In 2010, the Affordable Care Act (ACA) was signed into law, changing the approach to healthcare in the United States. These changes had far reaching impacts but for today, we’re going to focus on the implications the ACA had on 340B and what the potential changes to the ACA could mean for the future of the program.
The implementation of the ACA in 2010 expanded 340B to additional categories of hospitals and added in a variety of additional compliance restrictions and oversight elements. These include:
- Expanded 340B eligibility to additional categories of hospitals.
- Children’s hospitals (DSH >11.75%, ACA clarified eligibility)
- Freestanding cancer hospitals – CAN (DSH >11.75%)
- Sole community hospitals – SCH (DSH >8%)
- Rural referral centers – RRC (DSH >8%)
- Critical access hospitals – CAH (No DSH requirement)
- Added the Orphan drug exclusion for RRC, CAH, SCH, and CAN hospitals.
- Required HHS to develop a methodology for the calculation of the 340B ceiling price.
- Authorized HHS to make 340B ceiling price data available to covered entities through a secure website.
- Required the creation of a formal 340B program Administrative Dispute Resolution (ADR) processes by HRSA.
- Mandated HRSA develop a structure for imposing a Civil Monetary Penalty (CMP) on manufacturers that knowingly and intentionally overcharge a covered entity for 340B drugs.
- Expanded the Medicaid Drug Rebate Program to include Managed Care drugs but excluded 340B drugs from the expansion.
- Required HRSA to extend 340B recertification to all types of covered entities.
Unrelated to the changes the ACA brought about to the 340B program, there have been a number of legislative developments and challenges to the legality of the ACA. In December 2017, President Trump signed into law a tax bill that eliminated the ACA’s penalty on individuals who lack health coverage. Subsequently, Texas’ attorneys general filed a lawsuit arguing that the ACA statute, or at least the parts of the act closely linked to the individual mandate, were no longer valid. This escalated in December 2018, when a Texas district court struck down the ACA, but stayed its ruling pending appeal, concluding that the individual mandate is so connected to the law that Congress would not have passed the ACA without it. On appeal (Texas v. United States), the 5th U.S. Circuit Court of Appeals deemed that the individual mandate was unconstitutional. The panel instructed the district court to rehear the matter and “to employ a finer-toothed comb on remand and conduct a more searching inquiry into which provisions of the ACA Congress intended to be inseverable from the mandate.” In March 2019, the Supreme Court announced it would hear the case in its term beginning in the fall of 2020, blocking the lower courts from taking further action. The Supreme Court case, Texas v. California, began November 10th, 2020, with a ruling expected by June 2021.
While the concerns raised have little to do with the 340B Program itself, the outcome of the Supreme Court’s proceedings could have significant implications for the Program. Since none of us have a crystal ball, there is little use in trying to guess what the future may bring. With that said, it is prudent to understand the possible outcomes and what they may mean for the 340B program. Simplified, there are three main components of the ongoing litigation, all carrying varied implications for the 340B program.
- The Supreme Court could dismiss the case on technical grounds, leaving the statute in place. The court could decide, for instance, that Texas and the individual plaintiffs lacked standing to bring the lawsuit. This would leave the 340B Program hospital expansion and oversight additions from 2010 in place.
- Previously, the district court had concluded that individual plaintiffs have standing to challenge the mandate and the Fifth Circuit concluded that the states have standing to sue.
- A substantial portion of initial oral arguments surrounded this topic as a result of the perceived insufficient attention to this issue in the lower courts.
- Oral arguments did not clearly demonstrate the views of each Justice around standing, but significant focus was placed on the lack of penalty for non-compliance and the lack of transparency around alleged injuries.
- One of the arguments is related to harm imposed by other facets of the ACA and the assertion that these provisions are inseverable from the individual mandate, thus tying the reported harm to the individual mandate. During oral arguments, most Justices expressed skepticism around this theory.
- The Supreme Court could deem the individual mandate unconstitutional.
- This argument ties back to the Court’s decision in the 2012 case, National Federation of Independent Businesses v. Sebelius (NFIB), where the Court upheld the mandate as constitutional, portraying the mandate as a tax under Congress’ authority to tax and spend.
- Oral arguments did not clearly demonstrate the views of each Justice around constitutionality; however, questions were targeted to assess whether the mandate is a choice to purchase health insurance or a legal command (as supported by NFIB) and whether the provision is inoperative.
- The Supreme Court could deem the individual mandate as severable from the ACA. This would likely eliminate the verdict on the individual mandate from impacting other provisions of the ACA, including the changes brought to the 340B Program.
- Precedent directs courts to limit damage to the statute if the individual mandate is concluded to be unconstitutional by “finding the mandate severable from the rest of the ACA, including its guarantees-issue and community-rating provisions.”
- The Chief Justice and Justice Kavanaugh argued that the ACA’s legislative findings should not be treated as an inseverability clause, based on the absence of the “very clear” inseverability language Congress has included in other statutes.
While the Supreme Court proceedings have only just begun, the initial arguments give us optimism that it is unlikely the ACA will be struck down in its entirety. The individual mandate appears to be the most heavily contested component of the ACA and while initially perceived to be interwoven and an integral component of the ACA, which would prevent its reversal without “throwing out the baby with the bathwater,” so to speak, President Trump’s December 2017 tax bill reversed the teeth of the individual mandate and the ACA as a whole has not crumbled as a result.
Ultimately, the future of the ACA and its impact on the 340B Program cannot be predicted or guessed. With that said, the beginning of what is likely to be a many months’ long adventure leaves room for hope that regardless of the life expectancy of the individual mandate, the 340B Program facets implemented through the ACA will remain intact.