American Hospital Association asks court to approve 340B payments

The Supreme Court ruled last month that Medicare improperly cut the federal drug pricing program. Hospitals want the government to pay up.

The American Hospital Association has gone back to court in hopes of getting bigger payments from a federal drug program after a victory in the nation’s highest court.

The U.S. Supreme Court struck down Medicare’s cuts to the 340B drug pricing program in a unanimous decision issued in June. The 340B program offers discounts on certain outpatient drugs for hospitals and health systems that treat a large number of patients from underserved communities. The highly watched case involves $1.6 billion in annual payments.

The case has been referred back to the United States District Court for the District of Columbia, which has been charged with determining payments. Since the court ruling, the AHA has been pressing the U.S. Department of Health and Human Services to reimburse hospitals as quickly as possible.

The hospital association filed motions Wednesday with the district court, making its case for bigger payments to hospitals.

“There can be no question that 340B hospitals have been unlawfully deprived of critical funds,” the hospital association said in one motion. “And as the Supreme Court recognized, ‘340B hospitals perform valuable services for low-income and rural communities but have to rely on limited federal funding for support.’”

Specifically, the AHA is pressing the district court to order the health department to restore payments to hospitals for the years 2018 through 2022.

​​“There is only one available remedy: repaying those hospitals that were unlawfully underpaid, from 2018 to the present,” the AHA argued in its brief.

The hospital association filed a separate motion asking the court to compel the government to immediately halt cuts to the program for the rest of 2022. The AHA argues that each day, the health department is underpaying hospitals.

In its court filings, the AHA pointed to the unanimous ruling from the nation’s highest court, a rarity given the court’s ideological split.

“For five years, Defendants deprived hospitals of this limited funding by stubbornly persisting with legal arguments that both this Court and a unanimous Supreme Court rejected,” the AHA stated in the filing. Given the years-long legal battle, the government should have at least devised a remedy in the event the health department lost the case, the AHA said.

The hospital association also filed a separate motion to include federal reimbursements for 2020-22 in the case. The Supreme Court ruling only covered the payments in the years 2018 and 2019.

Hospitals have argued that the government payments are critical, particularly in light of the financial difficulties health systems have endured in the COVID-19 pandemic.

The AHA urged the court to prohibit the health department from reclaiming federal funds from hospitals and health systems to offset the higher 340B payments. “Fairness dictates that the government not penalize other hospitals — which have long spent the funds that the government may seek to recoup — for Defendants’ own mistakes,” the hospital association stated in the court filing.

The cuts to the 340B drug payment program took effect in 2018 under former President Trump. President Joe Biden sought to continue the policy.

The government argued the policy represented a better use of resources and helped support hospitals in other programs. Groups representing for-profit hospitals and rural hospitals said the changes increased reimbursements to hospitals outside the 340B program.

The hospital association sent a letter to U.S. Health and Human Services Secretary Xavier Becerra last month seeking a meeting to resolve the issue. “Given the vital role that 340B hospitals play in serving vulnerable communities, they should be repaid the funds that have been withheld from them without delay,” Rick Pollack, the AHA’s president, wrote in the letter.

The Supreme Court didn’t forbid Medicare’s from making cuts to the 340B program. Rather, the court found Medicare didn’t follow the proper process in reducing payments.

Under the law, Medicare must survey hospitals about the acquisition costs of drugs in the program. Since Medicare didn’t conduct a survey before implementing the cuts in 2018, the justices said the agency couldn’t change its reimbursement rates. Medicare did a survey of hospitals in 2020, but the AHA said that survey was flawed.

Hospitals and health systems say the 340B program is critical to supporting services for patients with low-incomes and those in urban and rural areas.

However, critics contend the 340B program needs to be reformed. The Alliance for Integrity and Reform of 340B says hospitals in the 340B program aren’t providing enough charity care. Some say patients aren’t getting the benefits of the drug discounts.

Critics also argue the program has grown well beyond its intended purpose. The program’s cost rose from $9 billion in 2014 to $38 billion in 2020.

Some drug companies have been reducing their own discounts in the 340B program, to the dismay of hospitals. Some hospitals say they are losing millions of dollars annually, according to a recent report by 340B Health, a group representing hospitals and health systems.

A bipartisan group of 181 members of Congress sent a letter to Becerra July 18 urging the health department to take action against the drug companies, including fines.

Defenders of hospitals in the 340B program point to the Supreme Court to bolster their case. Justice Brett Kavanaugh wrote in the unanimous opinion, “340B hospitals perform valuable services for low-income and rural communities but have to rely on limited federal funding for support.”