During my 22 years in leadership at the trade group for 340B hospitals, rarely did we ever have to threaten—or actually take—legal action against a government policy or drug industry action. Times have certainly changed.  

It seems like both sides in the debate over 340B—providers and drug manufacturers—now routinely turn to litigation as an unfortunate, but necessary, avenue to resolve matters.

Just last week, we saw the value of this approach when a Washington, D.C., federal district court struck down the Health Resources and Services Administration’s (HRSA) registration requirement that forced hospitals to wait up to 23 months to access 340B discounts after opening an offsite facility. 

 Judge Amit P. Mehta noted in his decision that “some covered-entity hospitals deliver medical services at locations separate from their main campus to reach patients who face geographic, financial or other barriers to receiving treatment at the primary hospital facility.” He cited, for example, an off-campus infusion center that treats cancer and other patients who require medications delivered through intravenous injection. Mehta agreed with New York-based Albany Med Health System and the 43 other health systems that sued HRSA that the policy—which, according to court records, cost Albany Med’s Glens Falls Hospital close to $6 million—“conflicts with the text of the 340B statute and therefore is contrary to law.”

340B hospitals appeared to be under the impression in 2020 that HRSA had finally decided to abandon this policy when the agency told 340B Report that it was making a permanent change to permit hospitals to have immediate access to the much lower 340B price when a child site opened. A HRSA contractor also confirmed this change in position. However, three years later, the agency abruptly reverted to its previous position—a shock to 340B hospitals which argued that these clinics couldn’t exist without revenue from prescribing or administering 340B drugs onsite. 

Fortunately, Mehta vacated the policy and 340B hospitals will now be able to provide affordable medications to patients closer to their homes. 

Additional Victory

The D.C. federal court’s decision came just a few months after another major victory for 340B advocates in a Maine federal district court. That court—and later a federal appeals court—prevented HRSA from implementing its 340B rebate model pilot program that would have dramatically changed how 340B providers access discounted prices. Instead of obtaining upfront discounts, 340B providers would have had to pay much higher drug prices and seek back-end rebates from manufacturers after submitting claims data. The policy, which hospitals argued would’ve required safety-net providers to float millions of dollars to the highly profitable drug industry, created tremendous anxiety among 340B covered entities throughout the nation.

Chief Judge Lance E. Walker of the U.S. District Court for the District of Maine determined that the pilot likely violated the Administrative Procedure Act (APA) because the agency did not adequately prepare the program or account for its potential impact on covered entities. The government appealed Walker’s decision to the U.S. 1st Circuit Court of Appeals in Boston, but a three-judge panel unanimously upheld the ruling.  

It is noteworthy that President Donald Trump appointed Walker, while former President Joe Biden appointed the appellate judges who ruled on the case, suggesting there were no political factors into their decisions. 

The rebate pilot is far from dead, but it is reassuring that there are guardrails in place to prevent such actions by the administration or the drug industry. 

Tipping the Scales

The courts’ growing importance in challenging unfair policies comes at a time when the Trump administration has begun to tip the scales towards pharmaceutical manufacturers.  

Despite the president and his Health and Human Services secretary’s populist rhetoric, the drug industry seems to be dictating 340B policy these days. From apparent plans to dramatically cut 340B hospitals’ Medicare Part B reimbursement to inaction as drug companies impose highly burdensome and arguably illegal claims data requirements, it is becoming increasingly clear that covered entities cannot rely on the administration to be a neutral arbiter.  

340B providers and state governments were taken aback with the administration’s recent decision to suddenly back the drug industry’s arguments in the yearslong dispute between manufacturers and states over contract pharmacy access laws that have been enacted in over 20 states.  

Notably, two U.S. Department of Justice (DOJ) attorneys who drafted a series of amicus briefs urging the courts to rule in the drug industry’s favor represented drug manufacturers in private practice prior to rejoining the DOJ in Trump’s second term.  In fact, the most senior DOJ attorney on the brief represented Sanofi on a variety of 340B matters prior to rejoining the Trump administration in January 2025. 

A DOJ spokesperson denied that there was any potential conflict of interest when 340B Report recently asked about the connection. 

Hamstrung

Even the legal avenue is not an easy road for the covered entity community. 340B providers have had one hand tied behind their backs since 2011 when the U.S. Supreme Court held, in Astra USA v. Santa Clara County, that covered entities cannot directly sue drugmakers for alleged violations of the 340B statute. Instead, they must largely rely on the federal government to challenge drug industry policies. 

The high court made the decision assuming that the newly established Administrative Dispute Resolution (ADR) process would soon be in place to resolve disputes between covered entities and the drug industry, but it took close to another 10 years before the ADR process was finalized. Since then, it has been largely ineffective as it’s gone through various changes from one administration to another.

Fortunately, the federal courts remain a critically important avenue for resolving 340B policy conflicts. I anticipate that the covered entity community will soon reach out to the courts for help in blocking new and unprecedented claims data requirements from drug companies, which have recently expanded beyond the contract pharmacy setting. Hopefully, the legal system will once again come to covered entities’ rescue during a very challenging time for the safety-net provider community.

———

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.