Supreme Court overturns 340B pay cut to hospitals

Paige Minemyer

The Supreme Court on Wednesday unanimously rejected massive payment cuts to hospitals under the contentious 340B drug discount program.

In the ruling (PDF), the justices noted that the Department of Health and Human Services did not survey hospital costs before adjusting payments for 340B in a 2018 rule, which cut payments to hospitals in the program by nearly 30%.

The agency repeated that approach in 2019 rulemaking, and attorneys for HHS argued before the court that the surveys were not required. SCOTUS disagreed.

"The text and structure of the statute make this a straightforward case," the opinion says. "Because HHS did not conduct a survey of hospitals’ acquisition costs, HHS acted unlawfully by reducing the reimbursement rates for 340B hospitals."

The American Hospital Association sued to challenge the payment cuts, and a federal district court sided with them and struck down the rule. However, an appeals court later reversed the decision, leading to the SCOTUS showdown.

HHS also argued that in designing the 340B program, Congress would not have intended for the agency to "overpay" hospitals for 340B drugs. However, the justices said that legislators would have been "well aware" that 340B hospitals paid less for prescription drugs.

"It may be that the reimbursement payments were intended to offset the considerable costs of providing healthcare to the uninsured and underinsured in low-income and rural communities," they said. "Regardless, this Court is not the forum to resolve that policy debate."

In a joint statement, AHA, AAMC and America's Essential Hospitals called the ruling "a decisive victory for vulnerable communities and the hospitals on which so many patients depend."

"340B discounts help hospitals devote more resources to services and programs for vulnerable communities and increase access to prescription drugs for low-income patients," the organizations said.

"Now that the Supreme Court has ruled, we look forward to working with the Administration and the courts to develop a plan to reimburse 340B hospitals affected by these unlawful cuts while ensuring the remainder of the hospital field is not disadvantaged as they also continue to serve their communities," they said.

While the Supreme Court has resolved this prong of the 340B debate, more legal battles around the program are ongoing. The Biden administration has fined multiple pharmaceutical companies for restricting contract pharmacies' access to 340B drugs, which has prompted a slew of lawsuits from drugmakers.