Document ID: ./input/supremecourt_opinions/opinions/21pdf/20-1114_09m1.pdf
Page Number: 8

Cite as:  596 U. S. ____ (2022) 

5 

Opinion of the Court 

In response to HHS’s proposed change, the 340B hospi-
tals countered that, under the Medicare statute, HHS could 
not single out 340B hospitals without conducting a survey 
of hospitals’ acquisition costs.  With respect to HHS’s policy 
arguments,  the  340B  hospitals  explained  that  the  reim-
bursement  payments  for  prescription  drugs  helped  those
hospitals  offset  the  considerable  costs  of  providing
healthcare  to  the  uninsured  and  underinsured  in  low-
income and rural communities.  The 340B hospitals pointed
out,  moreover,  that  Congress  had  long  been  aware  of  the
situation.  Indeed, the hospitals claimed that Members of 
Congress not only were aware, but actually intended for the 
340B  program’s  drug  reimbursements  to  subsidize  other 
services  provided  by  340B  hospitals.    The  hospitals  noted 
that  Congress  had  never  singled  out  340B  hospitals  for 
lower Medicare reimbursements for outpatient prescription
drugs.  Nor, until 2018, had HHS ever done so.  Further-
more, the 340B hospitals asserted that reducing their reim-
bursement  rates  for  prescription  drugs  would  force  those 
hospitals to eliminate or dramatically curtail other crucial
programs that provide a wide range of medical services in
low-income and rural communities—such as treatments for 
cancer,  mental  health  issues,  opioid  addiction,  and  diabe-
tes. 

In the final rule for 2018, HHS decided to establish two 
separate reimbursement rates: one rate for non-340B hos-
pitals and another rate for 340B hospitals.  The reimburse-
ment rate for non-340B hospitals remained at the historical
rate of approximately 106 percent of the average sales price 
for  each  drug.  But  HHS  established  a  substantially  re-
duced rate for 340B hospitals—a rate equal to 77.5 percent 
of the average sales price for each drug.  In setting that rate, 
HHS relied on an estimate from the Medicare Payment Ad-
visory Commission that 340B hospitals obtained prescrip-
tion drugs at an average discount of at least 22.5 percent 
below  the  average  sales  price  charged  by  manufacturers.