The Growing Debate over 340B Patient Definition
Written by: Ted Slafsky
In my last column, I addressed the growing trend of both providers and manufacturers turning to litigation to resolve key areas of debate in the 340B program—a significant departure from how the program worked for close to three decades when stakeholders rarely relied on the courts, even if they felt aggrieved.
Nearly every 340B policy dispute today—including, but not limited to, patient definition, contract pharmacy restriction and state protection legality, rebate permissibility, alleged drug manufacturer overcharges or alleged provider program misuse—are litigated. These are just a few of the high-stakes matters 340B stakeholders are currently debating in federal courts.
In today’s column, I address one of those matters under debate: what individuals qualify for 340B discounts. The 340B patient definition has long been one of the most contentious areas of dispute between covered entities (CEs) and drug manufacturers.
HRSA’s Definition
The Health Resources and Services Administration (HRSA) established a three-part patient definition test in 1996 federal guidance. It consists of the following:
The CE has established a relationship with the individual, such that it maintains records of the individual’s healthcare.
The individual receives healthcare services from a healthcare professional who is either employed by the CE or provides healthcare under contractual or other arrangements (like referral for consultation) such that responsibility for the care provided remains with the CE.
And a third test only applicable to federal grantees:
The individual receives a healthcare service or range of services from the CE that are consistent with the services for which grant funding status has been provided to the entity.
HRSA tried to revise its patient definition in proposed 2015 guidance, which would have created a six-part test and required assessment of whether an individual is a “patient” on a per-prescription or per-order basis. 340B providers strongly pushed back, arguing that would be a more onerous standard and undermine their ability to provide affordable care to patients. The government withdrew the proposal in 2017 after significant pushback from the CE community.
Provider Position on Patient Definition
Most 340B providers have argued that the current guidance provides a clear and reasonable framework for utilizing the program, despite acknowledging it could potentially use a refresh. However, some CEs believe that the guidance is too narrow.
For example, Genesis Health Care, a South Carolina health center, successfully sued HRSA in 2023 after a federal audit found it had dispensed 340B-discounted drugs to individuals that the agency said were not entity patients, including individuals to whom it did not initiate a healthcare service. The federal judge in the case ruled that the 340B statute’s plain wording does not require a CE to have initiated the healthcare service resulting in a prescription or impose a time limit on recent healthcare encounters to establish an individual’s patient status. Genesis only needed to demonstrate that it had a relationship with the individual.
As law firm McDermott Will & Schulte noted in its excellent summary of the decision, the court ruled that HRSA’s definition “limits the scope of the 340B program, limits the profitability of ‘covered entities’ and frustrates the goal of the 340B statute, which is to make ‘covered entities’ profitable in the face of prescription drug price increases that followed the Medicaid Drug Rebate Program and that continue to this day.”
The judge voided HRSA’s audit finding and called on the government to come up with a clearer, less narrow patient definition that would apply to the broader CE community. However, the judge limited the ruling to Genesis, and HRSA has not changed its interpretation of the patient definition.
Drug Industry’s Viewpoint
While CEs either support HRSA’s current patient definition or believe it is too narrow, the drug industry has argued that the definition is too broad. Despite the drug industry’s longtime handwringing, it had not challenged the government’s interpretation until recently.
Drugmaker AbbVie filed an April 2026 lawsuit in the U.S. District Court for the District of Columbia against the U.S. Department of Health and Human Services. It alleged that HRSA’s “outdated, overly expansive and erroneous” 340B patient definition enables “widespread 340B program abuse” and “effectively denie[s]” the drugmaker’s statutory right to audit providers.
The Chicago-based manufacturer argued that “this broad definition has created loopholes that allow covered entities to claim discounts on minimal or unrelated patient contact thousands of miles away, or even for the same prescription multiple times.”
“As a result, resources and savings meant for those most in need are being diverted elsewhere, used as a discretionary revenue stream instead of being tied to a tangible patient benefit,” AbbVie further contended. “This ultimately leads to higher healthcare costs for employers, taxpayers and patients, while diluting the program’s intended impact.”
AbbVie has asked the court and federal Judge Randolph Ross, an appointee of President Barack Obama, to strike down HRSA’s current patient definition and require the agency to replace it with a narrower standard. HRSA has until June 12 to respond to the suit.
Whether the courts eventually decide that HRSA’s patient definition is too broad, too narrow or just about right remains to be determined. But we do know that decision will have major ramifications for 340B stakeholders.
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Ted Slafsky is the Publisher and CEO of 340B Report, the only news and intelligence service exclusively covering the 340B program. Slafsky, who has over 30 years of leadership experience with the 340B program, is also Founder and Principal of Wexford Solutions. Ted can be reached at ted.slafsky@340Breport.com.
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