U.S. District Judge Rudolph Contreras dismissed a lawsuit against the 340B drug prescription program shortly before the new year because the changes to the federal drug discount program had not taken effect before the suit was filed.
The changes to the 340B program will result in lower hospital reimbursements for purchased drugs. The cuts are expected to save $1.6 billion.
The American Hospital Association (AHA), Association of American Medical Colleges (AAMC), America’s Essential Hospitals and three hospitals sued the CMS in an attempt to stop the payment cuts.
Contreras said his decision was based upon the “plaintiffs’ failure to present any concrete claim for reimbursement to the (HHS) secretary for a final decision.” In a joint statement following the ruling, the AHA, AAMC and America’s Essential Hospitals said they will continue to pursue the lawsuit.
The three hospital associations, Eastern Maine Healthcare Systems (Brewer, Maine), Henry Ford Health System (Detroit) and Adventist Health System’s Park Ridge Health (Henderson, N.C.) filed the suit in November following the CMS’ final rule that changed 340B payments.
About half of U.S. hospitals are 340B providers. Participating organizations grew from 583 in 2005 to 2,140 in 2014. Covered entities and their affiliated sites spent more than $7 billion to purchase 340B drugs in 2013, which was three times the amount in 2005.
The CMS said the changes to the program are needed to reduce out-of-pocket costs and improve patient-provider relations. Some have also questioned a lack of regulatory oversight of the 340B program. The Pharmaceutical Research and Manufacturers of America has plugged H.R. 4710 as one piece of legislation to increase oversight of the program.
Hospitals affected by the 340B change will be paid for most drugs 22.5% less than the average sales price. Those hospitals are currently receiving the average price plus 6%. Moody’s recently reported that the change will hurt nonprofit hospitals and suggested the lower payments will be “another headwind” for hospitals.
Following the ruling Darrell Kirch, president and CEO of the AAMC, warned the program changes will lead to “drastic cuts” for safety net hospitals, teaching hospitals, rural hospitals “and other underserved patients.”
AHA President and CEO Rick Pollack said the 340B program has helped hospitals “stretch scarce federal resources to expand and enhance patient services and access to care without any cost to the government.”
Also, Alexander Mansour, director of finance and contracts at Henry Ford Health System, wrote an open letter describing how the 340B program helps patients. Mansour said the 340B discounts allow Henry Ford to provide charity care and other types of uncompensated care, adding that pharmaceutical companies are targeting the 340B program “to protect their own profit margins.”
“They are perhaps too far removed from the actual delivery of care — having never been face-to-face with a stage-four lung cancer patient who couldn’t afford his medication — to appreciate the big picture,” Mansour said.