The Ever-Changing Landscape of the 340B Drug Pricing Program in 2023

The federal 340B Drug Pricing Program, designed to provide discounted pharmaceuticals to safety-net healthcare providers serving financially vulnerable patients, has been a critical component of the healthcare system for over three decades. In recent years, however, legislative changes and litigation have brought significant challenges and uncertainties to the program's future.

One of the key issues facing the 340B program involves the Medicare reimbursement rates for 340B hospitals. In June 2022, the Supreme Court ruled that the Department of Health and Human Services (HHS) had set unlawful reimbursement rates for these hospitals in 2018 and 2019. The Court found that the rates were inconsistent with the program's objective of supporting covered entities that treat underinsured and uninsured patients. This ruling has led to CMS lowering Medicare reimbursement to hospitals by over 30% for pharmaceutical medications acquired through the program.

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Affected covered entities, including the American Hospital Association (AHA), challenged the reduced payment rates, arguing that they were unlawful. The Supreme Court's decision resulted in the case being referred to lower courts, which ordered CMS to resume paying 340B hospitals at the lawful rate. However, questions remain about potential loss repayment schemes and the possibility of clawing back Medicare payments made to non-340B facilities.

Another crucial litigation case involves Genesis Healthcare, Inc., a holding corporation with healthcare businesses. The company was audited by the Health Resources and Services Administration (HRSA) in 2017, which found ineligible patients receiving 340B medications. Genesis sued HRSA for enforcing government recommendations outside the 340B statute's limits. The court battle challenged HRSA's definition of eligible patients, and a ruling in favor of Genesis could lead to an expansion of the program, benefiting covered companies and 340B pharmacies.

The evolving landscape of the 340B program has resulted in frequent litigation and state policy measures that continue to disrupt the program and confuse participants. The lack of explicit congressional guidance addressing the program's underlying design problems adds to the uncertainty.

As the year 2023 progresses, the judgments on these critical issues will significantly shape the 340B program's future. The decisions will have far-reaching financial implications for pharmaceutical manufacturers and covered entities alike, given that 340B-discounted pharmaceuticals made up 7% of the U.S. prescription market, amounting to $38 billion in sales in 2020.

To ensure the stability and effectiveness of the 340B program, Congress must provide clear guidance and address the ongoing challenges faced by the program. A comprehensive approach that considers the interests of all stakeholders, including pharmaceutical makers, covered entities, and patients, is essential. By doing so, the program can continue to fulfill its mission of providing cost relief to safety-net providers and improving access to essential medications for those in need.