A federal judge has blocked a Trump administration policy that reduces payments to hospitals under a drug discount program, ruling Thursday that the government overstepped its authority in an attempt to address the high cost of prescription medications.

The decision is a win for the 2,000-plus hospitals participating in the program, known as 340B, most of which serve large numbers of low-income patients.

In 2017, the Department of Health and Human Services reduced its reimbursements for some drugs by about 28 percentage points, or $1.6 billion, starting on January 1, 2018.


The administration framed this 340B change as part of its push to lower the price of prescription drugs. According to HHS, the reimbursement reductions were supposed to make drugs cheaper for some patients on Medicare.

But hospital groups argued that cuts to the program would hamstring their ability to care for low-income patients and fought the policy in court since it was first announced. They lost a previous legal battle to block the policy over the summer.

In his opinion, Judge Rudolph Contreras, a district court judge in Washington, D.C., said that, while the HHS secretary does have the authority to make “adjustments” to the program, “he cannot fundamentally rework the statutory scheme,” which is what he did in this case.

While the judge ruled that the change was in violation of the law, what exactly will happen because of that is unclear. The judge asked for more information from both the government and the hospital groups that brought the lawsuit — the American Hospital Association, the Association of American Medical Colleges, and America’s Essential Hospitals, along with some other non-profits — about what should be done.

“The court’s carefully reasoned decision will allow hospitals and health systems in the 340B Drug Pricing Program to serve their vulnerable patients and communities without being hampered by deep cuts to the program,” the American Hospital Association said in a statement.

“We are disappointed with the court’s ruling and are evaluating next steps,” HHS spokesperson Caitlin Oakley said in a statement. She added, “We look forward to briefing the court on this important matter.”

This story has been updated with a statement from HHS.

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  • The inequity between “low income” and those on Social Security deciding between good and prescriptions is appalling! We have young healthy people who NEVER worked and don’t WANT to work getting FREE prescriptions on Medicaid while seniors struggle to carry additional prescription insurance with monthly premiums, high deductibles, high co pays and limited formulates!!!

  • If institutions had not mis appropriated 340B discounts to NON 340B qualified patients then this situation wouldn’t have evolved the way it did. It’s that simple.

    There were some pretty well known medical institutions who WERE the profit leeches.

  • To attempt to reduce the 340B support to hospitals that serve low-income patients is tantamount to outright ignorance for those in the health care industry who are not for-profit-leeches. Good for this Judge to force the HHS to look elsewhere (into deeper pockets) for drug pricing cuts !

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