On June 15, the Supreme Court of the US (SCOTUS) issued its decision in American Hospital Association v. Becerra. SCOTUS unanimously ruled that Health & Human Services (HHS) could not vary reimbursement rates in 2018 and 2019 for 340B hospitals without first conducting a survey on hospital acquisition costs.

In 2018, the HHS reduced reimbursement rates for Part B drugs acquired through the 340B Drug Pricing program from average sales price (ASP) plus 6% to ASP minus 22.5% for most 340B covered entities, following a MEDPAC recommendation that the cuts would bring 340B payments closer to the drug acquisition cost. The American Hospital Association filed a lawsuit against the HHS in 2018 arguing that it had exceeded its authority because it had not applied 1 of the statutorily defined methods to adjust reimbursement. After a series of court rulings and appeals, the case landed at SCOTUS, but the most recent decision still leaves a lot of uncertainty for stakeholders.

Looking Ahead

The Centers for Medicare and Medicaid Services (CMS) will need to determine how it will retroactively reimburse providers for 2018 and 2019 payments in a budget neutral manner. Additionally, while reimbursement for 340B drugs will remain at ASP minus 22.5% for the remainder of 2022, stakeholders should monitor for the release of the CY 2023 Outpatient Prospective System proposed rule, as the HHS may plan to maintain the payment cuts or reinstate the full ASP plus 6% reimbursement methodology for 340B drugs.

The SCOTUS ruling also occurs against the backdrop of a flurry of other 340B developments that may draw policymaker attention.

Federal Activity

• Ongoing Litigation: Several manufacturers that received enforcement letters from HRSA stating that limits or conditions placed on contract pharmacy access to 340B discounts violated 340B statute have filed lawsuits against HRSA. The rulings in several cases were mixed, with some language in support of the plaintiff and others the defendant. Multiple judges noted the 340B statute as ambiguous, obscuring Congressional intent, suggesting Congressional action may be necessary to address the lack of clarity.
• Administrative Dispute Resolution (ADR) Rule: The ADR process is the formal means by which 340B covered entities and manufacturers can resolve disputes regarding overcharging, duplicate discounts, or drug diversion in the 340B program. The ADR rule finalized in December 2020 required the ADR panel to consist of representatives from HRSA, CMS, and HHS Office of the General Counsel. In January, the administration indicated a new ADR rule would be published, pending review at the Office of Management and Budget. The timing for the release is unclear, but the rule is expected to be released in 2022 and could have implications for stakeholders.
• Congressional Activity: Congressional activity around the 340B program has been limited. The most notable activity this year was related to the public health emergency (PHE), where Congress passed the omnibus spending bill (H.R.2471) with a provision that reinstated 340B eligibility for covered entities whose Medicare disproportionate share percentage fell below eligibility levels due to the PHE. In addition, the PROTECT 340B Act of 2021 (H.R.4390) has been introduced in Congress, which would bar pharmacy benefit managers (PBMs) from implementing practices that would lower reimbursement for 340B drugs relative to non-340B drugs. It remains unclear if this Congress will take action in the remaining months of 2022 to address the concerns raised by various 340B stakeholders.

State Policy Activity

• Differential Reimbursement Laws: At least 20 states have passed legislation that prohibits PBMs from applying different reimbursement policies on claims for 340B drugs relative to non-340B drugs. Several state legislatures have introduced or are considering bills that would institute similar prohibitions in their states. Stakeholders should consider how these 340B-related policies could impact their business as more states take up these types of proposals. Attention and conversations on the reimbursement of 340B drugs across markets will likely grow given the recent SCOTUS ruling.
• Medicaid FFS Transitions: Several states have or are currently pursuing efforts to “carve in” prescription drug coverage, shifting the prescription drug benefit from Medicaid Managed Care (MMC) to fee-for-service (FFS). In parallel, the 2016 Medicaid Covered Outpatient Drug final rule capped Medicaid FFS reimbursement of 340B eligible drugs at the 340B ceiling price plus a dispensing fee. As states shift their prescription drug benefit from MMC to FFS given the potential savings, 340B covered entities could be subject to lower reimbursement given the 2016 rule.

Avalere’s 340B subject matter experts continue to track ongoing 340B activity at the state and federal level that could impact the broader 340B landscape. Given the changing landscape, 340B stakeholders will need to remain aware of activity and the various impacts. With our vision to be the essential voice in healthcare, Avalere is positioned to help its clients qualitatively and quantitatively evaluate the impact of various developments and policy proposals related to 340B.

To stay up to date with 340B related policy and legislation, connect with us.