As discussed in this prior blog post, beginning in 2018 the U.S. Department of Health and Human Services (HHS) reduced reimbursement rates for Medicare prescription drugs to 340B hospitals by nearly thirty percent. The American Hospital Association (AHA) filed suit, and on June 15, 2022 the U.S. Supreme Court ruled that the cuts imposed by HHS, without conducting a survey of the hospitals’ acquisition costs, exceeded the agency’s authority and remanded the matter to the U.S. District Court for further proceedings.

Upon remand, District Court Judge Rudolph Contreras ruled that HHS must reimburse 340B hospitals at the default rate of average sale price plus six percent for the remainder of 2022.  And, when CMS published its Calendar Year 2023 OPPS Final Rule it provided reimbursement to 340B hospitals at a rate of average sale price plus six percent. However, what has remained a question is how the 340B hospitals would be made whole for the past underpayments beginning in 2018. This question has yet to be decided.

This issue was recently before the District Court, where the AHA argued that the only rational result would be for the Court to award the hospitals the difference between what they were paid and the average sale price plus six percent they were entitled to. Unfortunately for providers, Judge Contreras rejected the AHA’s position, finding that the proper course of action was to remand the matter to the agency to determine in the first instance what it believes to be the appropriate remedy. While Judge Contreras noted that the AHA could seek additional judicial review if it was dissatisfied with the agency’s selection of a remedy, this decision means additional delay should the agency fail to propose a reasonable approach to return the money owed to providers in a timely manner.

It is anticipated that HHS will propose a remedy in April 2023. While it is difficult to predict what remedy the agency will propose, the AHA is hoping the proposed remedy does not take budget neutrality into account. If the agency were to take such an approach, non-340B hospitals would almost certainly be negatively impacted by the decision resulting in a classic “rob Peter to pay Paul” scenario and almost guaranteeing to trigger more litigation.