Judge to decide 340B cuts' fate soon

A federal judge on Thursday said he will determine within days whether or not the federal government can move forward with a planned $1.6 billion cut to a federal drug discount program set to take effect on Jan. 1.

During the first public hearing in a lawsuit challenging the CMS' changes to 340B's payment calculation, U.S. District Judge Rudolph Contreras vowed to rule quickly on hospital associations' lawsuit seeking to halt the cuts.

"There is a lot at stake and it's better to resolve this before it goes into effect than after," Contreras said. "Then you'd be in the situation where you would have to try to unscramble eggs."

Under the old payment calculation, providers participating in 340B received 6% on top of the average sales price of a drug. Under the new rule released last month, the CMS would pay just over $65,000 for a drug that costs $84,000. It currently would pay $89,000 for that drug. Vaccine payments would not change under the calculation change.

The rule sparked immediate outcry from participating hospitals. The American Hospital Association, the Association of American Medical Colleges and America's Essential Hospitals sued the HHS and claimed that the agency doesn't have the authority to make those changes on its own.

U.S. Justice Department lawyer Joel McElvain said Thursday that hospitals would continue to get discounts on drugs purchased under the program, maintaining the changes are an "adjustment" to the payment calculations.

"Nothing in this rule changes the 340B program," McElvain said. "It will still operate the exact same way that it did before."

If Contreras grants the association's injunction request, HHS will have to continue payments under the old calculation until the litigation is resolved. During Thursday's 90-minute hearing, the judge said the line between determining if a program has been adjusted and has been transformed isn't clearly defined.

HHS maintains it is well within the HHS secretary's right to make the changes, telling Contreras the rule was a redistribution of funds to all hospitals that received reimbursement under Medicare's outpatient fee schedule rather than a cut to 340B.

Historically, Contreras has sided with industry over HHS on 340B matters. In 2015, he struck down a rule that drugmakers had to sell orphan drugs to rural and cancer hospitals at a discount under the 340B program.