- HHS argued that its double-digit payment reductions in the 340B Drug Pricing Program “were justified by developments in the market” due to the program's overexpansion, according to a brief filed this week as part of the ongoing lawsuit from hospitals seeking to reverse the cuts.
- The agency said that in practice, hospitals can acquire drugs at prices “well below even the ceiling prices set under the 340B program,” pointing to a 2015 Medicare Payment Advisory Commission report as justification for setting the new benchmark.
- Further, HHS already increased payments for non-drug items and services by 3.2% as a result of the $1.6 billion in reduced payments for 340B drugs. “Setting aside the final rule for 2018 would direct payments away from these other services while creating administrative havoc in the [Outpatient Prospective Payment System] system,” the agency said.
The MedPAC report HHS cited estimated that “on average, hospitals in the 340B Program receive a minimum discount of 22.5 percent of the [average sales price] for drugs paid under the OPPS.”
The lawyers argued that inflated Medicare payments for 340B drugs hurt the patients the program is meant to assist because of a 20% copayment tied to the payment rate.
According to the brief, the rate of 6% more than ASP "produced large profits" for 340B hospitals, thus reducing payments for non-drug items and other services in the OPPS system.
The American Hospital Association and other groups that brought the lawsuit against the government have maintained that the program is necessary and improves patient services along with access to care.
HHS noted in the filing that the payment cut exempted rural only community hospitals, children’s hospitals and prospective-payment-system-exempt cancer hospitals from the cut, while others such as critical access hospitals are also not affected.
“As a result, approximately 52% of covered entities in the 340B Program are not affected by the payment adjustment,” the government wrote.
HHS also argued that the Medicare statute “expressly precludes review of components of the Outpatient Prospective Payment System and adjustments to those components,” pointing to Amgen, Inc. v. Smith. Any adjustment of payments made to hospitals would require offsets in other areas, endangering the department’s ability to ensure budget neutrality, according to the filing.
The agency requested the U.S. Court of Appeals for the District of Columbia Circuit to affirm the lower court’s decision to dismiss the case.
“Given the difficult unscrambling the egg that is resetting OPPS rates for 2018, the balance of equities and the public interest both tip heavily in favor of the Secretary,” according to the brief.
The AHA told Healthcare Dive it did not have a comment on the government’s filing, noting that its response is due April 2. The court has set oral arguments for May 4.
Last week, the Senate HELP Committee held a hearing where lawmakers raised concern over 340B hospitals’ transparency, suggesting legislation that requires hospitals to report how they use savings from the program may be needed. Committee Chair Lamar Alexander, R-TN, said more hearings will be forthcoming.