Hospitals File Suit to Halt 340B Cuts

The American Hospital Association joined by other hospital interests filed suit in U.S. District Court to stop a nearly 30% reduction in Medicare payments to hospitals for purchase of outpatient drugs under the 340B program.

The payment cut totals $1.6 billion nationwide and will especially harm hospitals and clinics serving low-income patients. Congress created the 340B program in 1992 to help these providers by offering them drug discounts.  Under the 340B program, manufacturers of prescription drugs, as a condition of having their outpatient drugs covered through Medicaid, are required to offer 340B hospitals and clinics outpatient drugs at or below an applicable, discounted, statutorily-determined ceiling price. “In general, drug manufacturers must offer a minimum discount of between 13% and 23.1% depending on the type of drug,” according to the AHA suit.

Through its proposed Outpatient Prospective Payment System (OPPS) rule issued in July 2018, CMS proposed a 28.5% reduction in the 340B reimbursement rate.

The AHA suit contests the method CMS used to reduce the reimbursement, arguing that it violated the Administrative Procedure Act and exceeded the statutory authority of the Health & Human Services Secretary.