The U.S. Court of Appeals for the District of Columbia Circuit today overturned a 2018 district court decision that found the Department of Health and Human Services exceeded its statutory authority when it reduced 2018 and 2019 Medicare payment rates for many hospitals in the 340B Drug Pricing Program by nearly 30%.

“We hold that HHS’s decision to lower drug reimbursement rates for 340B hospitals rests on a reasonable interpretation of the Medicare statute,” Chief Justice Sri Srinivasan said in the opinion for the court.

The AHA, Association of American Medical Colleges, America's Essential Hospitals, and three hospital plaintiffs challenged the $1.6 billion per year payment cut for outpatient drugs purchased under the 340B program, arguing that the 340B provisions in the calendar year 2018 and 2019 outpatient prospective payment system final rule violated the Administrative Procedure Act and exceeded the agency's statutory authority.

“America’s 340B hospitals and the millions of patients they serve will suffer lasting consequences from today’s D.C. Circuit Court of Appeals ruling allowing Medicare Part B cuts to stand,” the AHA, AAMC and AEH said in a statement. “The decision conflicts with Congress’ clear intent and defers to the government’s inaccurate interpretation of the law, a point that was articulated by the judge who dissented from the opinion. For more than 25 years, the 340B program has helped hospitals stretch scarce federal resources to reach more patients and provide more comprehensive services. Hospitals that rely on the savings from the 340B drug pricing program are also on the front-lines of the COVID-19 pandemic, and today’s decision will result in the continued loss of resources at the worst possible time. We will continue to fight for our hospitals and their patients, and we call on CMS to reverse this harmful policy to ensure hospitals can continue to provide the services people need the most.”

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