On September 28, 2022, the U.S. District Court for the District of Columbia ordered HHS to stop its 340B-specific payment rate and immediately start to pay 340B hospitals at the generally applicable rate of average sales price (ASP) plus 6% for the remainder of 2022. Although the court recognized that HHS is generally subject to a budget-neutrality requirement with respect to hospital outpatient payments, and prospectively correcting the payment may disrupt budget neutrality for this year, the court believed the disruptions would be minimal.
Decision
U.S. District Judge Rudolph Contreras’ ruling addresses the first of two remedy questions stemming from June’s Supreme Court decision, in which the top court overturned a nearly 30% rate cut adjustment the Department of Health and Human Services (HHS) first introduced in 2018. The Supreme Court unanimously rejected HHS’ argument that it did not need to survey hospitals’ acquisition costs before introducing the adjustment. The case was returned to lower courts to address potential remedies.
The district court’s September 28, 2022, decision addresses only the hospitals’ request for prospective relief. HHS had argued that hospitals’ motion would require the district court to not only vacate the 2022 rule but also issue an injunction to return to the full OPPS payment rate. The district court disagreed and simply vacated the part of the 2022 rule that effectuates the 340B payment reductions. The district court reasoned that an injunction was unnecessary because vacating the rule automatically returned the payment rate for 340B drugs to the rate applicable to all other (non-340B) hospitals. The district court also rejected HHS’s argument that vacating the rule for the remainder of 2022 would violate budget neutrality requirements, reasoning that any remedy would necessarily implicate budget neutrality principles, and the budgetary impact of a vacatur effective September 28 would not be significant.
The district court’s decision vacates the 340B payment cuts for the remainder of 2022 and does so without requiring budget neutrality (i.e., a corresponding decrease in payments to other items and services paid under OPPS). But 340B hospitals should not expect to see an immediate restoration of 340B claims payment to the full OPPS amount because HHS must reprogram its payment systems, which will take some time.
Further, although the district court’s order does not require budget neutrality, HHS could attempt to maintain budget neutrality by implementing a downward adjustment on payments to all hospitals for other items and services for the remainder of 2022. The result of such a downward reduction would be a payment reduction for non-340B hospitals and possibly a net reduction in reimbursement for 340B hospitals the remainder of 2022. HHS may also appeal the district court’s order, which could delay any restoration of the payment rates while the matter is pending before the appeals court.
The district court did not address the issue of remedies for payment reductions made from January 1, 2018, to September 28, 2022, and stated that it would address that issue in a future order. While the district court was unsympathetic to HHS’s budget concerns as to the remainder of 2022, it acknowledged that the amount of money at issue for the remaining months of 2022 is much smaller than the amount involved from 2018 through 2022. In fact, based on the 2023 OPPS proposed rule, the amount at issue from 2018 through 2022 could be more than $10 billion.