The Centers for Medicare & Medicaid Services (CMS) “respectfully disagreed” with a recent federal district court’s “understanding of the scope of CMS’ adjustment authority” in making cuts to Medicare Part B reimbursement for drugs purchased through the 340B program, saying it plans to continue its 28.5 percent reduction in reimbursement while it pursues an appeal in federal court.

In its recently issued 2020 proposed Outpatient Prospective Payment System Final Rule (“OPPS Final Rule”), CMS plans to continue reimbursing certain categories of hospitals only 77.5 percent of the average sales price (ASP) for most of the drugs purchased through the program through calendar year 2020—down from 106 percent prior to the cuts. We discussed the origin and extent of these cuts at length in a prior article.

Notably, however, CMS acknowledged that it may lose its appeal and is now seeking public comments to craft an appropriate remedy if ordered by the appellate court. Specifically, CMS is seeking both comments on “appropriate OPPS payment rate for 340B-acquired drugs, including whether a rate of ASP+3 percent could be an appropriate payment amount” and “comments on whether such a remedy should be retrospective in nature (for example, made on a claim-by-claim basis), whether such a remedy could be prospective in nature (for example, an upward adjustment to 340B claims in the future to account for any underpayments in the past).”

Accordingly, covered entities (and any other affected 340B stakeholders) should weigh in on the proposed rule and offer constructive guidance as to what constitutes an appropriate payment amount and remedy if CMS’ ongoing appeal fails. If CMS’ appeal succeeds, covered entities must be sure to retain their appeal rights and be prepared for further litigation and 340B Program turbulence.

While we noted in previous writings that CMS had an August 5, 2019 deadline to propose remedies in accordance with the District Court’s injunction, CMS opted instead to appeal the District Court’s decision. Accordingly, the proposed payment amounts and remedies noted in the 2020 OPPS Final Rule above are likely the main “clues” as to what the future state of OPPS reimbursement for 340B drugs may look like.

We will continue to monitor CMS’ appeal and we will publish an update once we know more information.

If you have any questions about these updates and how they might affect your 340B program participation, please contact your Quarles & Brady attorney or:

Brenda M. Shafer: (602) 229-5774/

Richard B. Davis: (414) 277-5844/

Special thanks to Ben Lockwood for his assistance with this article.