Court Ruling Authorizes Further Discounts on 340B Drugs

A federal judge in the U.S. District Court for the District of Columbia ruled on March 31 that the Health Resources and Services Administration (HRSA) unlawfully implemented aspects of the Group Purchasing Organization (GPO) prohibition through 2013 policy guidance under the 340B Drug Pricing Program.

The court concluded that HRSA's policy restricting the use of GPOs in conjunction with a 340B replenishment model was illegal, and HRSA illegally prohibited the use of GPO pricing alongside 340B replenishment practices. The decision did not overturn Congress' underlying statutory GPO prohibition itself. Instead, the determination specifically applies to the prohibition for replenishment models.

The judge held that HRSA violated the Administrative Procedure Act (APA) by issuing the 2013 policy without adequate justification, finding the policy arbitrary and capricious. The judge determined HRSA failed to provide "any statutory interpretation" for the policy, as required for agency action of this kind. The decision leaves open the possibility for HRSA to issue revised guidance consistent with APA requirements.

The plaintiff in the case-Premier, a GPO-estimates 340B hospitals have been deprived of between $500,000 and $1.6 million in potential savings due to the restriction on GPO use in replenishment models.

At the time of publication, HRSA had not publicly commented on the decision.

Contact Director of Policy Rob Nelb, MPH, at [email protected] or 202.585.0127 with questions.