Alan J. Arville, Member of the Firm in the Health Care & Life Sciences practice, in the firm’s Washington, DC, office, was quoted in Specialty Pharmacy Continuum, in “More Transparency, Definitions Needed Around 340B Program,” by Karen Blum.
Following is an excerpt:
The federal 340B Drug Pricing Program has grown significantly since it was established in 1992, to limit the prices for certain outpatient drugs manufacturers charge to healthcare providers serving a disproportionate share of care to low-income and other vulnerable patient populations. But a lack of clear definitions and parameters for some of the program’s fundamentals—including patient eligibility, the use of contract pharmacies and enforcement—has led to a host of controversies and lawsuits.
“It seems like every little thing with the 340B program is controversial,” said Alan Arville, JD, a member of Epstein Becker & Green, during a panel discussion at AMCP 2025, in Houston. This extends to even simple terminologies, he said. For example, covered entities call the discount they receive 340B “savings,” while manufacturers call it 340B “profits” or “revenue.” Although everyone can agree the program has grown, people debate whether that relates to organic growth versus covered entities abusing the program or not complying, Mr. Arville said.
“My personal opinion is the 340B statute is the source of everything that’s problematic,” he said. “It’s very ambiguous; it doesn’t provide a lot of clear definitions and parameters around the key components of the program. The statute doesn’t give HRSA [the Health Resources and Services Administration within the Department of Health and Human Services] significant rulemaking authority. … [It] can only issue guidance.”
A central controversy with the 340B program concerns its purpose, Mr. Arville said. Covered entities and HRSA say the program is meant to help these participating facilities offset the cost of caring for vulnerable populations, while drug manufacturers view the purpose as making drugs more accessible and affordable to vulnerable, uninsured patients.
Controversies in 340B
Definition of Eligible Patients
The program has been the source of significant litigation in recent years, Mr. Arville said, including over the definition of eligible patients. In Genesis Healthcare v Becerra, Genesis, a federally qualified health center with an in-house pharmacy, was allegedly capturing patients who used their pharmacy as 340B-eligible, although some of the prescriptions were written by unaffiliated providers. HRSA viewed this as diversion (prohibited under the statute to resell or transfer a 340B drug to a person who is not a “patient” of the entity) and said Genesis would have to repay the savings or be eliminated from the program. Genesis sued HRSA saying the statute allows the program to be used for patients of the covered entity, even if the provider did not initiate a healthcare service resulting in a prescription filled by a 340B drug. In November 2023, a federal district court in South Carolina sided with Genesis, ruling that HRSA could not enforce against Genesis its interpretation that the term “patient” requires that the prescription must originate from a covered entity healthcare service.
Contract Pharmacy Restrictions
Another hot topic is restrictions over contract pharmacies used to deliver 340B-priced drugs to a covered entity’s patients, Mr. Arville said. In 1996, HRSA issued guidance stating covered entities could use a single contract pharmacy, but in 2010, the agency permitted the entities to use multiple pharmacies. Manufacturers raised concerns over this, and in 2020, a few began placing limitations on covered entities’ arrangements with contract pharmacies, such as limiting shipments of 340B-priced drugs to in-house pharmacies or requiring covered entities to provide various purchase and claim data elements to obtain 340B pricing.
HRSA took the position that these requirements were prohibited by the 2010 guidelines and sent enforcement letters to six drug manufacturers in October 2021, prompting all recipients to file suit, Mr. Arville said. As of the AMCP meeting, two federal circuit courts ruled in favor of manufacturers, finding they had no obligation to provide 340B pricing to an unlimited number of contract pharmacies. More than 35 manufacturers now have imposed contract pharmacy restrictions.
In response, Mr. Arville said, covered entities such as disproportionate share hospitals (DSHs) and federally qualified health centers have taken several actions, including growing in-house specialty pharmacies to be less reliant on contract pharmacies. Additionally, they have been reevaluating policies and parameters to look for opportunities to have more eligible patients receiving the medications, he said.
As a result of contract pharmacy restrictions, some states have passed laws stating manufacturers cannot deny 340B access to contract pharmacy arrangements, he said. Arkansas was the first, in 2021. Many other states have passed similar laws that are being challenged by drug manufacturers. Federal district courts in Louisiana, Maryland and Mississippi have ruled against manufacturers in lawsuits related to state laws preserving access to multiple contract pharmacies, but a West Virginia district court sided in favor of manufacturers.
Rebate Model
A newer area of litigation concerns the rebate model, Mr. Arville said. In August 2024, Johnson & Johnson sent notice to DSHs that to receive 340B discounts on ustekinumab (Stelara) and rivaroxaban (Xarelto), they would have to purchase the medications at wholesale acquisition cost (WAC) and submit rebate claims for the discount. Last September, HRSA said that model violates the 340B statute, which could potentially result in the termination of the company’s pharmaceutical pricing agreement with HHS. Johnson & Johnson ultimately ceased implementation of the model.
Four manufacturers, including Johnson & Johnson, have filed lawsuits against HRSA to impose rebate models; those cases are still being litigated. Covered entities have expressed several concerns including the financial impact of paying WAC for drugs as well as ceding decisions over what products are 340B-eligible to manufacturers rather than the government.
Managed Care Pharmacies
Managed care pharmacy participation in 340B is another area of scrutiny, and most apparent with the contract pharmacies that are owned by or affiliated with pharmacy benefit managers (PBMs) and managed care organizations, Mr. Arville said. A growing trend is smaller or newer PBMs establishing programs with employers and contract pharmacies to leverage the 340B program for savings. PBMs may require that pharmacies flag 340B dispensing using special identifiers or accept a lower reimbursement when dispensing 340B-eligible products. As a result, more than 30 states have passed laws to prohibit discriminatory reimbursement of 340B drugs.
