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SCOTUS Rules Against HHS Over Drug Reimbursement Rules

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


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

According to The Epoch Times, 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.

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The decision is considered a victory for hospitals that serve low-income patients, the outlet reported, and will now allow them to seek the funds they were denied by Becerra’s agency.

The cuts were actually ordered during the Trump administration in 2018 and were defended in court by the Biden administration, which argued that the cuts more accurately reflected the cost of hospitals buying the drugs and that the government was permitted to do so per a legal provision that gave regulators the power to order reimbursement adjustments.

The Epoch Times adds:

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.”

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But the nation’s highest court apparently believed that the issues involved in the case were so straightforward that Chevron did not enter into it.

The ruling was written by Justice Brett Kavanaugh. The case was American Hospital Association v. Becerra and was decided on June 15 following oral arguments back in November. The ruling overturns an earlier decision by a three-judge panel of the U.S. Court of Appeals for the District of Columbia.

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.

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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.

For the years 2018 and 2019, HHS failed to conduct a survey of acquisition costs for hospitals’ outpatient prescription drugs but the department went ahead and cut reimbursement rates anyway for one group of hospitals — Section 340B facilities, which mostly serve low-income or rural communities.

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“For those 340B hospitals, this case has immense economic consequences, about $1.6 billion annually,” Kavanaugh wrote. “The question is whether the statute affords HHS discretion to vary the reimbursement rates for that one group of hospitals when, as here, HHS has not conducted the required survey of hospitals’ acquisition costs. The answer is no.”

The court added: “We do not agree with HHS’s interpretation of the statute … [and] conclude that, absent a survey of hospitals’ acquisition costs, HHS may not vary the reimbursement rates for 340B hospitals. HHS’s 2018 and 2019 reimbursement rates for 340B hospitals were therefore contrary to the statute and unlawful.”

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