Supreme Court Rules on HHS Reimbursement Reduction

The 340B program is designed to lower healthcare costs and provide more comprehensive services to underserved patient populations.  The program involves drug manufacturers offering discounted prices to qualifying hospitals and providers that serve low-income patients.  The discounted drugs are reimbursed at prevailing rates by payers.  Providers can then use the savings from the program to provide discounted services and cover other costs.

The American Hospital Association (AHA) and other groups brought a case to the U.S. Supreme Court challenging the reimbursement rates for Medicare Part B from 2018 to 2019, during which time the U.S. Department of Health and Human Services (HHS) reduced reimbursement rates for 340B providers to ASP-22.5%.  The Supreme Court unanimously ruled that HHS’s decision to lower the reimbursement rates of 340B providers was unlawful.  However, based on the ruling, if HHS conducted a survey on the hospitals’ acquisition costs and set reimbursement rates based on their findings, then the change in reimbursement rates would be lawful.  This suggests that there may be cuts in reimbursement rates to 340B participants in the future.

This ruling is being viewed as a victory for the 340B entities and the patients that they serve.  The Supreme Court ruling may not be the end of this case, which now requires a remedy for past underpayments.  Currently, the case has been sent back to the U.S. Circuit Court of Appeals for the District of Columbia, where it could be sent back to the district court or the Centers for Medicare and Medicaid Services (CMS) where a remedy could be created.  There is not an expected timetable for resolution.

The 340B program faces other challenges.  One of the most pressing issues involving the sustainability of the 340B program is manufacturer participation. There are currently as many as sixteen drug manufacturers limiting discounted pricing of drugs to direct participants of the program, and not providing discounts to contract pharmacies.  The American Society of Health-System Pharmacists (ASHP) recognizes the delicate nature of the 340B program.  ASHP also advocates for the 340B program and pushes back against all efforts to undermine it.  What direction do you envision the 340B program taking in the future?  Stay tuned for future PHSL posts on this important issue.

Posted: July 2022