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U.S. Supreme Court Unanimously Rules In Favor Of Hospitals In 340B Decision

On June 15, 2022, the U.S. Supreme Court unanimously ruled to overturn a 2020 decision out of the U.S. Court of Appeals for the District of Columbia Circuit sustaining the authority of the Department of Health and Human Services (HHS) to reduce payments to certain covered entities that participate in the 340B drug pricing program.

This decision could indicate that this Supreme Court may apply the textual meaning of statutes and regulations when ruling on future cases and controversies even outside of the 340B program. 

The ruling states that the nearly 30 percent reduction in Medicare reimbursement for outpatient drug payments for hospitals participating in the 340B drug pricing program implemented in 2018 and 2019 were unlawful.  

In his opinion, Justice Brett Kavanaugh specifically noted the reimbursement rate of the average sales price (ASP) plus 6 percent for non-340B hospitals remained the same. However, 340B hospitals received a reduced reimbursement rate of ASP minus 22.5 percent based on “an estimate from the Medicare Payment Advisory Commission that 340B hospitals obtained prescription drugs at an average discount of at least 22.5 percent below the average sales price charged by manufacturers.” 

According to the ruling, HHS does not have the authority to reduce reimbursement rates for 340B hospitals without conducting a survey of the hospitals’ pharmaceutical acquisition costs. Because HHS did not conduct any surveys, the Court found that HHS’s 2018 and 2019 reimbursement rates for 340B acquired drugs at 340B hospitals were unlawful. 

Justice Kavanaugh pointed out that “for … 340B hospitals, this case has immense economic consequences, about $1.6 billion annually.” As such, hospitals and other covered entities should calculate any lost reimbursement and continue to monitor the effects of this ruling, as they may be able to appeal and be entitled to additional reimbursement. 

© 2023 BARNES & THORNBURG LLPNational Law Review, Volume XII, Number 168
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About this Author

John E. Kelly D.C. Healthcare Attorney Barnes & Thornburg
Partner

Chair of Barnes & Thornburg’s Healthcare Department and Industry Practice, John advises and defends companies and individuals in criminal prosecutions and civil litigation involving health care fraud and abuse issues, including the False Claims Act, Anti-Kickback Statute and Stark Law, the Food, Drug and Cosmetic Act (FDCA), the Controlled Substances Act (CSA), the Foreign Corrupt Practices Act (FCPA), and other regulatory and compliance issues. He is well versed in the needs of providers, hospitals, health systems, clinical labs, pharmacies, pharmacy benefit...

202-831-6731
Mark E. Rust Barnes Thornburg Law firm Chicago Corporate Finance and Healthcare Law Attorney
Partner

Mark Rust is Managing Partner of the Chicago office of Barnes & Thornburg, LLP, and Chair of the firm’s national Healthcare Department. Mr. Rust concentrates his practice in transactional, regulatory and medical-legal issues affecting healthcare entities and provider organizations. For nearly 30 years he has written about or practiced in healthcare law, writing in a wide variety of publications from theJournal of the American Bar Association to USA Today. He is listed as a notable healthcare lawyer in Chambers USA, Top Healthcare Lawyers of Illinois,Superlawyers...

312-214-8309
 Harte Elena Brick Healthcare Attorney Barnes & Thornburg LLP
Associate

Harte understands the need for healthcare entities, including hospitals, physician groups and other healthcare systems, to keep in compliance with various state and federal laws, regulations and programs. She assists provider clients by filing applications and drafting bylaws and policies conforming to hospital accreditation guidance and legal standards, as well as by performing related accreditation research and audits.

During her time as a summer associate with Barnes & Thornburg, Harte completed COVID-19 state disease reporting rubrics...

312-214-2118
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