CHA News Article

Federal District Court Dismisses 340B Lawsuit, Policy Effective as of Jan. 1

On Dec. 29, a federal district court granted the government’s motion to dismiss a lawsuit brought by the American Hospital Association and others seeking to prevent the payment cuts to hospitals participating in the 340B Drug Pricing Program. The payment cuts consequently became effective Jan. 1, reducing Medicare payments by nearly 30 percent, or $1.6 billion, to certain hospitals for outpatient drugs purchased under the 340B program. CHA and 32 other state and regional hospital associations had submitted an amicus (friend of the court) brief supporting the plaintiffs’ claims.

The lawsuit argues that the 340B provisions of the Centers for Medicare & Medicaid Services’ outpatient prospective payment system final rule violate the law and, therefore, should be set aside under the Administrative Procedure Act as unlawful and exceeding the Health and Human Services Secretary’s statutory authority. The judge dismissed the case without ruling on the merits and instead held that he lacked jurisdiction because the plaintiffs did not exhaust their administrative remedies by first presenting the Department of Health and Human Services with a concrete claim for reimbursement.

The American Hospital Association, the Association of American Medical Colleges and America’s Essential Hospitals said they will continue to pursue the lawsuit following the district court’s decision. The court’s decision permits the groups to refile the lawsuit once the cuts go into effect.

The court’s decision is attached. CHA will continue to support both legislative and regulatory efforts to roll back this policy. In the interim, CHA encourages hospitals to review the recently released frequently asked questions related to the application of the required modifiers that became effective Jan. 1.