Providers participating in the 340B drug discount program will receive approximately $9 billion to compensate them for reductions in previous years under a final rule the Health and Human Services Department and the Centers for Medicare and Medicaid Services published Thursday.

CMS will distribute the money in lump sums to eligible providers to undo reimbursement cuts from 2018 to 2022, which the Supreme Court ruled invalid last year. About 1,700 hospitals are due to receive funds by Jan. 8. But because federal law requires this spending to be budget-neutral, CMS offset the cost by reducing reimbursements for other outpatient products and services by $7.8 billion.

The 340B program offers estimated 25%-50% discounts on outpatient prescription medicines to safety-net hospitals and other providers that treat low-income and uninsured patients.

The federal government spent $106 billion on drugs under 340B last year, nearly twice as much as in 2018, according to the healthcare research company IQVIA. That spending reflects massive growth in participating providers: From 2000 to 2020, the number of 340B-eligible hospitals and clinics increased sixfold to 50,000, according to data the University of Southern California Schaeffer Center published in 2021.

CMS sought to rein in spending in 2018 by slashing reimbursements almost 30% from 2018 through Sept. 27, 2022, and redistributing the money to finance non-drug items and services. This prompted the American Hospital Association, the Association of American Medical Colleges and America's Essential Hospitals to sue the government. The Supreme Court sided with the plaintiffs last year, concluding that CMS failed to collect the necessary data to impose cuts and ordering the agency to devise a remedy.

Providers participating in 340B are also dealing with challenges stemming from a U.S. Court of Appeals for the 3rd Circuit ruling in January. Pharmaceutical companies won the case, which enabled drugmakers to withhold 340B discounts on medicines distributed through pharmacies that contract with providers and limit them to registered 340B participants. More than 20 pharmaceutical companies have since offered 340B pricing only to hospitals and affiliates designated as 340B providers.