U.S. District Court Judge Rudolph Contreras has decided against the Trump administration in its plan to cut 340B payments for outpatient drugs that took effect in January 2018. Contreras said HHS didn't have legal authority to reduce payments and sidestepped Congressional authority.
The American Hospital Association (AHA), America’s Essential Hospitals (AEH) and the Association of American Medical Colleges (AAMC) sued after HHS made the cuts. The groups said the government "exceeded its statutory authority when it cut Medicare reimbursement rates for certain outpatient pharmaceutical drugs by nearly 30%."
The judge asked that the hospital groups and federal government figure out an "appropriate remedy."
Division between hospitals, drugmakers and policymakers over the 340B program, which allows participating hospitals to get discounted rates on covered outpatient drugs for Medicare beneficiaries, has flared all year.
Hospitals say the lower drug costs enable them to provide care to lower-income patients.
However, in recent years, critics have decried the program's exponential growth and lack of oversight. In 2017, covered entities purchased more than $19 billion in drugs — a 114% increase since 2014.
In March, Senate health committee chairman Lamar Alexander, R-Tenn, questioned how hospitals used the program's savings. A New England Journal of Medicine report additionally said the 340B project "drives hospital/physician consolidation while not expanding care to low-income populations or improving their mortality rates."
There's also the issue of a billion-dollar gap between what hospitals pay for 340B drugs and what Medicare reimburses. HHS has tried to bridge the gap through the payment cuts, reducing Medicare reimbursement rates in the 340B program from the average sales price (ASP) plus 6% to ASP minus 22.5%.
When proposing the cut in 2017, HHS said the lower payment would "make Medicare payment for separately payable drugs more aligned with the resources expended by hospitals to acquire such drugs while recognizing the intent of the 340B program to allow covered entities, including eligible hospitals to stretch scarce resources while continuing to provide access to care."
In response, more than 200 members of the House of Representatives sent a letter in 2017 asking CMS to abandon the cuts.
Now, more than a year later, hospital groups are celebrating the latest decision. In a joint statement on Friday, the AHA, AEH and AAMC, called the decision "carefully reasoned" that will allow hospitals "serve their vulnerable patients and communities without being hampered by deep cuts."
Brian Siegel, president and CEO at AEH, said in a statement, "Congress was crystal clear when it created the 340B program to support the work of essential hospitals. Now our hospitals can continue their great work caring for the most vulnerable as good stewards of the program. This is a victory for law and common sense."
We are thrilled with last night's decision on #340B !! Sanity prevailed!! https://t.co/1r4vc6g4VJ— Bruce Siegel (@siegelmd) December 28, 2018
This is the latest twist in the 340B payment fight. In July, the U.S. Court of Appeals for the D.C. Circuit rejected the AHA's lawsuit against HHS on the payment cuts. The lawsuit was also earlier denied by Contreras because the cuts hadn't yet taken effect. After the July decision, the AHA, AAMC and AEH said they would "refile promptly in district court," which culminated in the decision on Thursday.