Year End 340B Round-Up: Hospital Moratorium Legislation Introduced; Hospital Payment Cuts Take Effect After Suit Hits Snag but Congress May Intervene

By , Published On: January 5, 2018

The closing months of 2017 saw a flurry of activity related to the 340B drug pricing program, both as a topic of legislative and regulatory actions, and the subject of litigation. The recent developments are focused on hospitals participating in the 340B Program, and do not directly impact federally-qualified health centers (FQHCs) or other covered entities that are not hospital-based.  Legislative or regulatory action addressing the 340B Program, however, might have farther reaching impacts than what is currently being discussed.

Proposed Moratorium on New Hospital Registrations

On December 21, 2017, Reps. Larry Bucshon (R-IN) and Scott Peters (D-CA) introduced the 340B Protecting Access for the Underserved and Safety-Net Entities Act (340B PAUSE Act). The bill would establish a 340B Program moratorium on registering new Disproportionate Share Hospitals (DSH) and their related child sites for a period of two years.

The PAUSE Act would require DSHs and children’s hospitals to annually report certain charity care and payer information to the Department of Health and Human Services (HHS), some of which would be made publicly available. Hospitals would have to report on the: number and percentage of individuals dispensed 340B drugs (organized by insurer categories); the aggregate gross reimbursement and aggregate acquisition costs for 340B drugs; the names of all third party vendors (including contract pharmacies) that provide services related to 340B; and the amount of charity care provided at each child site.

Although the 340B PAUSE Act would not apply to covered entities operated independently of a hospital, the bill comes on the heels of several congressional hearings on 340B and provides insight on how Congress may approach the 340B program over the next year.

Medicare Reimbursement Cuts on Hospital-Based 340B Drugs Taking Effect

In November 2017, the Centers for Medicare & Medicaid Services (CMS) finalized the Hospital Outpatient Prospective Payment System (HOPPS) Final Rule for 2018.  The Final Rule retained a controversial proposal to cut Medicare Part B drug reimbursement for products purchased under the 340B Program and billed through the HOPPS.

HOPPS is the reimbursement system for hospital-based outpatient care, and as such the change primarily impacts DSHs and hospitals paid under the HOPPS.  The rule does not impact reimbursement for FQHCs or other 340B Program covered entities which are not hospital-based. See our past blog post for more information.

After release of the HOPPS Final Rule, three hospital associations and three 340B-eligible hospitals sued CMS in the U.S. District Court for the District of Columbia, in an attempt to reverse the reimbursement reduction. The hospital complaint alleged that CMS exceeded its authority under the Social Security Act and, therefore, the Court should set it aside under the Administrative Procedure Act as unlawful. However, the Court granted the Government’s motion to dismiss for lack of subject matter jurisdiction, finding that the plaintiffs had not exhausted their avenues for recourse within HHS. The hospitals since have pledged to continue the lawsuit.

In addition to the judicial challenge to the cuts, Congress has taken steps to intercede.  On November 14, 2017, Rep. David McKinley introduced a bill that would stop the cuts.  That legislation drew 167 co-sponsors (113 Democrats and 54 Republicans), but has not yet emerged from the committees of jurisdiction.

Feldesman Tucker Leifer Fidell LLP will monitor these and other developments and will continue to provide updates in this space.  If you have questions, please contact Mike Glomb, Jason Reddish, or the FTLF attorney with whom you typically work.