A federal district judge ruled that the U.S. Department of Health and Human Services did not have the authority to make the 2017 reduction to reimbursement rates for Medicare's 340B drug pricing program.

U.S. District Court for the District of Columbia Judge Rudolph Contreras sided with hospitals in the ongoing fight between hospital groups and the federal agency about the reduction of the 340B drug pricing program's reimbursement rates, which totaled nearly 30%. While Contreras said that HHS did not have the authority to make the reduction, the judge requested additional material from both parties to determine an appropriate remedy to the lawsuit. Contreras filed his decision Dec. 27.

The 340B drug pricing program allows participating hospitals and healthcare entities that serve vulnerable populations, such as low-income or uninsured individuals, to receive discount prices from drug manufacturers and rebates from the federal government for specific drugs. Participants can then use those savings for other healthcare services.

In November 2017, HHS reduced the reimbursement rates participating hospitals receive by nearly 30%. Previously, hospitals received a rate of the average sale price of a drug plus 6%. HHS reduced this rate to the average sale price minus 22.5%, a move that hospital groups said would reduce payments by as much as $1.6 billion.

In September, the American Hospital Association, a national group representing hospital systems, filed a lawsuit challenging the reduction by HHS. The AHA claimed that the pricing reduction could hurt the vulnerable populations participating hospitals typically serve. The Association of American Medical Colleges and America's Essential Hospitals, both large hospital organizations, and several individual hospitals also have joined the AHA's suit.

"The court's carefully reasoned decision will allow hospitals and health systems in the 340B Drug Pricing Program to serve their vulnerable patients and communities without being hampered by deep cuts to the program," the AHA said on Dec. 28 in a joint statement with the Association of American Medical Colleges and America's Essential Hospitals.

Contreras' opinion did not include a remedy to the lawsuit. The AHA and the other hospital groups have asked for monetary recompensation and the re-establishment of the previous reimbursement rate. However, the judge said the decision could have a large impact upon the Medicare program and requested additional material from both parties to help determine an appropriate remedy.

The AHA did not respond to S&P Global Market Intelligence's requests for comment regarding the organization's next steps.