Zuckerman Spaeder Win Restores Federal Drug Discount Program Savings

On behalf of the American Hospital Association, the American Association of Medical Colleges, America’s Essential Hospital, and member hospitals, Zuckerman Spaeder achieved a significant win in its fight against the Department of Health and Human Services’ (HHS) policy of reducing Medicare payments for drugs acquired under the 340B drug discount program, which provides important benefits for certain nonprofit hospitals and community health centers and other federally funded clinics that serve vulnerable communities. On September 28, Judge Rudolph Contreras of the U.S. District Court for the District of Columbia granted a Zuckerman Spaeder motion to vacate HHS’s 340B payment policy for the remainder of 2022. 

In 2018, the firm successfully challenged HHS’s 340B payment policy. After the district court’s ruling invalidating the policy was upheld by the Supreme Court in June 2022, the case returned to district court for a decision on remedies. Zuckerman Spaeder filed two motions in the case: the first led to this week’s order requiring HHS to immediately end the payment cuts for the remainder of 2022, and the second, which remains pending, seeks an order requiring HHS to make up past underpayments going back to 2018.

The 340B program provides funds that help to pay for services for underserved communities, including low-income and uninsured individuals. The Medicare payment policy for 340B drugs implemented by HHS beginning in 2018 has deprived 340B hospitals of more than $1.6 billion per year.

“For several years now, the government’s unlawful cuts have significantly and adversely impacted hospitals and community health centers,” said Zuckerman Spaeder partner and former HHS general counsel  William B. Schultz. “Coming at a time when these organizations are facing increased costs, the restoration of full payments provides important relief that will help ensure they can meet the needs of their patients and communities.”

In its ruling, the court rejected HHS’s argument that forcing the agency to vacate its reimbursement policy for 2022 would impact its duty to maintain budget neutrality, stating “HHS is attempting to use budget neutrality now as a shield to justify ongoing and continuing application of an unlawful reimbursement rate.” The court went on to say that “HHS should not be allowed to continue its unlawful 340B reimbursements for the remainder of the year just because it promises to fix the problem later.”

The Zuckerman Spaeder team includes Mr. Schultz, partner Margaret "Peggy" Dotzel, and associate Ezra B. Marcus.

The case is American Hospital Association, et al. v. Xavier Becerra, et al.; 1:18-cv-02084.

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Katie Munroe
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