On July 31, 2020, the US Courtroom of Appeals for the District of Columbia Circuit held that the Facilities for Medicare and Medicaid Companies (CMS) has authority below the Social Safety Act to scale back Medicare cost charges for 340B medication reimbursed below the Medicare Hospital Outpatient Potential Cost System (OPPS). This choice reverses a previous district court docket ruling and preserves the cost cuts for the foreseeable future.
Since 2018, the CMS OPPS guidelines have lowered hospitals’ Medicare Half B reimbursement for 340B medication from Common Gross sales Value (ASP) plus 6% to ASP minus 22.5%, a discount of virtually 30%. Nearly instantly after the discharge of the 2018 Closing Rule, a gaggle of hospitals and hospital associations sued the federal government, alleging that CMS didn’t have statutory authority to implement the cost reduce. In December 2018, the US District Courtroom for the District of Columbia held that, in making these reductions, CMS had exceeded its authority, partly as a result of CMS didn’t have ample knowledge to help the reductions. Our prior On the Topic, “Courtroom Points Everlasting Injunction Blocking Medicare 340B Cost Cuts,” offers an summary of the district court docket’s choice and evaluation.
The DC Circuit Determination
On July 31, 2020, the US Courtroom of Appeals for the DC Circuit reversed the district court docket’s ruling, discovering that CMS’s choice to decrease 340B drug reimbursement charges was primarily based on a “affordable interpretation of the Medicare statute.” The DC Circuit centered on whether or not CMS “permissibly conceived” of the needs of the Medicare statute governing OPPS cost charges for 340B medication when it lowered reimbursement charges for 340B medication particularly. After analyzing the Medicate statute’s construction, ambiguities and implications, the court docket discovered that CMS was permitted to interpret the intent of the statute as compensating hospitals for the prices they incur to accumulate outpatient medication. Primarily based on that interpretation, the court docket concluded that it was affordable for CMS to train its statutory authority to “alter” reimbursement charges for 340B medication to extra carefully align with hospitals’ prices to accumulate these medication.
Notably, the DC Circuit’s choice was not unanimous. Two of the three judges who heard the case concluded that the reimbursement discount was permissible, however the third decide discovered that the reimbursement discount was unauthorized by statute. She opined that the statute doesn’t authorize CMS to institute massive reimbursement reductions for distinct hospital teams (i.e., for 340B coated entity hospitals solely) with out common acquisition value knowledge for these hospitals derived from a survey that meets sure necessities. The dissenting decide concluded that, absent that knowledge, CMS should set up reimbursement charges throughout hospital teams primarily based on ASP, topic to restricted changes.
The hospital litigants might ask for a rehearing by the complete panel of judges on the DC Circuit, and if the litigants don’t request such a rehearing, they could additional enchantment the case to the Supreme Courtroom of the US. Acceptance of both of those enchantment choices is discretionary by the relevant court docket, so there isn’t any assure that the litigation will proceed or that the hospitals will prevail in any enchantment.
The DC Circuit’s choice is a big win for the federal government, in addition to for non-340B OPPS hospitals, which profit from the cost cuts due to budget-neutral redistribution of the reimbursement quantities “saved” by the 340B cost cuts. Additional, absent a reversal of the latest DC Circuit choice, it’s extremely unlikely that 340B OPPS hospitals will obtain retrospective OPPS reimbursement for 340B medication administered or disbursed in 2018, 2019 and 2020, as was contemplated as a possible end result following the decrease court docket choice.
Nevertheless, the cut up choice on the DC Circuit, when seen within the context of a positive district court docket holding, means that each CMS and the hospital appellants have arguments that may very well be persuasive upon additional enchantment, if such enchantment is granted. The hospital associations concerned within the litigation have launched a joint assertion indicating that they “will proceed to struggle for our hospitals and their sufferers, and [they] name on CMS to reverse this dangerous coverage to make sure hospitals can proceed to offer the companies folks want essentially the most.”
Additional appeals would require an prolonged time frame for decision. For reference, CMS filed its enchantment with the DC Circuit in July 2019, greater than a 12 months earlier than the court docket introduced its choice. In mild of the annual OPPS rulemaking timeframe and the complexity of resolving widespread historic underpayments, hospitals ought to assume that the 340B cost cuts will proceed into the close to future.
CMS just lately launched a drug acquisition value survey to gather data relating to 340B hospitals’ web acquisition prices for 340B-purchased medication, described in our earlier On the Topic, “CMS Releases 340B Drug Acquisition Price Survey, Responses Due Might 15, 2020.” CMS indicated that the aim of the survey was to gather knowledge mandatory to ascertain acquisition value cost charges for 340B medication disbursed to hospital Medicare sufferers. The survey gave the impression to be an administrative fallback course of supposed to offer CMS a pathway to proceed its lowered reimbursement charges within the occasion the DC Circuit sided with the hospitals and the district court docket. Nevertheless, CMS may additionally use the survey acquisition value knowledge to additional cut back reimbursement charges for 340B medication past ASP minus 22.5%.