Recent Court Decision Signals Potentially Massive Expansion of 340B Patient Eligibility Standards

In November 2023, a South Carolina federal district court in Genesis Health Care, Inc., v. Becerra, et al. addressed the long-standing issue of who qualifies as a “patient” of a covered entity pursuant to the federal 340B program, and paved the way to a large potential reframing of the 340B program. 

In March 2019, the Health Resources & Services Administration (“HRSA”), the agency responsible for administering the 340B program, issued a letter to Genesis Health Care, a 340B covered entity, clarifying its interpretation that in order for an individual to qualify as an eligible patient, Genesis (i.e., the covered entity) must have initiated the healthcare service resulting in the prescription.

In its order, the district court took issue with HRSA’s interpretation, finding it to be contrary to the plain language of the 340B statute, which only provides that “a covered entity shall not resell or otherwise transfer the drug to a person who is not a patient of the entity.” The court reasoned that a less restrictive and broader reading of “patient” ultimately supports the 340B program’s purpose— to stretch scarce resources as far as possible, reaching more eligible patients and providing more comprehensive services in the safety-net health care providers participating in the 340B Program. Therefore, the court rejected HRSA’s 2019 interpretation requiring the FQHC or its providers to have “originated” the prescription for the individual to be deemed an eligible 340B patient.

It is of note that the Court did not rule directly on whether HRSA’s October 1996 three-part patient definition is appropriate. Pursuant to HRSA’s patient definition, an individual is a “patient” of the covered entity only if: (1) the covered entity has an established relationship with the individual, such that the covered entity maintains records of the individual’s health care; (2) the individual receives health care services from a health care professional who is either employed by the covered entity or provides health care under contractual or other arrangements such that responsibility for the care provided remains with the covered entity; and (3) the individual receives a health care services or range of services from the covered entity which is consistent with the service or range of services for which grant funding or Federally-qualified health center look-alike status has been provided to the entity. Therefore, it remains an open question as to how the three-part test will fare under future judicial scrutiny.

Moving forward, the 340B “patient” definition may be more deeply scrutinized in the future, by both courts and regulators. Thus, it is important that stakeholders in the 340B program, including covered entities and contract pharmacies remain up-to-date on all 340B program changes. Where courts continue to reject wide-sweeping and restrictive patient eligibility language, covered entities may be able to qualify more prescriptions as 340B-eligible. However, the uncertainty surrounding HRSA’s patient definition also leaves open the potential for legislatures to take action to restrict the patient definition, further curtailing the 340B program and imposing greater burdens on safety-net providers. Frier Levitt can assist these stakeholders navigate the complex web of the 340B statute, as well as agency rules, regulations, and guidance in implementing a compliant 340B program and preparing covered entities and contract pharmacies for any forthcoming changes to the program.