Supreme Court To Hear Case Impacting Medicare Reimbursement for 340B Drugs

The United States Supreme Court has agreed to hear a case that has a direct impact on the 340B Drug Discount Program (the 340B Program) and how Medicare will reimburse hospitals for dispensing of 340B covered drugs, as well as other reimbursement issues.

A link to the Court docket is here. Interestingly, it had been reported by some media outlets that the Court initially denied the petitioners’ request for cert, only to change course a few days later on July 2. Arent Fox analyzed the case when it was still making its way through the lower courts, here.

The case, American Hospital Association, et al. v. Becerra, presents the immediate question of “whether Chevron deference permits HHS to set reimbursement rates based on acquisition cost and vary such rates by hospital group if it has not collected adequate hospital acquisition cost survey data,” but the Court also asked that the parties brief and argue whether the challenge to HHS’s reimbursement adjustment is precluded by the statutory provision limiting the ability to conduct administrative or judicial review of “periodic adjustments” to reimbursement amounts (42 U.S.C. 1395l(t)(12)).

At the heart of the case is whether the Department of Health and Human Services (HHS) acted within its authority to single out hospitals participating in the 340B Program and drastically cut reimbursement for 340B covered outpatient drugs as part of the 2018 Outpatient Prospective Payment System (OPPS) Final Rule. Rather than maintain drug reimbursement for 340B hospitals at ASP + 6% (which is, notably, the reimbursement formula used for all other hospital groups), HHS set reimbursement for covered outpatient drugs dispensed by 340B hospitals at ASP minus 22.5%. HHS argued that it was allowed to vary reimbursement by hospital group because the agency had not collected specific hospital acquisition cost data, and was therefore allowed by statute to make certain adjustments to reimbursement as it saw fit.

The case has been closely followed by participants in the drug supply chain, with an amicus brief authored by some 36 state and regional hospital associations filed with the Court. Arent Fox will continue to follow this case and provide our insight once the Court hears oral argument.