According to the District Court’s opinion, some estimates show the underpayments at issue total nearly $10 billion.
On Tuesday, January 10, 2023, the United States District Court for the District of Columbia issued an important ruling allowing the U.S. Department of Health and Human Services (HHS) to propose an appropriate retrospective remedy for underpayments made from 2018 through September 27, 2022, to hospitals participating in the 340B drug pricing program.
The ruling is the latest installment in ongoing litigation, American Hospital Association et al. v. Becerra, in which the United States Supreme Court ruled on June 15, 2022, that HHS exceeded its statutory authority when it implemented a discriminatory reimbursement structure in 2018 and 2019 that resulted in certain 340B hospitals receiving lower Medicare Part B drug reimbursement than other hospitals. According to the District Court’s opinion, some estimates show the underpayments at issue total nearly $10 billion.
On remand to the District Court following the SCOTUS ruling, the District Court granted the 340B hospitals prospective relief on September 28, 2022, and ordered HHS to immediately restore payments for Medicare Part B drugs to 340B hospitals to the same levels all other hospitals receive.
2018 – 2022 Retrospective Reimbursement Ruling
Prior to the January 10, 2023 ruling, the District Court had not yet addressed the issue of remedies for payment reductions made from January 1, 2018 to September 27, 2022. The plaintiffs asked the District Court for injunctive relief and to order that HHS immediately pay 340B hospitals the difference between what 340B hospitals were paid and what they should have been paid. However, by the January 10 ruling, the District Court has instead remanded the question of retrospective reimbursements back to HHS.
On January 4, 2023, the Office of Management and Budget (OMB) released the 2022 Unified Regulatory Agenda and Regulatory Plan, which outlines regulatory actions federal agencies are considering in the coming months. Within the plan, HHS officials indicated their intent to issue a proposed rule in April 2023 regarding “potential remedies” for Medicare Part B drug underpayments to 340B hospitals from 2018 through September 27, 2022. This aligns with recent filings made by HHS, stating it was “committed to announcing [a remedy for claims submitted 2018 through September 27, 2022] through special notice-and-comment rulemaking, which it intends to complete before the 2024 OPPS rulemaking cycle is complete.”
A key remaining question is whether HHS must apply any retrospective remedy in a budget-neutral manner, which could involve the complex recoupment of increased payments for non-drug services resulting from the reduction in payments for 340B drugs. Whatever remedy the agency chooses may then itself be further examined by courts, so 340B hospitals should watch closely as this issue develops.
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