Hospitals said Tuesday in the Supreme Court that Medicare and Medicaid’s cut 340B reimbursement was illegal.
The American Hospital Association, the American College of Medicine Association, and other provider groups have sued to reverse the nearly 30% reimbursement cut of $ 340 billion launched by CMS in 2018, arguing the changes were illegal because the agency did not conduct a survey to identify hospitals. … the average cost of purchasing drugs.
Instead, CMS based the 340B payments on the “average price” of the drug, a calculation formulated by the secretary that resulted in a $ 1.6 billion reduction in reimbursement in the first year after the change.
These are the two options the law allows for determining Medicare reimbursement for drugs purchased from hospitals.
But the AHA argued that CMS had illegally set different reimbursement rates for 340B hospitals and non-340B hospitals, which are mostly commercial establishments.
“Congress has directly raised the issue of when rates can be based on acquisition costs and vary by hospital group, and that’s when it does a cost study,” said Donald Verrilli, an adviser to the plaintiffs in the case.
He later added: “If you don’t want to do this, if you think it’s too burdensome or if you think it’s bad policy, then you go to Congress and say ‘change the law.’ But they did neither. Instead, they took a path that is not permitted by law. “
The 340B Drug Pricing Program allows providers serving large numbers of low-income patients to buy drugs at great discounts from manufacturers and sell them at higher prices to Medicare and commercial insurers. 340B providers and program proponents argue that these “savings” help participating nonprofit hospitals deliver services to low-income patients and cover uncompensated treatment costs.
But the Trump administration cut reimbursement rates to 340 billion suppliers in 2018, arguing they need to be adjusted to match which hospitals pay for drugs.
The government said Tuesday that its cuts are allowed under the law and that Congress has allowed it to vary reimbursement rates for 340B and non-340B hospitals.
Medicare continues to reimburse drug costs to non-340B providers at the average selling price plus 6%. According to the changes made in 2018, 340B providers are paid 22.5% less than the average selling price.
This is still profit for 340B hospitals, but not as large as what they were getting before the change.
Judges on Tuesday expressed skepticism about the government’s argument.
“You are reading the text of the regulation … as if it said,” Use the average acquisition cost if you have survey data or if you do not have survey data, do the same. ” This is not what the regulation says, “said Judge Elena Kagan. This regulation says that if you have survey data, you do one thing, and if you do not have survey data, you do something else.”
The difference between reimbursement rates based on hospital acquisition data and rates based on average price could mean lost money for 340B hospitals.
Judge Clarence Thomas asked state attorney Christopher Michel why HHS would ever change rates in line with the first option – by conducting a survey – when it could simply skip the survey and set a refund at an average cost.
“The research continues to benefit the agency a lot,” Michelle said.
But he added that HHS conducted the study only once – in 2020 while the case was pending – and that the data was similar to the average price the agency used to calculate rates.
Hospitals and other observers are concerned that if the Supreme Court sides with the CMS, it could give the government more power over how to interpret laws passed by Congress.
Judge Neil Gorsuch asked the government council how ambiguously an agency was needed to say it should be allowed wide freedom of interpretation of the law, but Michel said he believed the statute of Congress was clear.
Verrilli later returned to Gorsach’s question, saying, “How much ambiguity is enough? I think the answer is much more than what you have here. ”
The Supreme Court agreed to consider the case after the US Court of Appeals for the District of Columbia sided with HHS. The lower court previously sided with the AHA.