Key Takeaways:
- On
November 3, 2023 , aFederal District Court issued a decision invalidating theHealth Resources and Services Administration's (HRSA's) 340B “patient” definition. - HRSA's “patient” definition is key to determining the individuals for whom a 340B-covered entity may obtain discounted drugs under the program; purchasing 340B drugs for non-patients constitutes prohibited “diversion.”
- The decision applies only to the plaintiff-covered entity and will almost certainly be appealed by HRSA. However, if upheld, the decision may limit HRSA's ability to establish a narrow patient definition, further expanding the scope of the 340B program by broadening the population of individuals potentially eligible for 340B-purchased drugs.
On
Background
In 2017, HRSA audited Genesis Health Care, a federally qualified health center (FQHC) in
The District Court's
In a nutshell, the current dispute revolves around whether HRSA has properly interpreted the statutory phrase “patient of the entity” to refer only to those individuals whose drugs were prescribed in connection with services provided by the entity. This interpretation was first set forth in a subsequently withdrawn 2015 guidance (revising HRSA's longstanding patient definition set forth in 1996) but was reiterated in a 2019 letter to Genesis. Genesis argued that HRSA is not authorized to promulgate this narrower interpretation of the 340B statute. The court agreed and declared, "the only statutory requirement for 340B eligibility of a person is that the person be a patient of a covered entity" and that “the plain wording of the 340B statute does not require the 'covered entity' to have initiated the healthcare service resulting in the prescription."
Notably, HRSA asserted neither Chevron nor Auer deference regarding its 340B patient definition first established in 1996, or its interpretation of the patient definition in the
Implications Going Forward
While the court's ruling applies only to Genesis, and will almost certainly be appealed by HRSA, the court's reasoning has potentially significant implications with respect to the scope of the 340B program going forward. As a threshold matter, while courts have previously found that HRSA lacks broad 340B rulemaking authority, here the court disagreed with Genesis that HRSA could not promulgate a patient definition via rulemaking. Specifically, the court held that a patient definition is a necessary part of the dispute resolution process for which
However, the court's ruling may nonetheless significantly limit HRSA's ability to establish a robust patient definition. HRSA cannot establish a patient definition that conflicts with the plain language of the statute, even via rulemaking. Not only did the court question whether the statute authorizes HRSA to require a prescribing relationship between an individual and covered entity, the court also expressed doubt over whether the statute authorizes HRSA to impose temporal limitations on how frequently an individual must have visited a covered entity to qualify as a patient. Accordingly, a court may be likely to strike down even a regulatory patient definition that includes such limitations.
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