More than 150 hospitals have sued HHS to reverse CMS's steep payment cut for 340B-purchased drugs covered under Medicare Part B. | Shutterstock

Hospitals File New Suit To Reverse Steep Part B Payment Cuts for 340B Drugs

More than 150 hospitals have sued the U.S. Department of Health and Human Services (HHS) in the latest attempt by providers to end steep cuts in 340B reimbursement at their off-campus outpatient sites.

Filed in district court in Washington, D.C., on June 18, the suit’s plaintiffs include hospitals in various parts of the country. Among them are facilities from the Ascension, Amita Health, and Beaumont hospital systems and standalones such as Lenox Hill Hospital in New York City.

The suit challenges HHS’ decision in 2018 to cut reimbursement for 340B drugs for off-campus outpatient sites to the average drug sales price (ASP) minus 22.5%, a policy that has been renewed annually as part of the updates to the Outpatient Prospective Payment System (OPPS). That rule replaced the previous payment rate of ASP plus 6%. The suit claims the change was made in violation of the Social Security Act, the Administrative Procedure Act, and the Public Health Service Act.

The suit contends that the decision has cost hospitals at least $3.2 billion in 340B revenue over the past several years. It seeks a reversal of the OPPS rules, as well as retroactive reimbursement to the hospitals under the old payment.

The attorney representing the hospitals in this latest lawsuit, Sarah Jean MacCarthy of Hall Render, Killian, Heath & Lyman in Milwaukee, declined to comment about the chances of this suit versus litigation brought three years ago by the American Hospital Association and other trade organizations.

Whether this new litigation will obtain any traction in the federal courts remains to be seen. The American Hospital Association (AHA), America’s Essential Hospitals, and the American Association of Medical Colleges have had a rocky path pursuing their own litigation against HHS.

Although a district court judge ruled that HHS had overstepped its authority in a September 2019 decision, he was reversed in a 2-1 ruling by a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit in July 2020. The panel concluded that HHS had the authority to make such cuts as part of a reasonable effort to control the growth of outpatient traffic at hospital-owned clinics. AHA and the other plaintiffs were unable to obtain a hearing in front of the full appeals court.

The trade groups have lodged a final appeal with the U.S. Supreme Court, which is expected to announce tomorrow whether it will hear the case.

“We remain hopeful that the U.S. Supreme Court will agree to hear our case on payments cuts to the 340B drug pricing program and that they reject the appellate court decision deferring to the government’s interpretation of the law that clearly imperils many of the important services hospitals and health systems provide to their patients and vulnerable communities,” AHA General Counsel Melinda Hatton told 340B Report in a statement.

The high court only hears a handful of cases from the thousands of appeals it receives during each term. Most legal experts doubt it will take up the AHA case because it does not involve conflicting rulings from federal circuits or a petition from a government agency.

There has been some speculation that the Biden administration may make changes to the payment rates in its OPPS rules in 2022, reversing the stance taken by the Trump administration. Those rules are expected to be published this month.

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