Judge tosses AHA challenge to 340B cuts

A federal judge on Friday allowed the CMS to move forward with its planned $1.6 billion cut to a federal drug discount program.

U.S. District Judge Rudolph Contreras ruled that the American Hospital Association, Association of American Medical Colleges, America's Essential Hospitals and three hospitals prematurely sued the CMS, since the proposed 340B program cuts have not gone into effect yet.

Starting Jan. 1, providers participating in 340B are scheduled to begin receiving smaller reimbursements for purchased drugs. Under the old calculation, providers received 6% on top of the average sales price of the drug. Starting next week, the CMS will pay approximately $65,000 for a drug that costs $84,000.

The hospital associations sued the HHS in November, shortly after the CMS issued its final rule changing the 340B payment calculations.

The groups said Friday that they will continue to pursue their lawsuit, noting that Contreras did not rule on the merits of the case. They will have the opportunity to refile their complaint after the reimbursement cuts go into effect.

"Making cuts to the program, like those CMS has put forward, will dramatically threaten access to healthcare for many communities with vulnerable patients," AHA President and CEO Rick Pollack said in a statement. "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."

HHS has said it is well within its authority to make the 340B changes, calling the final rule a redistribution of funds to all hospitals that received reimbursement under Medicare's outpatient fee schedule rather than a cut to 340B.

Although Judge Contreras said last week during a hearing that it would be difficult to "unscramble eggs" after the cuts go into effect, he determined that the associations' and hospitals' comments on the proposed rule weren't enough to give them standing to sue. They will have to cite specific reimbursement claims in order for a renewed suit to move forward.

"Plaintiffs' failure to present any concrete claim for reimbursement to the (HHS) secretary for a final decision is a fundamental jurisdictional impediment to judicial review," the judge wrote.