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This final rule describes the agency’s actions to comply with the remand from the district court to craft a remedy in light of the United States Supreme Court’s decision in American Hospital Association v. Becerra, 142 S. Ct. 1896 (2022), relating to the adjustment of Medicare payment rates for drugs acquired under the 340B Program from calendar year (CY) 2018 through September 27th of CY 2022.

Overall Description of Deadline: Per the CMS notice published December 30, 2004 (69 FR 78442), except for certain Medicare payment regulations and certain other statutorily-mandated regulations, we schedule all Medicare final regulations for publication within the 3-year standardized time limit in the current Unified Agenda. We do not intend to delay publishing a Medicare final regulation for 3 years if we are able to publish it sooner.

Statement of Need:

From CY 2018 through September 27th of CY 2022, CMS paid a lower rate (generally ASP minus 22.5 percent) to certain hospitals for drugs acquired through the 340B discount program. The purpose of this policy was to pay these hospitals for 340B drugs at a rate that more accurately reflected the actual costs they incurred to acquire them. This 340B policy was the subject of several years of litigation, which culminated in a decision of the Supreme Court of the United States in American Hospital Association v. Becerra, 142 S. Ct. 1896 (2022), which held that if CMS has not conducted a survey of hospitals' acquisition costs, it may not vary the payment rates for outpatient prescription drugs by hospital group. The Supreme Court subsequently remanded the case, and the district court ultimately ordered CMS to implement a remedy to address the reduced payment amounts to the plaintiff hospitals from CY 2018 through September 27th of CY 2022.

Summary of the Legal Basis:

Under the Hospital Outpatient Prospective Payment System (OPPS), we generally set payment rates for separately payable drugs and biologicals (hereinafter referred to collectively as drugs) under section 1833(t)(14)(A) of the Social Security Act (the Act). Section 1833(t)(14)(A)(iii)(II) of the Act provides that, if hospital acquisition cost data are not available, the payment amount is the average price for the drug in a year established under section 1842(o), section 1847A, or section 1847B of the Act, as the case may be. Payment rates for drugs are usually established under section 1847A of the Act, which generally sets a default rate of the average sales price (ASP) plus 6 percent. Section 1833(t)(14)(A)(iii)(II) of the Act also provides that the average price for the drug in the year as established under section 1847A of the Act is calculated and adjusted by the Secretary of the Department of Health and Human Services (Secretary) as necessary for purposes of paragraph (14).

Alternatives:

We evaluated several options to determine which remedy would best achieve the objectives of unwinding the unlawful 340B payment policy while making certain OPPS providers as close to whole as is administratively feasible. A discussion of these options, including our reasons for not moving forward with them, will be included in the final rule.

Anticipated Costs and Benefits:

To comply with statutory budget neutrality requirements, we plan to annually reduce OPPS payments for non-drug items and services beginning in CY 2025 by decreasing the OPPS conversion factor by 0.5 percent each year, until a total offset of an estimated $7.8 billion is reached.

Risks:

Any risks regarding potential impacts will be included in the final rule.