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After Stalling for Months, HHS Plans to Accelerate 340B Changes

Analysis  |  By Steven Porter  
   October 19, 2018

Hospitals suing over the delayed tweaks to the drug pricing program have asked a judge to force the Trump administration to enforce the Obama-era regulation.

Since taking office last year, the Trump administration has repeatedly delayed implementation of a rule finalized in the last few weeks of the Obama administration.

Amid a legal challenge from several prominent hospital groups, the administration abruptly reversed course this week, assuring the plaintiffs and the court that the matter would soon be resolved to everyone's satisfaction. The hospitals aren't buying it.

At issue, the plaintiffs say, are regulations designed to protect hospitals from being overcharged by drug manufacturers. The delays are causing significant financial harm to the nearly 2,500 hospitals nationwide that participate in the 340B Drug Pricing Program, they allege.

The rule in question, which is authorized by the Affordable Care Act, was supposed to implement tweaks to the 340B program effective March 6, 2017. But the Trump administration postponed that date several times, citing a variety of reasons.

Most recently, in June, the administration pushed the rule's effective date back a full year, to July 1, 2019, saying the delay would "allow a more deliberate process of considering alternative and supplemental regulatory provisions and to allow for sufficient time for any additional rulemaking."

In response to that delay, the American Hospital Association, America's Essential Hospitals, the Association of American Medical Colleges, and 340B Health filed a lawsuit accusing HHS of arbitrary and capricious rulemaking. The organizations were joined in the suit by three hospitals: Rutland Regional Medical Center in Vermont, Genesis HealthCare System in Ohio, and Kearny County Hospital in Kansas.

Related: Hospital CEOs Urge Congress to Protect 340B

The plaintiffs asked last month that the judge order HHS to make the final rule effective within 30 days.

The administration had until this past Monday to respond. Rather than argue that the judge should deny the plaintiffs' request, however, the administration asked the judge to put the entire proceeding on hold. Why? The department expects to issue a rule "that could moot this case or narrow the issues to be resolved," government attorneys wrote.

There's a proposed rule currently being considered by the Office of Management and Budget, and HHS "intends" to issue a notice of proposed rulemaking by November 1 that would hasten the implementation by six months, the HHS filing states.

"Implementing the 340B Pricing Rule by January 1 would effectively provide plaintiffs with all of the relief they have sought in their Complaint," the filing claims.

Related: 'Deeply Disappointed' Hospitals Urge CMS to Change Course on OPPS 2019

"Even if there were lingering disputes after the 340B Pricing Rule goes into effect, the issues before the Court would be narrower, as the Court would not have to decide, for example, whether the challenged rule delaying implementation of the 340B Pricing Rule until July 1, 2019 was warranted or not," the HHS filing adds.

The plaintiffs, however, see the situation differently. They responded Thursday afternoon, arguing that the administration should be forced to move forward with implementation and not given the benefit of the doubt—especially since odds are slim that HHS will manage to hit its new January 1 target date, in light of the detailed regulatory process.

"They argue that their proposed rule 'would effectively provide plaintiffs with all of the relief they have sought,'" the hospitals wrote in their response opposing HHS' request. "But in fact … if the stay is granted there is a significant, and potentially high, risk that plaintiffs will receive none of the relief they seek."

The hospitals said they have waited more than eight years, since the ACA was passed, for the benefit of regulations that Congress required to protect hospitals from overcharging by drugmakers.

"Defendants' submission to OMB of a proposed rule—without any assurance that the Final 340B Rule will actually be implemented by January 1, 2019—is not a basis for a stay, and Defendants' other arguments for delay are meritless," the hospitals wrote.

Rather than grant the HHS request, the judge should order the government to respond to the pending motion for summary judgment within 7-10 days, so the case can be resolved expeditiously, the hospitals argued.

Judge John D. Bates in the D.C. District Court had yet to issue a ruling as of Friday morning.

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


After delaying implementation of the 340B rule until July 1, 2019, the administration said this week it "intends" to move that date up six months, to January 1, 2019.

Hospitals contend that the government's stated intentions would not justify putting their lawsuit on hold.

The plaintiffs asked a judge to force HHS to act within 10 days, rather than permitting further delays.

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