The United States District Court for the District of Columbia granted plaintiffs’ motion to vacate the 2022 OPPS Rule’s 340B rates on a prospective basis, meaning that HHS will pay 340B hospitals the drug’s average sales price (ASP) plus six percent for the remainder of the year. Previously, the Supreme Court decided that HHS had unlawfully changed 340B hospitals’ reimbursement for outpatient drugs by varying the methodology between different groups of hospitals without conducting a statutorily mandated survey.
To determine whether or not to vacate the OPPS Rule’s reimbursement rate, the Court considered two factors: (1) “the seriousness of the [action’s] deficiencies,” and (2) the likelihood that the decision will cause disruption. In this action, HHS admitted that the 340B reimbursement rate cut was unlawful. The Court found that HHS’s implementation of an unlawful reimbursement methodology was serious enough to satisfy the first factor.
Under the second factor, the Court found that vacating the rule on a prospective basis would not cause substantial disruption because, in part, vacatur would not force HHS to retrospectively unravel past payments under the defective reimbursement methodology. The ruling would only be applied on a prospective basis. The Court did not find HHS’s argument that vacatur would disrupt budget neutrality persuasive stating that HHS cannot “use budget neutrality now as a shield to justify ongoing and continuing application of an unlawful reimbursement rate that no amount of reasoning can rehabilitate on remand.” HHS’s promise to fix the problem later if it was permitted to continue using its unlawful reimbursement methodology for the remainder of the years was similarly rejected by the Court. The Court also noted that paying 340B hospitals the proper reimbursement amount for the remainder of the year would only represent a small portion of the time period that was being challenged by the action and underscored that HHS had agreed to go back to its previous reimbursement methodology in 2023. The Court also held that injunctive relief was unnecessary because the reimbursement rate would automatically default to the ASP plus six percent rate as mandated by the statute.
The Supreme Court’s decision of American Hospital Association v. Becerra held that HHS could not vary rates of reimbursement for 340B drugs between different groups of hospitals using its most recent methodology without conducting a survey of hospitals’ acquisition costs. Previously, Medicare reimbursed outpatient drugs provided by 340B hospitals at the drug’s ASP plus six percent as mandated by statute. In the 2018 OPPS rule, CMS reduced the reimbursement rate for drugs to the ASP minus 22.5 percent. The Supreme Court remanded the case to the D.C. Circuit Court “to address potential remedies,” who remanded it to the D.C. District Court..
Plaintiffs’ second motion to retrospectively remedy the 340B underpayments to hospitals under the defective OPPS rules will be addressed at a later date by the D.C. District Court.
The D.C. District Court’s decision is available here.
