Document ID: ./input/supremecourt_opinions/opinions/21pdf/20-1114_09m1.pdf
Page Number: 7.0

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AMERICAN HOSPITAL ASSN. v. BECERRA 

Opinion of the Court 

explained that HHS had not previously attempted to con-
duct  such  surveys  because  the  surveys  are  “very  burden-
some  on  the  study  takers,”  are  “very  burdensome  on  the 
hospitals,” and do not “produce results that are all that ac-
curate.”  Tr. of Oral Arg. 41–42. 
  As a result, until 2018, HHS consistently relied on option 
2 and set reimbursement rates for each drug based on the 
average-sales-price data provided by manufacturers.  Every 
year, HHS set the reimbursement rates at about 106 per-
cent  of  each  covered  drug’s  average  sales  price,  and  HHS 
used  the  same  reimbursement  rates  for  all  hospitals.    In 
other words, until 2018, HHS never varied the reimburse-
ment rates by hospital group.  See Medicare Program: Hos-
pital  Outpatient  Prospective  Payment  and  Ambulatory 
Surgical  Center  Payment  Systems  and  Quality  Reporting 
Programs, 82 Fed. Reg. 52490, 52494–52495 (2017). 
  During its rulemaking for 2018, HHS proposed a change 
to reduce the reimbursement rates only for 340B hospitals.  
Importantly, HHS did not conduct a survey of hospital ac-
quisition costs.  As a policy matter, HHS said that its exist-
ing  reimbursement  rates  resulted  in  what  the  agency 
viewed as overpayments to hospitals that serve low-income 
or  rural  populations  through  the  federal  340B  program.  
Federal law requires drug manufacturers to sell prescrip-
tion  drugs  to  those  340B  hospitals  at  prices  below  those 
paid by other hospitals.  See 42 U. S. C. §256b(a)(1) (setting 
a “ceiling price” that manufacturers can charge to 340B hos-
pitals).    Consistent  with  the  Medicare  statute,  however, 
HHS  historically  had  reimbursed  340B  hospitals  for  cov-
ered outpatient prescription drugs at the same reimburse-
ment rates that were set for all other hospitals.  For 2018, 
HHS said that the uniform reimbursement rates combined 
with the discounted prices paid by 340B hospitals for pre-
scription  drugs  meant  that  340B  hospitals  were  able  to 
“generate significant profits” when they provided the pre-
scription drugs to Medicare patients.  82 Fed. Reg. 52494.