Category Archives: American Hospital Association v Becerra

Supreme Court hears 340B rate cut case

Posted on by • Posted in American Hospital Association (AHA), American Hospital Association v Becerra, Chevron Doctrine, Health Policy, Health System, Hospital, Hospital Industry, Medicare 340B Drug Discount Program, Pharmaceutical Industry, Supreme Court • Leave a comment

https://mailchi.mp/016621f2184b/the-weekly-gist-december-3-2021?e=d1e747d2d8

Earlier this week, the American Hospital Association (AHA) made its case before the US Supreme Court, in opposition to Medicare reimbursement cuts to hospitals that participate in the 340B Drug Pricing Program. The program allows hospitals that serve low-income patients to purchase outpatient drugs at a discount.

In the graphic above, we look at what’s at stake for hospitals in the case. Beginning in 2018, Medicare cut reimbursement for 340B-eligible drugs purchased by most hospitals by 28.5 percentage points, amounting to roughly $1.6B annually—which was a significant hit to hospitals’ 340B revenue. As we recently discussed, that revenue has become essential for many hospitals’ financial sustainability. However, the true impact on hospital bottom lines is more nuanced, as the savings from 340B rate cuts are being redistributed to all hospitals that participate in the Outpatient Prospective Payment System (OPPS), regardless of their 340B status, via a 3.2 percent payment bump for non-drug Part B services. While the cut negatively impacts those with large 340B programs—generally larger hospitals located in urban areas—the resulting redistribution actually provides a net benefit to about four in five hospitals.

Although 340B program revenues are at stake, the broader legal question before the Court centers on the level of authority federal agencies like the Centers for Medicare & Medicaid Services (CMS) have to create regulations to interpret ambiguous laws. (If the justices rule against CMS, it will overturn a key legal doctrine known as the Chevron Defense, which compels courts to defer to an agency’s interpretation of unclear statutes.)

A ruling isn’t expected until next spring, but regardless of the outcome, the 340B program faces other threats, chiefly from several lawsuits involving large pharmaceutical manufacturers’ moves to restrict discounted product sales to contract pharmacies. Undoubtedly, the ongoing scrutiny of the 340B program will continue to raise questions about whether there are better ways to subsidize the operations of hospitals serving low-income patients and ensure that underserved patients have access to lifesaving treatments.

Justices mull Chevron and voice skepticism of Medicare’s rate cut for hospital drugs

Posted on by • Posted in American Hospital Association v Becerra, Center for Medicare and Medicaid Services (CMS), Chevron Doctrine, Health System, Hospital, Hospital Industry, Medicare 340B Drug Discount Program, Supreme Court • Leave a comment
Justices mull Chevron and voice skepticism of Medicare’s rate cut for hospital drugs
Justices mull Chevron and voice skepticism of Medicare's rate cut for hospital drugs - SCOTUSblog

Over at Scotusblog, I’ve posted a recap of yesterday’s oral argument on American Hospital Association v. Becerra.

The Supreme Court appeared receptive to the claim that Medicare overstepped its authority when it cut the amount that it paid certain hospitals for drugs they dispensed in their outpatient departments. None of the justices voiced sympathy with the government’s argument that Congress had precluded judicial review of the question. And while oral argument mainly involved a technical discussion about statutory meaning, several of the conservative justices toyed with the possibility of abandoning Chevron deference — the principle that the courts will defer to an agency’s reasonable interpretation of the statute that it administers.

It is always treacherous to try to anticipate what the justices will decide from the questions they ask at oral argument. Still, it’s safe to say that the hospitals challenging Medicare’s rate change had a good day in court. If they prevail, 340B hospitals will recoup billions in withheld payments and will continue to have an enormous incentive to dispense expensive drugs in their outpatient centers, even when cheaper and equally effective alternatives exist.

That’s a bad policy outcome, whatever the Supreme Court thinks the law requires. If Medicare lacks the legal power to fix it, however, it will be up to Congress to narrow the gap between 340B drug costs and Medicare payments. We could be waiting a very long time for a solution.