HHS Says It Can Limit Hospitals From Drug Discount Purchases

A federal health agency is supporting its decision to limit certain hospitals that operate under Premier Inc. from using their group purchasing arrangements to buy medicines outside of a federal drug discount program.

The hospitals don’t qualify to buy steeply discounted drugs under the 340B Drug Discount Program if they purchase those medicines through a group purchasing organization, the US Health Resources and Services Administration said May 9 in a cross motion for summary judgment filed in the US District Court for the District of Columbia.

“Accepting Plaintiff’s argument would make the group purchasing prohibition meaningless,” HRSA wrote. “In other words, not only does a hospital not know which units of a drug from an initial purchase are destined to be dispensed to a 340B patient, but the hospital also does not have that knowledge for drugs that it acquires through replenishment.”

Under the federal 340B program, covered entities such as qualifying safety-net hospitals, clinics, and other providers can purchase outpatient drugs at discounted prices from manufacturers participating in Medicaid. For inpatient drugs, which are not covered by 340B, hospitals typically use group purchasing organizations like Premier to obtain negotiated price discounts.

The statute includes a provision that prohibits certain covered hospitals from purchasing covered outpatient drugs though the 340B program and a GPO simultaneously, also known as the GPO limitation.

Premier claimed in a lawsuit filed in November 2024 that HRSA’s rejection of the company’s request for an exemption from the 2013 policy is arbitrary and capricious because the agency provided no explanation for its decision. The health company asked the court to vacate HRSA’s decision denying its request for an exemption from the policy and enjoin the agency from applying the policy to Premier or any of the company’s covered entity hospital members.

However, the health agency argued the policy isn’t contrary to law because it was an interpretive rule that did not require legislative rulemaking. The question for the court is whether HRSA adequately explained its decision for rejecting Premier’s exclusion to the rule, the agency said.

The case is Premier Inc. v. Health Resources and Serv. Admin, D.D.C., No. 1:24-cv-03116, cross motion for summary judgment 5/9/25