The hospital filed a lawsuit with the Supreme Court on Tuesday for reimbursement reduce The 340B drug pricing plan established by the Center for Medicare and Medicaid Services is illegal.

Provider groups such as the American Hospital Association and the American Medical College require the court to revoke nearly 30% cut In the 340B reimbursement initiated in 2018, CMS considered these changes to be illegal because the agency did not conduct an investigation to determine the average drug procurement cost of the hospital.

On the contrary, based on CMS 340B Pay at the “average price” of the drug, a calculation made by the secretary, resulting in a reduction of $1.6 billion in reimbursement for the first year.

These are two options permitted by law to determine the medical insurance reimbursement for drugs purchased by the hospital.

However, the AHA argued that CMS illegally set different reimbursement rates for hospitals participating in the 340B plan and non-340B hospitals (mainly for-profit institutions).

“Congress directly talked about when rates can be based on acquisition costs and vary from hospital group to hospital group, and that’s when it conducts cost research,” said Donald Villiley, a lawyer for the plaintiff in the case.

He later added: “If you don’t want to do that, if you think it’s too onerous or you think it’s a bad policy, then you go to Congress and say’change the law’. But they didn’t do these two things. On the contrary, They took a shortcut that the regulations did not authorize.”

The 340B drug pricing plan allows suppliers that provide services to a large number of low-income patients to purchase drugs from drug manufacturers at substantial discounts and sell them to medical insurance and commercial insurance companies at higher prices. 340B providers and supporters of the plan believe that these “savings” will help participating non-profit hospitals provide services for low-income patients and pay for unpaid care.

But the Trump administration lowered the reimbursement rate to 340B providers in 2018, believing that it needs to be more in line with the hospital’s payment for drugs.

The government argued on Tuesday that the law allows it to cut spending and Congress allows it to change the reimbursement rate between 340B hospitals and non-340B hospitals.

Non-340B suppliers are still reimbursed by Medicare for drug costs at the average selling price plus 6%. According to the changes in 2018, the compensation of 340B suppliers is 22.5% lower than the average selling price.

For the 340B hospital, this is still a profit, but it has not changed the profit they made before.

On Tuesday, judges expressed doubts about the government’s arguments.

“You are reading the text of the clause… It seems that the clause says,’If you have survey data, or if you don’t have survey data, use the average purchase cost and do the same thing.’ This is not what the clause says,” Elena Judge Kagan said. “This rule says that if you have survey data, you do one thing, and if you don’t have survey data, you do another thing.”

The difference between the reimbursement rate based on hospital acquisition data and the reimbursement rate based on average prices may mean that the 340B hospital loses money.

Justice Clarence Thomas asked government lawyer Christopher Michel why HHS would change the rate under the first option—by conducting an investigation—when it could skip the investigation and set reimbursement at average cost.

“The investigation still provides a lot of benefits for the agency,” Michelle said.

But he added that HHS only conducted one study-during the 2020 case-and the data was similar to the average price the agency used to calculate the rate.

Hospitals and other bystanders worry that if the Supreme Court is on the side of CMS, it can give the government more power to interpret laws passed by Congress.

Judge Neil Gorsuch asked the government committee how much ambiguity is needed for an agency to claim that they should be given broad freedom to interpret the law, but Michelle said it believes the Congressional regulations are clear.

Verrilli later re-examined Gorsuch’s question and said: “How much ambiguity is enough? I think the answer is much more than what you have here.”

After the Washington Circuit Court of Appeals upheld HHS, the Supreme Court agreed to hear the case.Lower court earlier Double sided With AHA.