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A Win for 340B Providers

In a unanimous decision, the U.S. Supreme Court held in American Hospital Association v. Becerra that the Department of Health and Human Services (HHS) impermissibly reduced the Medicare reimbursement rate for outpatient drugs paid to hospitals participating in the 340B program.

The 340B program allows health care providers to purchase drugs from pharmaceutical companies at reduced pricing, because participating providers serve a higher proportion of lower income patients at great expense.

In executing the price cut, HHS reasoned that if the hospitals were paying less for the drugs, the reimbursement from federal health care programs should also decrease, to avoid the hospitals getting a windfall. The hospitals vehemently objected because the cuts resulted in a $1.6 billion dollar loss of Medicare funding.

The hospitals argued that the Medicare statute did not authorize HHS to pay a lower amount to 340B participating hospitals compared to other hospitals. HHS argued that the statute allows it to “adjust” the average price of a drug, and in this case to do so by varying reimbursement rates among providers.

The Court, however, concluded that HHS’s interpretation of its authority was wrong.  Quite simply, the Court held that HHS does not have the authority to vary the rates it pays for outpatient drugs among providers.

Alexandria K. Montanio
410-576-4278 • amontanio@gfrlaw.com


September 22, 2022




Montanio, Alexandria K.
Rosen, Barry F.


Health Care