Payment cuts to 340B drug program put on pause

A federal judge has intervened in the planned payment cuts to the 340B drug pricing program that enables outpatient facilities to purchase certain drugs at a lower cost.

HHS finalized a rule that would result in cuts to the program in 2019, prompting industry objections and a lawsuit from the American Hospital Association and other hospital associations. Namely, the rule cut reimbursement rates for the average sales price of drugs for some facilities.

On Dec. 27, the AHA won a permanent injunction against HHS that stops the reimbursement cuts. Judge Rudolph Contreras of the United States District Court for the District of Columbia ruled that CMS had overstepped its authority by attempting to implement the cuts.

HHS justified the cuts by citing a large profit margin created by the reimbursement rates and what hospitals pay to acquire 340B drugs. However, the agency did not have data to “precisely calculate the price paid by 340B hospitals for [any] particular covered outpatient drug,” the court filing reads. HHS therefore calculated costs based on the average discounted prices, though the estimate was likely much higher.

“As the court correctly recognized, its judgment has the potential to wreak havoc on the system," Caitlin Oakley, a spokesperson with the Department of Health and Human Services, said in a statement. "Importantly, it could have the effect of reducing payments for other important services and increasing beneficiary cost-sharing. We look forward to briefing the court on this important matter."

The AHA, the Association of American Medical Colleges, and America’s Essential Hospitals were enthusiastic about the ruling.

“America’s 340B hospitals are immeasurably pleased with the ruling that the Department of Health and Human Services unlawfully cut 2018 payment rates for certain outpatient drugs,” the associations said in a joint statement. “The court’s carefully reasoned decision will allow hospitals and health systems in the 340B Drug Pricing Program to serve their vulnerable patients and communities without being hampered by deep cuts to the program.”