Hospital groups sue HHS over long-delayed 340B final rule

Four national healthcare organizations have filed suit against HHS over the long delay of its final rule that would implement price ceilings in the 340B drug discount program.

The rule, should it be finalized, would set the price ceilings and impose civil penalties on pharmaceutical companies that knowingly overcharge hospitals in the program. The Department of Health and Human Services delayed the rule for a fifth time in June, after it was initially issued in January 2017.

The American Hospital Association, America’s Essential Hospitals, 340B Health and the Association of American Medical Colleges are signed on to the lawsuit (PDF). In it, they argue that the nearly two-year delay is unlawful under the Administration Procedure Act.

“While hospitals routinely meet rigorous requirements for accountability in the 340B program, the government has failed to hold manufacturers to the same standard,” Bruce Siegel, M.D., CEO of America's Essential Hospitals, said in a statement.

“We must have a level playing field to ensure this program works as Congress intended, which is to help hospitals and other covered entities give vulnerable patients greater access to affordable drugs and healthcare services,” Siegel said.

RELATED: Hospital groups urge HRSA to institute 340B final rule

The suit also includes three hospital plaintiffs: Genesis HealthCare System, Kearny County Hospital and Rutland Regional Medical Center.

The most recent delay pushes off final rule until July 2019. The Health Resources and Services Administration argues that the delay was needed as the Trump administration considers an overhaul of the 340B program.

Congress granted HHS the power to create the penalties in 2010, and the initial rule was finalized under the Obama administration before the repeated delays. The rule was first proposed in 2015, allowing for several comment periods on the issue and ample time to “put parties on notice,” the lawsuit notes.

“The Department’s proffered rationales for their successive delays have shifted and been inconsistent,” according to the lawsuit.

RELATED: Hospitals, drug companies and oncology patients are in an uneasy financial dance

The 340B program has been under increased scrutiny of late after enjoying years of bipartisan popularity, including three expansions in Congress. However, critics argue that hospitals are taking advantage of the discounts to line their wallets and are snapping up oncology providers to boost the number of pricey specialty drugs they can prescribe under the program.

The Centers for Medicare & Medicaid Services adjusted the payment rate in the 340B program in a final rule issued late last year, shifting the payments from up to 6% above the average sales price of a drug to 22.5% less than the average sales price. The change, the agency said, was part of the administration’s goal to reduce drug prices.

The AHA, AEH and AAMC have also gone to court over those changes. The trio of groups refiled their case last week after it was delayed by a federal appeals court judge, who challenged the suit’s merits as no claims had been filed when the case was originally brought to keep it from going into effect.

The refiled lawsuit seeks expedited relief in the case now that it has addressed the judge’s concerns.