By Nate Raymond
BOSTON, Jan 7 (Reuters) – A federal appeals court on Wednesday blocked a Trump administration plan to require hospitals serving low-income Americans to pay full price upfront for the first 10 costly medications that are subject to Medicare drug price negotiations and wait for rebates later.
The Boston-based 1st U.S. Circuit Court of Appeals rejected a request by President Donald Trump’s administration to put on hold an injunction a judge in Maine issued at the behest of the American Hospital Association and several healthcare providers who argued the new drug pricing initiative constituted a hasty shift away from decades of providing advance discounts on drugs bought by safety-net hospitals.
The order blocked a Health Resources and Services Administration program the plaintiffs said would saddle the hospitals with hundreds of millions of dollars in extra costs and force them to pay higher prices for the drugs.
The 10 drugs include the widely used blood thinner Eliquis sold by Pfizer and Bristol Myers Squibb; Johnson & Johnson’s rival medication Xarelto; and Merck & Co’s diabetes drug Januvia.
The Inflation Reduction Act, a 2022 law enacted under Democratic President Joe Biden, allowed the U.S. Department of Health and Human Services, which HRSA is a part of, to negotiate a maximum fair price that Medicare, the healthcare program for people aged 65 and older or those with disabilities, would pay for certain costly drugs.
State Medicaid programs, which provide health insurance for low-income Americans in collaboration with the federal government, receive a rebate to ensure they only pay the Medicare-negotiated price on behalf of qualifying patients.
Several of the medications affected by the law were already subject to the federal 340B Drug Pricing Program, which for decades has required drugmakers seeking Medicaid and Medicare coverage for their drugs to provide upfront discounts to safety-net healthcare providers.
HRSA said its 340B Rebate Model Pilot Program, which it announced in July, was intended to help drugmakers avoid duplicate price concessions to hospitals, which they were allowed to avoid under the IRA.
Drug companies under the pilot program could charge hospitals their products’ wholesale prices and issue rebates later to reflect their ultimate discount.
The American Hospital Association sued last month, saying the pilot program was adopted in violation of the Administrative Procedure Act by failing to consider the impact of the rebate model on the hospitals.
U.S. District Judge Lance Walker, a Trump appointee in Maine, agreed and issued an injunction on December 29 that blocked the planned January 1 implementation, saying the agency failed to consider how ending the decades-long practice of upfront discounts would affect resource-strapped hospitals serving rural and poor communities.
(Reporting by Nate Raymond in Boston; Editing by Alexia Garamfalvi and Bill Berkrot)
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