The Medicare statute provides two options to the Department of Health and Human Services (HHS) for determining the reimbursement rates for covered outpatient prescription drugs The rate may be equal: (I) to the average acquisition cost for the drug for that year (which, at the option of the Secretary, may vary by hospital group (as defined by the Secretary based on volume of covered OPD services or other relevant characteristics)), as determined by the Secretary taking into account the hospital acquisition cost survey data under subparagraph (D); or (II) if hospital acquisition cost data are not available, the average price for the drug in the year established under section 1395u(o) of this title, section 1395w–3a of this title, or section 1395w–3b of this title, as the case may be, as calculated and adjusted by the Secretary as necessary for purposes of this paragraph.

Prior to 2018, HHS relied on the second option, and consistently set reimbursement rates for all hospitals at about 106 percent of each covered drug's average sales price.

The United States Court of Appeals for the District of Columbia Circuit reversed, finding that the rule was a reasonable interpretation of the law, and applied deference under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc..[1] On February 10, 2021, the AHA filed a petition for a writ of certiorari.

The court ruled that the statute does not give the Department of Health and Human Services the authority or the discretion to vary the reimbursement rates for 340B hospitals.

Many legal experts considered the case to have significant consequences for the future of Chevron deference, and although the precedent was discussed extensively during oral arguments, the opinion did not mention it even once.