CMS to send $9B to 340B hospitals for underpayments, following court loss

Following the unanimous Supreme Court decision siding with hospital groups in June, the Centers for Medicare & Medicaid Services is proposing lump-sum payments of about $9 billion to reimburse more than 1,600 safety-net hospitals for illegal discount drug program cuts from 2018 to 2022. The funds would come from clawing back an estimated $7.8 billion in overpayments to other hospitals, including rural and children’s hospitals.

In 2018, the U.S. Department of Health and Human Services cut prescription drug payments for 340B-covered entity hospitals by nearly 30%. The 340B Drug Pricing Program, created in 1992, requires drug manufacturers to provide outpatient drugs to eligible health-care organizations and covered entities at significantly reduced prices.

The American Hospital Association and other hospital groups sued to halt the cuts, and an appellate court sided with HHS that it has the power to make the cuts. In June 2022, the Supreme Court unanimously rejected the massive payment cuts to hospitals. The court ruled that the differential payment rates for 340B-acquired drugs were unlawful because HHS didn’t follow the proper procedure. Before implementing the rates, HHS failed to conduct a survey of hospitals’ acquisition costs under the relevant statute, the Supreme Court ruled.