In a case with “enormous economic consequences”, especially one involving $1.6 billion, the U.S. Supreme Court unanimously approves domination wednesday The Department of Health and Human Services acted illegally by reducing drug reimbursement rates for certain hospital groups without an investigation. The case revolves around the 340B drug pricing program.
The 340B federal program includes more than 2,500 hospitals that serve low-income and uninsured patients and rely on subsidies to pay for outpatient drug costs, but the Department of Health and Human Services stopped reimbursement of outpatient drug costs to 340B hospitals in 2018 and 2019 when the department when adjusting their reimbursement rates.
On Wednesday, the justices overturned a Washington, D.C., appeals court ruling that it was illegal to adjust reimbursement rates for hospitals participating in federal programs without an investigation.
The U.S. Supreme Court ruled Wednesday: “The Department of Health and Human Services cannot change reimbursement rates for certain hospital prescription drugs.”
In 2018, HHS relied on estimates from the Medicare Payments Advisory Committee to set a rate equal to 77.5% of the average selling price of each drug for hospitals participating in the 340B plan.
“As a matter of policy, HHS stated that its existing reimbursement rates lead the agency to believe that hospitals serving low-income or rural populations are overpaid through the federal 340B program,” Judge Kavanaugh wrote.
However, he continued, federal law requires drug makers to sell prescription drugs at discounted prices to participating hospitals.
By reducing reimbursement amounts to 340B hospitals, HHS saved $1.6 billion, which was spent on other aspects of the Medicare program.
Many hospitals have had to “cancel or substantially scale back other critical programs that provide a broad range of care” due to increased prescription costs. This includes programs that address the needs of low-income and rural communities, such as cancer treatment, opioid addiction treatment, and mental health resources.
Historically, HHS has set reimbursement rates based on average selling price data provided by drug manufacturers, and until 2018, HHS did not offer different reimbursement rates to non-340B hospital groups.
The Supreme Court ruled it was illegal without an investigation into the hospital’s cost of outpatient prescription drug purchases.
“This decision is a decisive victory for vulnerable communities and hospitals on which so many patients depend,” groups including the American Hospital Association and the Association of American Medical Colleges said in an emailed statement.
“Now that the Supreme Court has ruled, we look forward to working with the government and courts to develop a plan to compensate the 340B hospitals affected by these illegal cuts, while ensuring that the rest of the hospital field is not disadvantaged as they also continue to serve their community,” the groups said.
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