340B Legal, Compliance Concerns Top of Mind for 2023

December 12, 2022

340B Law|

Our most recent quarterly 340B Insider webinar featured the insights of Jason Reddish, a partner at the law firm Feldesman Tucker Leifer Fidell and an expert on 340B legal and compliance issues. R1 340B insiders Don Holladay and Melissa Opraseuth joined Reddish to discuss key legal and compliance concerns faced by covered entities of the 340B drug pricing program.


Jason Reddish, J.D.

Feldesmand Tucker Leifer Fidell

Melissa Opraseuth, PharmD

SVP, 340B Operations,

Donald Holladay, PharmD, 340B ACE

VP, 340B Business Development,

Contract pharmacy litigation drives 340B uncertainty and risk.

Three appeals courts have been hearing oral arguments regarding the permissibility of manufacturers imposing restrictions on discounts through contract pharmacies, and their rulings will have a profound impact on the future of the 340B program. A central question in the dispute is whether HRSA actually has the authority to compel compliance with its contract pharmacy guidance. The webinar began with Reddish offering his insights into the current state of litigation and what covered entities can expect next.

“There were four cases brought in federal court in response to HRSA’s attempt to enforce their contract pharmacy guidance. We’re now at the stage where the parties have oral arguments so we get a taste of what these appellate panels think based on the questioning. You can’t always read too much into the courts’ questions but there are signals that it’s unlikely HRSA will run the table on all three appellate panels and get opinions that say, yes, your interpretation is correct.

We should get decisions on all cases in early 2023, probably in the first quarter. There’s a significant chance that one of the panels will send their case back down to the district court and instruct them to make more specific findings around what manufacturers can and can’t do, or what HRSA can and can’t enforce. The worst-case scenario is that one of these courts goes way beyond the others and says that manufacturers don’t have to ship drugs to contract pharmacies at all. That would create a chaotic situation where we’d be teed up for Supreme Court resolution.”

Jason Reddish

Reddish did note that the courts may not be the final arbiter of these disputes. There is the possibility that Congress could offer some legislative relief and clarity, or that HRSA could revise its contract pharmacy guidance to mollify manufacturers and alleviate some of the concerns the courts could raise.

Patient definition still presenting 340B opportunity and risk.

As providers look for ways to optimize 340B program savings, they often look at revisiting their patient definition policy language. We asked Reddish about his recent experiences with expanding patient definition and the legal implications of straying too far from conventional wisdom.

“We know that some covered entities have gotten more aggressive with their interpretation of the patient definition. Part of that stems from HRSA being in a looser enforcement position than before. And one approach to the statute would be to say, everybody we’ve ever treated at any point is our patient, and they are eligible for free TB drugs.

I personally wouldn’t be comfortable going too far out on a limb until we get a ruling on the Genesis case. If that court determines that the patient definition guidance is a valid interpretation, and HRSA feels like they have full authority to go out and enforce that in audits, you could be on the hook for some substantial repayment if you’ve gone really outside the bounds of the current definition environment.”

Jason Reddish

340B referral capture offers best lever for added savings.

Many covered entities are successfully expanding their 340B discount savings through referral prescription capture. However, many are foregoing program expansion due to fears about the consequences of non-compliance, which include refunding discounts and possible program exclusion. We asked Reddish what the most current legal consensus tells us about the state of referral capture and what concerns it raises for providers.

“For referral prescriptions a lot of entities relied on guidance from the Safety Net Hospital for Pharmaceutical Access Group, which is now 340B Health. They indicated that you could qualify a prescription for a patient – if it was related to care that you provided – if the patient then got outside care related to that in-clinic care. There have been variations over the years, but the one thing that they’ve come back to time after time is the referral loop – do you have a referral out that you can document, and do you have something coming back from that outside provider that shows that you maintain responsibility for the episode of care?

So realistically, moving forward we’re going to still have this requirement for documentation. The requirement for auditable records is in the statute. That’s not going to change. And you’re going to have to be able to show records that indicate that you are responsible for this prescription that was filled with 340B drugs. And I think the referral capture approach of having a documented referral and some feedback loop, some information coming back, some indication that you are still keeping tabs on that outside care is probably going to be the standard that we have moving forward. It’s certainly the one I would bet on.”

Jason Reddish

Other topics discussed in this 340 Insider webinar included:

  • The likelihood of a legislative resolution and the competing interests asserting influence on Congress
  • The impact of the Inflation Reduction Act’s new ‘maximum fair price’ drug class on 340B program operations
  • The push by manufacturers for claim sharing and the reasons for provider reluctance
  • Opportunities for expanding 340 savings through clinical pharmacy and telemedicine

To hear the full discussion, access the 340B Insider session on-demand.

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