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The Health and Human Services Department does not have the discretion to change 340B reimbursement rates without gathering data on what hospitals pay for outpatient drugs, the Supreme Court ruled Wednesday.
The unanimous opinion, authored by Justice Brett Kavanaugh, reverses a 2020 decision by the U.S. Court of Appeals for the District of Columbia Circuit.
“Absent a survey of hospitals’ acquisition costs, HHS may not vary the reimbursement rates only for 340B hospitals; HHS’s 2018 and 2019 reimbursement rates for 340B hospitals were therefore unlawful,” Kavanaugh wrote. “Under the text and structure of the statute, this case is therefore straightforward.”
In 2018, the Centers for Medicare and Medicaid Services cut Medicare 340B reimbursements by nearly 30% for most outpatient drugs. The policy generated approximately $1.6 billion in savings in the first year, which the agency redistributed to hospitals through rate increases for non-drug items and services.
But the American Hospital Association and other provider groups argued the cuts were illegal because CMS didn’t survey hospitals to determine their average drug acquisition costs. The agency instead used the “average price” for the drugs, another option allowed under Medicare law for determining reimbursement for hospital-purchased drugs. HHS countered that courts don’t have jurisdiction to review these payment policies.
The Supreme Court ruling concludes that CMS overstepped its legal authority by employing the second method and setting different payment rates for hospitals that do and don’t participate in the 340B program. The high court also rejected HHS’s contention that the regulations aren’t subject to judicial review.
This is a developing story. Please check back for updates.
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