Judge Dismisses Challenge to 340B Cuts, Final Rule Goes Into Effect

Days before CMS’ final rule on 340B went into effect, a federal judge dismissed a move to block the sharp cut to hospital reimbursements.

The American Hospital Association (AHA), America’s Essential Hospitals, and the Association of American Medical Colleges sued HHS last year to block the 2018 Medicare Outpatient Prospective Payment System rule that would cut $1.6 billion to the Medicare program. US District Judge Rudolph Contreras tossed the case, saying that the suit was premature since the changes hadn’t yet taken effect.

With the cuts now in effect as of January 1, 340B hospitals will receive smaller reimbursements for drugs purchased through the program. Under the old calculation, hospitals received 6% plus the average sales price of the drug; now, hospitals will receive the average sales price minus 22.5%. Rural sole community hospitals, certain cancer hospitals, and children’s hospital will be exempt from the reductions. According to CMS, the savings will be redistributed equally to hospitals covered under the rule. In addition to the cuts, 2 modifiers will be put in place in order to identify whether a drug was purchased under the 340B program.

“Making cuts to the program, like those [the CMS] has put forward, will dramatically threaten access to health care for many communities with vulnerable patients," said Rick Pollack, president and CEO, AHA, in a statement following the ruling. "We are disappointed in this decision from the court and will continue our efforts in the Courts and the Congress to reverse these significant cuts to the 340B program.”