A federal court has ruled it’s up to the HHS to determine how to repay hospitals enrolled in the 340B drug discount program after years of underpayments, sparking concern from hospital groups.
The court’s ruling on Tuesday is the latest update in a yearslong legal dispute between safety net hospitals and the government over payment rates, that wound its way up to the Supreme Court. The dispute originated in 2018, when the CMS changed the rate of payments in 340B from the average sales price of the drugs plus 6% to the average sales price minus 22.5%. The cuts amounted to some $1.6 billion annually for 340B hospitals.
In June, SCOTUS ruled unanimously that it was illegal for the Trump administration to cut payment rates for drugs acquired through the 340B program, and ordered it to pay back billions to hospitals.
But 340B hospitals are still waiting for the payments to be returned to them. The American Hospital Association and America’s Essential Hospitals, who were plaintiffs in the case, expressed disappointment that the repayment process would be put in the hands of the agency who underpaid them initially.
Hospitals had asked the U.S. District Court for the District of Columbia to vacate the rules and dictate terms of repayment to the HHS.
”For more than five years, the Department of Health and Human Services has unlawfully withheld vital funding from 340B hospitals that helps them provide a range of important benefits to their patients and communities. We are disappointed that the district court elected to extend this delay by remanding this case back to the department to determine the appropriate remedy,” the American Hospital Association said in a statement.
The AHA said it plans to work with the HHS to be “swiftly” repaid, with interest. The HHS has indicated it expects to propose a repayment plan by April, according to the AHA. One potential fix would be to hike pay rates in the future for 340B hospitals, a solution that the D.C. district court suggested.
“We urge HHS to honor the plain language of the ruling, which calls on the department to ‘act promptly’ to repay the more than five years of funding lost to these cuts. Essential hospitals cannot afford additional delays in repayment, and we stand ready to work with HHS to resolve this matter quickly,” America’s Essential Hospitals said.
The three-decadesold 340B drug discount program requires drug companies that want to participate in Medicaid and Medicare’s drug benefit to charge no more than the statutory ceiling prices for eligible outpatient drugs. The 340B discounts can range from 25% to 50% of the cost of the drugs.
Hospitals and clinics then use the savings from those discounts to care for low-income patients and rural communities, without having to rely on taxpayer dollars. The program has faced heavy criticism concerning oversight from pharmaceutical manufacturers and lawmakers, given that hospitals don’t have to account for how they use the savings.