A divided US appeals court on Friday ruled that the US government had the authority to reduce subsidies Medicare pays certain hospitals to obtain discounted pharmaceutical medications, as reported This is Money.
The US Court of Appeals for the District of Columbia Circuit by a 2-1 vote overturned a judge's ruling that the government lacked authority to cut such payments by $1.6 billion in 2018.
Specifically, the cuts reduced subsidies for purchases by nonprofit hospitals of outpatient drugs bought through the 340B Drug Pricing Program, which allows them to purchase medications at large discounts and seek reimbursement.
A 2017 rule by the US Department of Health and Human Services sought to address a gap between the discounted drug prices and reimbursement rate that provided hospitals a substantial profit margin.
The American Hospital Association and several nonprofit hospitals sued, claiming HHS' 28.5% rate cut rested on an impermissible interpretation of the statute governing Medicare, but US Circuit Judge Sri Srinivasan said "HHS's decision to lower drug reimbursement rates for 340B hospitals rests on a reasonable interpretation of the Medicare statute."
President Donald Trump's administration has argued that the payment system in place before it instigated the rate cuts led to unnecessarily high Medicare spending on prescription drugs.
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