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Photo: Megan Jelinger/AFP via Getty Images

The U.S. Supreme Court heard oral arguments Tuesday about whether the federal government had the authority to cut hospitals' payments for outpatient drugs.

Why it matters: The controversial case involves billions of dollars for hospitals, pits not-for-profit hospitals against rural and for-profit facilities, and tests the broader legal theory of whether federal agencies can take matters into their own hands when laws are vague.

Details: Justices questioned Donald Verrilli, the former U.S. Solicitor General representing the American Hospital Association and other hospitals, and Christopher Michel of the Department of Justice.

  • Hospitals pocket large savings when acquiring certain drugs through a federal program called 340B.
  • Medicare, under the Trump administration, instituted a 28.5% cut to those drug payments starting in 2018. Research indicated some hospitals were profiting excessively from the program.
  • Justices peppered both sides about whether Medicare's rate adjustment abided with the law.

Zoom in: The crux of the case falls on the so-called Chevron doctrine, which says federal agencies like Medicare have some leeway to interpret ambiguous laws, and courts should defer to them.

  • However, after decades of using this legal doctrine, "How much ambiguity is enough?" Justice Neil Gorsuch asked.
  • "I'm not sure anybody's answered that question," Michel said. And in this case, "I don't think there's much ambiguity at all," he said.

The bottom line: A ruling against hospitals would redistribute large sums of money from a drug discount program that many experts believe the hospital industry has abused, and it would solidify Medicare's ability to make these types of adjustments based on current law.

Go deeper: Overviews from legal experts Nicholas Bagley and Allison Hoffman.

Go deeper

Supreme Court blocks Biden's vaccine mandate for large employers

Photo: Robert Alexander/Getty Images

The Supreme Court on Thursday blocked the Biden administration's COVID-19 vaccine-or-test requirement for large employers, but it will allow a similar mandate to continue for workers at federally funded health care facilities.

Driving the news: The Occupational Safety and Health Administration’s emergency measure went into effect on Monday. It said that employers with more than 100 workers must require their workers to either get vaccinated or tested every week.

FDA limits use of Regeneron and Lilly COVID antibody treatments

A coldbox containing monoclonal antibody treatments at a Regeneron clinic in Pembroke Pines, Florida, in August. Photo: Eva Marie Uzcategui/Bloomberg via Getty Images

The FDA said Monday it's limiting the use of two monoclonal antibody therapies as COVID-19 treatments because data indicates they're "highly unlikely" to be effective against the dominant Omicron variant.

Driving the news: The FDA revised the authorizations for Regeneron and Eli Lilly "to limit their use to only when the patient is likely to have been infected with or exposed to a variant that is susceptible to these treatments," per a statement from the agency.

Updated 3 hours ago - World

Pentagon: 8,500 troops on high alert for possible deployment to eastern Europe

Photo: Anna Moneymaker/Getty Images

Defense Secretary Lloyd Austin has placed 8,500 U.S. troops on "heightened preparedness to deploy" to eastern Europe in case NATO activates its rapid-response force over tensions with Russia, the Pentagon announced Monday.

Why it matters: No decisions have been made to actually deploy U.S. forces, but the heightened alert level will allow the military to rapidly shore up NATO's eastern flank in the event that Russia invades Ukraine. The Pentagon warned that Russia has shown "no signs of de-escalating," and continues to amass troops on Ukraine's borders.