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U.S. District Judge Rules 340B Cuts Exceeded HHS Authority

On December 28, 2018, a federal judge in Washington reversed the enormous cuts to Medicare OP Drug payments implemented by CMS which were effective January 1, 2018. U.S. District Judge Rudolph Contreras ruled CMS and HHS secretary exceeded their authority by cutting 340B reimbursement by approximately 28.5%. The Medicare OP Drug reimbursement methodology for certain hospitals was changed from a calculation based on average sales prices (ASP) plus 6.0% to ASP minus 22.5% resulting in an overall cut of approximately 28.5% or $1.6 billion annually.

The judge stated the HHS secretary overstepped his authority and is not permitted to fundamentally rework the statutory scheme by applying a different methodology than the provision required. Hospitals asked the judge to allow retroactive payments back to the start date of January 1, 2018, based on the prior reimbursement methodology. The judge has asked for additional briefings before forcing HHS to change the reimbursement policy.

While this ruling appears to be a win for the hospitals affected by the payment cuts, it is not certain how this will be settled. These cuts were intended to be budget neutral with the savings redistributed across the OPPS to other separately payable, non-drug items and services.

Blue & Co. will monitor the situation and update its clients as more information becomes available.

If you have any questions regarding this or any other 340B related questions, please call one of our 340B Apexus Certified Experts – Bill Rees, David Layne or Jason Prokopik.

Identify the best tax planning strategies for you. Click here to go to our 2018 Year-End Tax Planning Guide.

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