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American Hospital Association suing HHS over delay in implementing drug pricing rule for 340B

AHA joins other 340B stakeholders in asking the court to declare the delay unlawful and to enact the regulation.

Susan Morse, Managing Editor

The American Hospital Association and America's Essential Hospitals have joined five other 340B stakeholders in a lawsuit against the Department of Health and Human Services over its delay in implementing a final rule for drug pricing transparency that includes monetary penalties for overcharging.

HHS has delayed implementation five times.

Congress in 2010 gave HHS the authority to ensure the accuracy and transparency of ceiling prices for 340B participants, after the Office of Inspector General documented numerous instances of drug companies overcharging hospitals, according to the stakeholders. In January 2017, HHS issued a final rule on the ceiling prices and monetary penalties, but the current administration has delayed the effective date of the new rule saying it intends to conduct longer rulemaking.

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The lawsuit asks the court to declare the delay unlawful and to enact the regulation. It challenges the most recent delay of the final rule on the grounds that it is arbitrary and capricious and an unreasonable delay in violation of the Administrative Procedure Act.

Under the rule, drug companies are to disclose the maximum per unit ceiling price that can be charged to 340B providers for outpatient drugs.

The 340B program, created in 1992 and expanded under the Affordable Care Act, requires drug manufacturers to provide outpatient drugs to eligible providers at discounts of 20 to 50 percent.

Participating hospitals can then use the savings from the discounts to provide care to low income patients and to offer such benefits as free vaccines and transportation to follow-up appointments.

But 340B has also come under scrutiny by some who question whether the discounts have become a cash cow with some providers prescribing more expensive drugs to get additional funds.

340B stakeholders said the program enables hospitals that care for many low-income and uninsured patients to purchase certain outpatient drugs from pharmaceutical manufacturers at discounted prices. 

"As prescription drug prices continue to skyrocket, the 340B program is as crucial as ever in helping hospitals and health systems provide access to healthcare services for vulnerable patients and communities," said Rick Pollack, president and CEO of the AHA. 

The American Hospital Association, the Association of American Medical Colleges, America's Essential Hospitals, 340B Health, Genesis Healthcare System, Kearny County Hospital and Rutland Regional Medical Center filed their lawsuit today in the U.S. District Court for the District of Columbia.

"While hospitals routinely meet rigorous requirements for accountability in the 340B program, the government has failed to hold manufacturers to the same standard," said Bruce Siegel, MD,  president and CEO of America's Essential Hospitals. 

Maureen Testoni, 340B Health interim president and CEO Maureen Testoni said that Congress required 340B pricing transparency after a government watchdog uncovered widespread overcharging. 

"Here we are eight years later, with no evidence that the overcharging has abated, no transparency around prices, and providers still in the dark as to whether they are being overcharged," Testoni said.

Twitter: @SusanJMorse
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