A federal appeals court has ruled that the Trump administration can cut drug reimbursements for the 340B drug discount program by nearly 30 percent. The 340B program requires drug manufacturers give safety-net hospitals discounts—averaging between 20-50%—in exchange for participating in Medicaid, King reports.
In 2017, the Department of Health and Human Services "sought to address a payment gap between 340B and Medicare Part B, which reimburses providers for drugs administered in a physician's office such as chemotherapy. There was a 25% and 55% gap between the price for a 340B drug and on Medicare Part B," King reports. "So HHS administered a 28.5% cut in the 2018 hospital payment rule. The agency also included the cuts in the 2019 payment rule."
Three hospital groups sued, saying that HHS did not have the federal authority to adjust the rates to the program. A lower court sided with the hospital groups and told HHS to roll back the cuts, which had already taken effect. But HHS argued that it has the authority to adjust 340B payment amounts to make sure hospital reimbursements don't exceed the cost of acquiring the drug, King reports.
If there is no data for how much hospitals pay to acquire certain drugs, HHS can use the average drug price to determine the reimbursement amount. HHS argued in court that it needed to do that in this case because hospital cost acquisition data was not available, King reports.
The appeals court sided with HHS, and added that "the $1.6 billion gleaned from the cuts would go to all providers as additional reimbursements for other services," King reports. "This is the latest legal defeat for the hospital industry. A few weeks ago, the same appeals court ruled that HHS had the legal authority to institute cuts to off-campus clinics to bring Medicare payments in line with physician offices, reversing a lower court’s ruling."