Government Accountability Office.

Program Note:
Listen to RACmonitor national correspondent Timothy Powell report this story live during Monitor Monday, May 20, 10-10:30 a.m. ET.