AHA Asks Federal Court to Immediately Stop 340B Payment Cuts

The American Hospital Association (AHA) has asked the US District Court for the District of Columbia to order HHS to immediately halt underpayments to hospitals participating in the 340B Drug Pricing Program. The motion comes months after the US Supreme Court ruled that the 340B payment cuts implemented in 2018 were unlawful.

HHS finalized the 340B payment cuts through the 2018 Outpatient Prospective Payment System (OPPS) rule. Hospitals participating in the drug pricing program faced payment cuts of nearly 30 percent. The federal government said it implemented the cuts after research showed that some hospitals were profiting excessively from the 340B Drug Pricing Program.

Hospital groups have challenged the claim that hospitals have profited from the program. They argue that the hospitals participating in the 340B Drug Pricing Program are safety-net providers who treat large volumes of low-income and underserved patients. Hospitals have used the payments from the drug pricing program to maintain access to quality care in their communities.

The case went through the court system, with an appeals court upholding the 340B payment cuts in 2020. In August of that year, HHS proposed further cuts to 340B hospital payment. Hospitals in the 340B Drug Pricing Program were to get reimbursed for covered outpatient drugs at average sales price minus 34.7 percent, plus an add-on of 6 percent of the product’s average sales price, bringing the net payment rate to 28.7 percent less the average sales price.

AHA asked the Supreme Court to take on the case in February 2021. The Supreme Court said it would hear the case later that year.

The Supreme Court Justices unanimously agreed that the policy instituting the 340B payment cuts did not follow federal law since HHS targeted 340B hospitals with the cuts and failed to conduct a survey of hospital acquisition costs, which it can do to determine hospital reimbursement rates.

The cuts would have reduced hospital reimbursement for the participating facilities by $1.6 billion annually.

Now, hospitals are looking to get reimbursed fully for participating in the 340B Drug Pricing Program. For them, that means reimbursing hospitals 6 percent over each drug’s average sales price rather than the modified 22.5 percent below average sales price.

AHA also called on the federal court to make HHS repay 340B hospitals for the unlawful cuts it has made since 2018 and to repay the hospitals without penalizing other hospitals.