Zuckerman Spaeder Clients Win Lawsuits to Stop Cuts and End Implementation Delay of Changes to the 340B Drug Pricing Program

prescription drugs

Zuckerman Spaeder LLP has led two important legal wins for the federal 340B drug discount program, which supports certain nonprofit hospitals, community health centers and federally funded clinics that provide services for vulnerable communities, including low-income and uninsured individuals. In the first, a federal judge last week ruled that the Department of Health and Human Services (HHS) unlawfully cut 340B drug reimbursement rates by almost 30%. And in a previous win, HHS agreed to end its eight-year delay in implementing changes to the 340B Program. The changes were passed by Congress as part of the Affordable Care Act in 2010 and were designed to ensure that the program delivers on its promise of deep discounts for the purchase of prescription drugs by certain nonprofit hospitals, community health centers and federally funded clinics.

The first lawsuit was filed on behalf of the American Hospital Association, the Association of American Medical Colleges, America's Essential Hospitals, and three hospitals.  In the second lawsuit, the three trade associations were joined by 340B Health.

Commenting on the defeat of HHS cuts to the program, Zuckerman Spaeder partner and former HHS general counsel Bill Schultz, who led the first lawsuit along with Mike Smith and associates Ezra Marcus and Wen Shen, said, “This is an important victory that will restore approximately $1.6 billion prescription drug discounts to certain nonprofit hospitals and community health centers.”

The 340B program changes that were passed in 2010 officially took effect on January 1st and will help ensure that approximately $6 billion in drug discounts are made available each year. 

“Providers of discounted drugs, and the thousands of people who need them, are finally getting the help they’ve long been promised,” continued Schultz. “With drug prices on the rise, the need for these discounts has grown even more since Congress took action. But with the end of the delay finally here, 340B providers and the patients and communities they support have good reason to celebrate.” 

The 340B Drug Pricing Program was created by statute in 1992. The legislation passed in 2010 required HHS to take steps to ensure that 340B providers get the discounts to which they are entitled. It included provisions granting these providers access to 340B manufactures’ statutorily calculated prices, and imposing civil monetary penalties on manufacturers that overcharge 340B providers. (The HHS Inspector General had previously found that there was no effective mechanism for enforcing violations of this law.) Although the final regulation implementing these changes was issued in January 2017, beginning in February 2017 HHS delayed the effective date of that regulation five times. This prevented 340B providers from obtaining the benefits Congress had required and, without the lawsuit, the delays would have extended to at least July 2019. 

In September 2018, Zuckerman Spaeder sued HHS, challenging the agency’s delay in implementing the new 340B rules. The lawsuit was filed by Schultz, Peggy Dotzel (former HHS acting and deputy general counsel) and Adam Abelson. In response to the lawsuit, the government agreed that, beginning January 1, 2019, 340B manufacturers will be liable for civil monetary penalties if they overcharge 340B providers, and providers will have tools to ensure that the discounts are accurately calculated. This includes access to the 340B prices on a secure website, which HHS has stated will be available by April 1.

Zuckerman Spaeder is pleased to have achieved these important benefits for 340B providers, to support the important work they do on behalf of their patients and communities.

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