The U.S. Supreme Court’s ruling in American Hospital Association (“AHA”) v. Becerra (2022) sent shockwaves through the 340B drug pricing program when it held that CMS’ reduction of reimbursement for drugs purchased under the 340B program was not permitted by law. The Supreme Court chose not to address potential remedies and remanded the case back to the D.C. District Court for further proceedings on how to correct the underpayments. Instead of vacating the unlawful reimbursement rates, the District Court decided to remand without vacatur, allowing HHS the opportunity to remediate its underpayments.[1] AHA v. Becerra (2023).
In response, the Centers for Medicare & Medicaid Services (CMS) issued a 2023 Final Rule mandating a retroactive lump-sum reimbursement to 340B participating hospitals for 340B underpayments made between 2018 and 2022. The Supreme Court’s decision, coupled with CMS’s administrative action, has led to significant contractual disputes and regulatory challenges as 340B contract hospitals seek restitution for past financial shortfalls while Medicare Advantage organizations (“MAOs”) grapple with the fiscal implications of these payment adjustments. The stakes are high, with hospitals seeking significant back payments and MAOs pushing back, arguing that their obligations are dictated by contracts, not federal rulemaking. As legal battles unfold, the question remains: Who is financially responsible for correcting these underpayments? This article analyzes these developments, focusing on the litigation between hospitals and MAOs and offering strategic contractual considerations in this shifting landscape.
[1] The court reasoned that vacatur would be highly disruptive due to the complexity of the Medicare system and potential budget neutrality concerns.
Our colleague Stuart Gerson of Epstein Becker Green has a new post on SCOTUS Today that will be of interest to our readers: Court’s Unanimous Opinion in Federal Tort Claims Act Case Provides Useful Guidance on Claim/Issue Preclusion.
The following is an excerpt:
The Court rendered a unanimous opinion (per Thomas, J., with Sotomayor, J., concurring) in the case of Brownback v. King. The Respondent, King, suffered personal injury in a confrontation with Brownback and Allen, two members of a federal task force, and brought suit against them and others under the Federal ...
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