340B Drug Program’s Support of Vulnerable Communities Protected

340B

Under the leadership of Bill Schultz, former General Counsel of the Department of Health and Human Services (HHS), the firm’s health care practice delivered two significant legal wins in 2019 that are helping to ensure that the federal 340B drug discount program can continue to support nonprofit hospitals, community health centers and federally funded clinics that provide services for vulnerable communities, including low-income and uninsured individuals. 

Zuckerman Spaeder led a legal fight that forced the Trump Administration to end its delay in implementing long-awaited changes to the 340B program, which provides about $6 billion annually in drug discounts. The changes passed by Congress in 2010 were aimed at improving the transparency and accountability of the program, thereby assuring its effectiveness and long-term viability. 

For years, however, HHS delayed acting on the regulation that would implement the congressionally-passed law – including five delays since the final regulation was issued in January 2017. With little clarity on when and if HHS would finally put the changes into effect, Zuckerman Spaeder’s health care team filed a lawsuit on behalf of several hospital trade groups and a 340B advocacy non-profit.

The lawsuit, and subsequent motion for summary judgement, put considerable public and legal pressure on HHS. In October 2018, soon after the summary judgement motion was filed, HHS agreed to go forward with the program changes, which took effect January 1, 2019.

The second case centered on the HHS’s plan to cut 340B drug reimbursement rates by almost 30 percent. On behalf of several hospitals and hospital trade groups, Zuckerman Spaeder sued HHS in November 2018 after the agency announced a proposed rule that would change the 340B reimbursement rate, thereby reducing payments by $1.6 billion per year. 

The plaintiffs were handed a significant victory in December 2018 and again in May 2019, when “Judge Rudolph Contreras [of the U.S. District Court for D.C.] sided with the hospital groups, reaffirming that cuts made under the 2018 Outpatient Prospective Payment System (OPPS) were unlawful and extended the ruling to include the 2019 cuts” after the complaint was amended to include that rule (FierceHealthcare).

HHS appealed the ruling, and on July 31, 2020 in a 2-1 vote, a three judge panel of the U.S. Court of Appeals for the District of Columbia upheld HHS’s decision to change the 340B reimbursement rule. The plaintiffs have filed a petition for rehearing before the full court.

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