Judge orders HHS to resolve 340B underpayments

By Lauren Berryman / January 10, 2023

A federal judge Tuesday ordered the Health and Human Services Department to create a plan to correct underpayments made to 340B hospitals under a regulations the Supreme Court ruled unlawful.

In 2018, the Centers for Medicare and Medicaid Services cut 340B reimbursement by nearly 30%, which generated $1.6 billion in savings. The agency redistributed the money to all hospitals, sparking frustration among hospitals that participate in 340B. The 340B program gives these hospitals drug discounts ranging from 25% to 50%, according to the Health Resources and Services Administration.

The Supreme Court ruled in June that HHS did not have the legal authority to implement its changes to the 340B program without determining what hospitals pay for outpatient drugs. Following this decision, CMS proposed reimbursing for 340B drugs at the same rate as other medicines, stirring debate among providers.

The American Hospital Association and America’s Essential Hospitals, plaintiffs in the case, expressed dissatisfaction with Judge Rudolph Contreras of the U.S. District Court for the District of Columbia for deferring to HHS. Hospitals that lost out of 340B dollars because of the 2018 regulation had asked the court to vacate the rules and to dictate terms to HHS.

“For more than five years, the Department of Health and Human Services has unlawfully withheld vital funding from 340B hospitals that helps them provide a range of important benefits to their patients and communities. We are disappointed that the district court elected to extend this delay by remanding this case back to the department to determine the appropriate remedy,” Melinda Hatton, general counsel and secretary at American Hospital Association, said in a statement.

This is the court’s latest move to address how HHS should fix payment discrepancies from 2018 to 2022. In September, Judge Contreras ordered HHS to restore 340B payments for the remainder of 2022.