Hospital groups sue Trump administration to halt 340B pilot program
- The American Hospital Association (AHA) and four large safety-net hospital systems - Advocate Aurora Health, Henry Ford Health, Northwell Health, and Trinity Health - filed a lawsuit on...
- The core of the dispute centers around how drug manufacturers offer discounts.
- The 340B program was established in 1992 as part of the Veterans Health Care Act.
“`html
Hospital Lawsuit Challenges Changes to 340B Drug Discount Program
What Happened?
The American Hospital Association (AHA) and four large safety-net hospital systems – Advocate Aurora Health, Henry Ford Health, Northwell Health, and Trinity Health – filed a lawsuit on December 27, 2023, seeking a temporary restraining order to block changes to the 340B drug discount program. The lawsuit,filed in the U.S. District Court for the District of Columbia, argues that the changes implemented by the Department of Health and Human Services (HHS) will considerably reduce 340B savings for hospitals.
The core of the dispute centers around how drug manufacturers offer discounts. Currently, manufacturers typically provide discounts at the point of purchase.Though, several manufacturers began offering rebates *after* purchase, a shift the AHA and hospital systems contend violates the intent of the 340B program and creates administrative burdens.
What is the 340B Program?
The 340B program was established in 1992 as part of the Veterans Health Care Act. Its original purpose was to help hospitals that serve a disproportionately large number of low-income patients offset the costs of providing care.Over time, the program expanded to include other types of healthcare providers, such as rural referral centers, children’s hospitals, and critical access hospitals.
Under the 340B program, drug manufacturers participating in Medicare and Medicaid are required to provide outpatient drugs to eligible healthcare organizations at significantly reduced prices – generally ranging from 25% to 50% off the average manufacturer price (AMP), and sometiems even higher. These savings are intended to be passed on to patients in the form of lower drug costs or reinvested in patient care programs.
| Program Component | Details |
|---|---|
| Established | 1992 (Veterans Health Care Act) |
| Participating Manufacturers | Those in Medicare & Medicaid |
| Typical Discounts | 25% – 50% of average Manufacturer Price (AMP) |
| Eligible Healthcare Organizations | Hospitals serving low-income patients, rural referral centers, children’s hospitals, critical access hospitals |
Why Does This Matter?
The 340B program is a critical source of funding for hospitals, notably those serving vulnerable populations. The savings generated by the program allow these hospitals to provide essential services, such as cancer care, HIV/AIDS treatment, and mental health services. According to the AHA, the program provides over $40 billion
in savings annually.
The shift to rebates,rather than upfront discounts,creates several problems for hospitals. First, it requires hospitals to invest in new systems and processes to track and manage rebates. Second, it delays the realization of savings, potentially impacting cash flow. Third, some manufacturers have begun to limit the amount of 340B savings available to hospitals, further reducing the program’s benefits.
Timeline of Events
- 1992: The 340B program is established as part of the Veterans Health Care Act.
- Early 2020s: Several drug manufacturers begin to explore option payment models, including rebates.
- 2023: Manufacturers begin implementing rebate-based pricing for 340B drugs.
- December 27, 2023: The AHA and four hospital systems file a lawsuit seeking to halt the changes.
Who is Affected?
The following groups are directly affected by the changes to the 340B program:
- Hospitals: Particularly safety-net hospitals that rely heavily on 340B savings.
- Patients: Those receiving care at 340B hospitals may see reduced access to services if hospital savings are diminished.
- Drug