SCOTUS Rules HHS Violated Drug Reimbursement Rules For Low-Income Patients


OPINION: This article may contain commentary which reflects the author's opinion.

The U.S. Supreme Court recently ruled that the Department of Health and Human Services violated drug reimbursement rules for low-income patients.

The court unanimously ruled that HHS, which is led by former California Attorney General Xavier Becerra, illegally cut prescription drug reimbursements to hospitals by $1.6 billion per year in connection with a program that was established to help poorer patients. The decision is considered a victory for hospitals that serve low-income patients and will now allow them to seek the funds they were denied by Becerra’s agency.

But HHS improperly relied on a formula that Congress made available only in specific circumstances, which didn’t apply in the case, the court determined. President George W. Bush in 2003 signed the Medicare Prescription Drug, Improvement, and Modernization Act into law. The statute requires HHS to establish reimbursement rates every year for certain outpatient prescription drugs provided by hospitals using a predetermined formula.


Despite the urging of the Biden administration, the Supreme Court didn’t address whether the so-called Chevron doctrine that the Supreme Court enunciated in 1984 applied to the case. In Chevron v. Natural Resources Defense Council, the high court held that while courts “must give effect to the unambiguously expressed intent of Congress,” where courts find “Congress has not directly addressed the precise question at issue” and “the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.”

The outlet notes:

As Kavanaugh summarized in the opinion, federal Medicare law states that HHS is required to reimburse hospitals for some outpatient prescription drugs that the hospitals give to Medicare patients. These reimbursements total tens of billions of dollars every year.

HHS may calculate reimbursements in two ways. It may vary reimbursement rates for different categories of hospitals if it first carries out a survey of the amount that hospitals pay to acquire the prescription drugs. Alternatively, if the agency has not done such a survey, it has to establish reimbursement rates based on the average sales price manufacturers charge for the drugs and is not allowed to vary the reimbursement rates for different kinds of hospitals.


After the ruling, so-called 340B hospitals picked up a win after a federal judge ordered that “defective” payment cuts for the drug discount program be tossed for the remainder of 2022.

“U.S. District Judge Rudolph Contreras’ ruling addresses the first of two remedy questions stemming from June’s Supreme Court decision, in which the top court overturned a nearly 30% rate cut adjustment the Department of Health and Human Services (HHS) first introduced in 2018,” the report stated.

“In short, the Court finds that any disruption that will be caused by vacating the prospective portion of the 2022 OPPS Rule’s 340B reimbursement rate does not rise to the level of justifying remand without vacatur,” the judge wrote.

AHA General Counsel and Secretary Melinda Hatton said in a statement that the immediate halt will help hospitals provide services to their local communities.


“We continue to urge the administration to promptly reimburse all the hospitals that were affected by these unlawful cuts in previous years and to ensure the remainder of the hospital field is not penalized for their prior unlawful policy, especially as hospitals and health systems continue to deal with rising costs for supplies, equipment, drugs, and labor,” she said.


At a fundraiser for Delaware Democrat Rep. Lisa Blunt Rochester earlier this week, Biden attacked the Supreme Court and described the high court as “more of an advocacy group these days” than “evenhanded.”

“I view this off-year election as one of the most important elections that I’ve been engaged in because a lot can change because the institutions have changed,” Biden said. “The Supreme Court is more of an advocacy group these days than it is … evenhanded about it,” Biden said when speaking about the upcoming midterm elections on Nov. 8.


Related Articles