On June 15 the Supreme Court released a unanimous decision in American Hospital Association et al. v. Becerra, Secretary of Health and Human Services, et al. in favor of the American Hospital Association (AHA) and its objection to reduced reimbursement rates for Medicare Part B drugs purchased through the 340B drug pricing program.
Prior to 2018, Medicare reimbursed 340B drugs under the Part B program at average sales price (ASP) plus 6%. The discounted purchase price for 340B drugs combined with the ASP plus 6% reimbursement rate allowed hospitals to realize significant savings on high-cost drugs, which in turn could be used to support uncompensated care costs and other safety net programs. Beginning in 2018, the Centers for Medicare & Medicaid Services (CMS) implemented a controversial policy that dramatically reduced the reimbursement rate of separately payable drugs to ASP minus 22.5%. AHA challenged that policy in federal court.
The Supreme Court ruled that the Medicare statute does not give the Department of Health and Human Services (HHS) the discretion to vary the reimbursement rates for a particular group of hospitals—in this case, 340B hospitals—without a survey of hospital acquisition costs. The Court did not use this case to challenge the Administration’s interpretive authority of Medicare law and did not provide a specific remedy for underpayment. The case will now return to a lower court, and the Administration will propose a remedy for the hospitals that have been underpaid for the last several years.
The Association for Clinical Oncology (ASCO) opposed the 2018 cuts to 340B, which were maintained in the 2018-2022 rulemaking. ASCO has urged CMS to consider recommendations outlined in the Association’s policy statement on the 340B program, as the agency works to reform 340B in a way that supports high-quality care for uninsured, underinsured, and low-income patients. ASCO specifically recommends that CMS analyze the impact of policies—including whether they satisfy the original intent of the legislation—the presence or absence of appropriate safeguards for compliance and oversight, and other unique considerations related to people with cancer and other vulnerable patient populations.
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