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AMERICAN HOSPITAL ASSN. v. BECERRA 

Opinion of the Court 

rates for different groups of hospitals.

For 2018 and 2019, HHS did not conduct a survey of hos-
pitals’  acquisition  costs  for  outpatient  prescription  drugs.
But HHS nonetheless substantially reduced the reimburse-
ment rates for one group of hospitals—Section 340B hospi-
tals, which generally serve low-income or rural communi-
ties.  For  those  340B  hospitals,  this  case  has  immense 
economic consequences, about $1.6 billion annually. 

The question is whether the statute affords HHS discre-
tion to vary the reimbursement rates for that one group of
hospitals  when,  as  here,  HHS  has  not  conducted  the  re-
quired survey of hospitals’ acquisition costs.  The answer is 
no.  We therefore reverse the judgment of the U. S. Court of 
Appeals for the D. C. Circuit. 

I 
A 
In 2003, Congress passed and President George W. Bush
signed  landmark  legislation  expanding  Medicare  to  cover 
prescription  drugs.    See  Medicare  Prescription  Drug,  Im-
provement, and Modernization Act of 2003, 117 Stat. 2066,
42 U. S. C. §1395.  Under that 2003 law, HHS must annu-
ally  set  reimbursement  rates  for  certain  outpatient  pre-
scription drugs provided by hospitals.  §1395l(t)(14). 

The Medicare statute meticulously lays out the formula
that HHS must employ to set those reimbursement rates.
As relevant here, the agency’s reimbursement rate for each
covered outpatient prescription drug “shall be equal” to one
of two measures: 

“(I) to the average acquisition cost for the drug for that 
year (which, at the option of the Secretary, may vary by 
hospital  group  (as  defined  by  the  Secretary  based  on 
volume of covered OPD services or other relevant char-
acteristics)),  as  determined  by  the  Secretary  taking
into account the hospital acquisition cost survey data
under subparagraph (D); or