HHS exceeded authority in cutting hospitals' drug payments, court rules

HHS overstepped its statutory authority when it reduced Medicare payments to hospitals for medicines covered under the 340B drug discount program by nearly 30 percent, a federal court has ruled.

The May 6 decision by Judge Rudolph Contreras, a District judge in Washington, D.C., concluded that the 340B drug reimbursement rate in the 2019 Medicare Outpatient Prospective Payment System violated federal law.

The judge made the same ruling last year regarding identical cuts to the 2018 Medicare reimbursement rate. He ruled that the HHS secretary is authorized to make "adjustments" to the program, but "he cannot fundamentally rework the statutory scheme."

President Donald Trump's administration has characterized the cuts as an effort to address high prescription medication costs. However, healthcare groups — including the American Hospital Association, Association of American Medical Colleges and America's Essential Hospitals — have challenged the change, saying the cuts financially harm 340B hospitals that serve vulnerable patients.

In his most recent ruling on the issue, Mr. Contreras writes that "despite the fatal flaw in the … rate adjustments, vacating HHS' 2018 and 2019 rules is not the best course of action."

Instead, the court is remanding the rules to HHS and giving the agency "the first crack at crafting appropriate remedial issues," according to the ruling.

The court is giving HHS until  Aug. 5, or before, to provide a progress report on the matter.

"We urge HHS to promptly comply with the judge's ruling and restore to 340B hospitals all funds that have been unlawfully withheld," the healthcare groups said in a May 7 news release.


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