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Hospitals Pursue Lawsuit to Reverse Cuts for 340B Hospitals

January 02, 2018

On December 29, 2017, the American Hospital Association (AHA), the Association of American Medical Colleges, and America’s Essential Hospitals announced that they are appealing a district court decision granting the government’s motion to dismiss a lawsuit that could have prevented Medicare payment cuts from taking effect for many hospitals in the 340B Drug Pricing Program. The court decided that the lawsuit was premature, but did not address the merits of the claim. 

Last November, the three hospital groups and three plaintiff hospitals sued the U.S. Department of Health and Human Services in the U.S. District Court for the District of Columbia to stop a payment cut of nearly 30 percent for outpatient drugs purchased under the 340B program from starting on January 1, 2018. They argued that the 340B provisions of the Centers for Medicare & Medicaid Services’ (CMS) Outpatient Prospective Payment System final rule violate the law and should be set aside under the Administrative Procedure Act as unlawful and in excess of the HHS Secretary’s statutory authority. The court’s decision does provide an opportunity for these groups to refile the lawsuit once the cuts go into effect. The CMS final rule reduces by Medicare payments to certain hospitals by $1.6 billion.

The 340B program has enabled Pennsylvania hospitals to care for low-income and uninsured patients by purchasing certain outpatient drugs from pharmaceutical manufacturers at discounted prices. Hospitals can then use the savings to provide an expanded range of comprehensive health services to their local communities, such as increased access to care, clinical pharmacy services, community outreach programs, free vaccines, and transportation to follow-up appointments.

“For 25 years, the 340B Drug Savings Program has played a vital role in helping hospitals stretch scarce federal resources to expand and enhance patient services and access to care without any cost to the government,” said Rick Pollack, AHA’s president and CEO. “Making cuts to the program, like those CMS has put forward, will dramatically threaten access to health care for many communities with vulnerable patients. We are disappointed in this decision from the court and will continue our efforts in the Courts and the Congress to reverse these significant cuts to the 340B program.”

The 340B program constitutes less than 2.8 percent of the $457 billion in annual U.S. drug purchases but the savings generated by the program make a big difference to patients served by 340B hospitals. HAP joined 31 state and regional hospital associations in filing an amicus brief in support of the original AHA lawsuit, and will continue to keep members updated and engaged as the appeal proceeds.

Additionally, HAP is supporting national advocacy efforts to work with Congress to overturn the detrimental payment policy. Nine members of Pennsylvania’s Congressional delegation have signed on to legislation, H.R. 4392, that would reverse the payment cuts.

For additional information or questions, please contact Jolene Calla, HAP’s vice president, health care finance and insurance, or Laura Stevens Kent HAP’s vice president of federal advocacy.

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