Federal Judge Orders HHS to Properly Reimburse Hospitals for Prescription Drugs

Health Secretary Xavier Becerra testifies to Congress in Washington on June 10, 2021. Kevin Dietsch/Getty Images

The U.S. Department of Health and Human Services (HHS) must immediately halt 30 percent reimbursement cuts to hospitals made under the 340B program aimed at helping poor patients, a federal judge ordered.

The ruling (pdf) in American Hospital Association v. Becerra, civil action 18-2084, was issued on Sept. 28 by Judge Rudolph Contreras, an Obama appointee on the U.S. District Court for the District of Columbia. Contreras is also presiding judge for the U.S. Foreign Intelligence Surveillance Court. Xavier Becerra is the HHS secretary.

Contreras turned down an HHS plan to hold off restoring the full reimbursement rates until Jan. 1, 2023. His order vacated the drug reimbursement rate for 340B hospitals in the 2022 Outpatient Prospective Payment System (OPPS) Rule.

“HHS should not be allowed to continue its unlawful 340B reimbursements for the remainder of the year just because it promises to fix the problem later,” the judge wrote.

His ruling followed the Supreme Court’s unanimous June 15 decision finding that HHS had overstepped its authority by unlawfully reducing prescription drug reimbursements to hospitals by $1.6 billion per year for the program in 2018 and 2019.

As Justice Brett Kavanaugh wrote for the high court, federal Medicare law requires HHS to reimburse hospitals for some outpatient prescription drugs that the hospitals give to Medicare patients. These reimbursements total tens of billions of dollars every year.

HHS didn’t calculate reimbursements properly and should have conducted a survey of the hospitals’ costs, the court held, as The Epoch Times reported.

“For those 340B hospitals, this case has immense economic consequences, about $1.6 billion annually,” Kavanaugh wrote. “The question is whether the statute affords HHS discretion to vary the reimbursement rates for that one group of hospitals when, as here, HHS has not conducted the required survey of hospitals’ acquisition costs. The answer is no.”

Maureen Testoni, president and CEO of 340B Health, a nonprofit organization of more than 1,400 hospitals and health systems participating in the federal 340B drug pricing program, was pleased with the ruling by Contreras.

“This is an important victory for 340B hospitals that have been fighting these unlawful Medicare cuts for nearly six years,” Testoni told trade publication Healthcare Finance News.

“The Centers for Medicare and Medicaid Services has the clear responsibility to restore the appropriate payments for 340B drugs immediately, and now a federal court has ordered it to do so without delay.”