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Court Rejects AHA’s Attempt to Block 340B Hospital Payment Cuts

AHA did not give the final rule reducing 340B hospital payments by $1.6 billion enough time, therefore their case against HHS must be tossed, an appellate court decided.

340B hospital payments and the 340B Drug Pricing Program

Source: Thinkstock

By Jacqueline LaPointe

- A federal appellate court recently tossed the American Hospital Association’s (AHA) lawsuit against HHS, which attempted to block $1.6 billion in 340B hospital payment cuts.

Three judges on the US Court of Appeals for the District of Columbia Circuit unanimously agreed that a lower court appropriately decided to dismiss the lawsuit filed by the AHA and several other industry groups because the groups failed to meet the “presentment” threshold.

The presentment threshold requires plaintiffs to present Medicare claims to the HHS Secretary to demonstrate the harm a rule caused. The requirement also states plaintiffs must exhaust all administrative remedies prior to seeking legal action.

However, the AHA’s challenge of the rule that would reduce 340B hospital payments was premature, the judges decided. AHA and other plaintiffs sued to challenge the rule the very day that HHS published it and before the rule’s effective date of Jan. 1, 2018.

“When the plaintiffs filed this lawsuit, neither the hospital plaintiffs, nor any members of the hospital-association plaintiffs, had challenged the new reimbursement regulation in the context of a specific administrative claim for payment,” Judge Gregory Katsas wrote in the court’s decision.

READ MORE: Pres Trump Eyes 340B Drug Reforms to Lower Prescription Drug Costs

“Nor could they have done so, for the new regulation had not yet even become effective. Therefore, they had neither presented their claim nor obtained any administrative decision at all, much less the ‘final decision’ required,” he added.

The court also rejected the AHA’s argument that the industry groups had fulfilled the presentment threshold by submitting comments on the proposed rule to reduce 340B hospital payments in 2018. Comments opposing the proposed reductions to 340B hospital payments would not meet the threshold because the rule was not final, Katsas explained.

The appellate court’s recent rejection of the AHA’s lawsuit is merely a setback, the industry groups said in a recent statement. The AHA, alongside the Association of American Medical Colleges (AAMC) and America’s Essential Hospitals, vowed to continue fighting the $1.6 billion in 340B hospital payment cuts.

"As today’s decision stated, ‘The question presented is not whether they may obtain judicial review of their challenges….but when and how they may do so through the special-review scheme for Medicare claims.,’” the groups wrote.

“We will continue our fight to reverse these unwarranted cuts and protect access for patients, and we expect to refile promptly in district court,” the groups added.

READ MORE: Leveraging Group Purchasing for Hospital Supply Chain Management

The decision to reject the AHA’s case on 340B hospital payments comes just weeks after HHS Secretary Alex Azar called for greater oversight of the 340B Drug Pricing Program.

“Its creation in 1992 was a bipartisan accomplishment, an innovative way to have stakeholders augment federal support for the provision of healthcare to low-income Americans,” he recently said at the annual 340B Coalition meeting.

“Since then, billions of dollars of drug savings have been applied to charity care by entities covered by the program. We know that because of the sheer scale of the program. But at the same time, we simply do not know the scale of benefits that have been delivered.”

Without a way to measure the benefits of the program, Azar called for greater transparency into how hospitals are using the 340B drug discounts to provide care for low-income and vulnerable patients.

Policymakers are also currently debating whether to reduce the scope of the 340B Drug Pricing Program. The House Committee on Energy and Commerce recently held a hearing on ways to improve the drug discount program.

READ MORE: Prescription Drug Rates Remain Top Healthcare Supply Chain Issue

The committee debated several pieces of legislation, including a proposal from Representative Joe Barton (R-TX) that would increase eligibility thresholds for the program. Barton proposed to raise the minimum Disproportionate Share Hospital percentage from 11.75 percent to 18 percent.

The increased eligibility threshold would eliminate 573 of the 1,115 Disproportionate Share Hospitals currently in the program, a recent 340B Health analysis uncovered.

However, another bill on the table during the committee’s hearing aimed to reverse the multi-billion-dollar hospital payment reduction. Representative Doris Matsui (D-CA) created a bill that would prevent the payment cuts, as well as formalize penny pricing, which has been delayed for over a year.

Hospital groups have expressed concerns that greater oversight and potential reductions in the program would harm safety-net hospitals delivering comprehensive care to low-income and vulnerable individuals using the drug discounts from the program.

“[Barton’s proposal] would decimate the 340B drug pricing program and leave millions of low-income Americans with higher costs and less access to care,” stated Maureen Testoni, Interim President and CEO of 340B Health. “Such a drastic change would put enormous pressure on safety net hospitals, clinics, and health centers.”

The 340B Drug Pricing Program could face many changes in the near future as providers, hospitals, policymakers, and other stakeholders consider how to best run the program and administer the program’s incentives to hospitals.

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