June 28, 2012—The U.S. Supreme Court’s 5-to-4 decision today to largely uphold the constitutionality of the Affordable Care Act (ACA) preserves rural, children’s, and cancer hospitals’ eligibility to participate in the 340B drug discount program. The Drug Discount Monitor is still analyzing the 193-page decision.[ms-protect-content id=”2799″]
Writing for the majority, Chief Justice John Roberts said that Congress had the authority under its taxing power to require individuals to purchase health insurance. Justice Roberts also upheld the law’s expansion of Medicaid, allowing it to go forward but narrowing its reach. The federal government, he said, cannot deny states all of their Medicaid funding if they decline to expand their programs.
ACA expanded 340B eligibility to critical access hospitals, sole community hospitals, rural referral centers, and free-standing cancer hospitals. Free-standing children’s hospitals became eligible for 340B under a 2005 law, but another law passed in late 2010 linked their eligibility to ACA.
The Court’s decision means that these five categories of hospitals remain eligible for 340B drug discounts. If the Court had declared the entire health care reform law unconstitutional, as the four justices in the minority voted to do, there would have been no legal basis for these hospitals’ participation in 340B.
“The act before us here exceeds federal power both in mandating the purchase of health insurance and in denying non-consenting states all Medicaid funding,” Associate Justice Anthony Kennedy wrote for the minority. “These parts of the act are central to its design and operation, and all the act’s other provisions would not have been enacted without them. In our view it must follow that the entire statute is inoperative.”
The majority opinion also preserves changes that ACA made to the Medicaid drug rebate program that resulted in much steeper drug discounts for all 340B covered entities.
ACA also includes provisions to increase 340B program oversight. They include:
- requiring covered entities to annually update their contact information in the OPA database
- requiring OPA to develop more detailed guidance on billing Medicaid
- covered entity access to actual, verified 340B ceiling prices
- a system to ensure accurate 340B pricing by manufacturers, including selective audits of manufacturers and wholesalers and spot checks of sales transactions
- civil monetary penalties for manufacturers and sanctions for covered entities in violation of program requirements
- a mandatory dispute resolution process
- procedures for manufacturers to issue refunds to covered entities when there is an overcharge
Many of these provisions have not yet been implemented.[/ms-protect-content]