Through the 340B program, pharmaceutical manufacturers sell drugs used in eligible safety net hospitals’ outpatient settings at discounted prices. Participating entities can achieve savings of 25 to 50 percent on pharmaceutical purchases. Hospitals reinvest 340B savings for a wide range of purposes, including providing low-cost or free prescriptions for uninsured and low-income populations, expanding services offered to patients and providing services to more patients. The 340B program involves no federal spending. Currently, one in four Texas hospitals participate in the program.
In November 2017, the Centers for Medicare & Medicaid Services finalized a
rule to limit hospitals’ Medicare reimbursement for prescription drugs purchased under the 340B Drug Discount Program. Since Jan. 1, 2018, 340B-participating hospitals faced an almost 30 percent reduction in Medicare reimbursements for these drugs, which significantly reduce hospitals’ ability to sustain necessary patient programs. The 2018 outpatient prospective payment system final rule reduced hospitals' Medicare reimbursement by $1.6 billion annually.
In September 2018, AHA sued the U.S. Department of Health and Human Services on the grounds that the 340B provisions of the OPPS rule violate the Administrative Procedure Act. A federal court in December 2018 sided with AHA and other plaintiffs,
ruling that HHS exceeded its authority by cutting hospitals' Medicare reimbursement for drugs purchased through the 340B program.
In May 2019, a federal judge
blocked the 340B cuts and asked HHS to propose a plan by Aug. 5 with remedial measures to resolve the issue. Read the latest on the lawsuit here.
Legal proceedings are ongoing to determine whether HHS will have to provide retroactive payments according to the 2017 OPPS rule methodology and/or change its policy.
AHA encourages all 340B hospitals to follow the instructions in a memo prepared by its outside counsel to continue pursuing Medicare appeals for 2018 and initiate appeals for reduced payments in 2019. The memo includes actions for 340B hospitals to request review of 340B claims in order to preserve hospitals’ right to seek the full reimbursement amounts under the 2017 rate pending the final outcome of litigation.
Read how hospitals in certain Congressional districts invest 340B savings.