Document ID: ./input/supremecourt_opinions/opinions/21pdf/20-1114_09m1.pdf
Page Number: 6

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

3 

Opinion of the Court 

“(II) if hospital acquisition cost data are not available, 
the average price for the drug in the year established 
under section 1395u(o) of this title, section 1395w–3a 
of this title, or section 1395w–3b of this title, as the case 
may be, as calculated and adjusted by the Secretary as 
paragraph.” 
necessary 
§1395l(t)(14)(A)(iii) (emphasis added). 

purposes 

this 

for 

of 

To simplify a bit: Congress afforded HHS two options to
set the reimbursement rates for hospitals.  Option 1 applies
if the agency has conducted a survey of hospitals’ acquisi-
tion costs—that is, the amount that hospitals pay to acquire 
the prescription drugs.  If the agency has conducted a sur-
vey and collected that data, HHS may set reimbursement
rates based on the hospitals’ “average acquisition cost” for
each  drug. 
see  also 
§1395l(t)(14)(D)  (requirements  for  conducting  surveys  of 
hospitals’ drug acquisition costs).  Importantly for present
purposes, if HHS has  conducted a  survey of hospitals’ ac-
quisition costs, option 1 authorizes HHS to vary those re-
imbursement rates for different groups of hospitals. 

See  §1395l(t)(14)(A)(iii)(I); 

Option  2  applies  if  HHS  has  not  conducted  a  survey  of 
hospitals’  acquisition  costs. 
In  that  circumstance,  the 
agency must set reimbursement rates based on “the aver-
age price” charged by manufacturers for the drug, as “cal-
culated and adjusted by the Secretary as necessary for pur-
poses of ” this statutory provision.  §1395l(t)(14)(A)(iii)(II).
The statute in turn sets “the average price” as 106 percent
of the drug’s average sales price.  See ibid. (citing §1395w–
3a).  Critically, option 2 does not authorize HHS to vary re-
imbursement rates for different groups of hospitals.

For more than a decade after those provisions took effect
in 2006, HHS did not conduct a survey of hospitals’ acqui-
sition costs.  Indeed, HHS has only once attempted to con-
duct  such  a  survey—in  2020,  after  this  litigation  com-
menced.  At oral argument in this Court, the Government