Recent 340B program developments

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Legal challenges to the significant Medicare reimbursement cuts for drugs purchased by most hospitals under the 340B program continue. As previously reported, the Centers for Medicare & Medicaid Services (CMS) issued a final rule effective January 1, 2018, cutting 340B-purchased drug reimbursement by nearly 27 percent for DSH hospitals. In response to the cuts, but prior to the rule’s effective date, hospital associations, including the American Hospital Association and the Association of American Medical Colleges, filed a lawsuit challenging the reduction in 340B-purchased drug reimbursement, claiming that CMS exceeded its authority by adjusting payment for drugs under the 340B program. The lawsuit was dismissed on procedural grounds, because the court found the associations and their members had not appropriately alleged or suffered actual harm under the rule. The associations appealed the dismissal and sought a remand to the trial court and a preliminary injunction directing CMS to set the reimbursement rates without the payment reduction and at the level needed to correct the effects of the reduction thus far. The appellate court granted the request for an expedited briefing schedule, and briefs were recently submitted. The court has scheduled oral arguments for May 4, 2018.

Other 340B program news

  • The Health Resources and Services Administration (HRSA) is expected to once again delay the effective date of a final rule on drug ceiling prices and civil monetary penalties for drug manufacturers in the 340B program from its current date of July 1, 2018. The rulemaking efforts began eight years ago, and the final rule has already been delayed several times.

  • The U.S. Senate’s Health, Education, Labor and Pensions Committee held a hearing on March 15, 2018, on the 340B program. Topics discussed included potential improvements to the 340B program, whether hospitals should report 340B income and “where they direct their 340B drug discounts.”

  • Senator Bill Cassidy introduced legislation in January 2018 to alter the 340B program, including a two-year moratorium on certain new 340B hospitals and hospital outpatient departments as well as stricter 340B eligibility criteria for hospital outpatient sites.

  • The last two White House budget requests have included proposed changes to the 340B program.

  • CMS posted new sub-regulatory guidance regarding modifiers for 340B drugs to its website on April 2, 2018.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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