Jan 23
2024
The South Carolina District Court’s Ruling On the Definition of a 340B Patient
By Ken Perez, healthcare marketing, strategy and policy consultant
The 340B Drug Pricing Program was created in 1992 to give safety-net providers—those that deliver a significant level of both healthcare and other health-related services to the uninsured, Medicaid, and other vulnerable populations—discounts on outpatient drugs to “stretch scare federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”
In brief, the program requires drug makers participating in Medicaid and Medicare Part B to provide discounts on outpatient drugs to 340B providers, which include various types of hospitals and certain federal grantees, such as federally qualified health centers (FQHCs) and comprehensive hemophilia treatment centers. These providers are referred to as covered entities (CEs).
In recent years, there has been much debate regarding the legality of the use of contract pharmacies by 340B CEs. One other, arguably even more fundamental, issue is the definition of a “patient” of a 340B CE who is eligible to receive a 340B drug.
On November 3, the U.S. District Court for the District of South Carolina issued a monumental decision endorsing a broader view of the definition of such a patient. In Genesis Healthcare, Inc. v. Becerra, the South Carolina district court overturned part of the government’s definition of a 340B-eligible patient, ruling in favor of Genesis Healthcare, Inc., a FQHC CE that filed a lawsuit in 2018 challenging a Health Resources and Services Administration (HRSA) audit finding that Genesis violated the 340B statute by using 340B drugs for ineligible patients.
According to the Veterans Health Care Act of 1992, the law which established the 340B Program, CEs are prohibited from transferring or reselling a 340B drug to a “person who is not a patient of the entity.” The definition of a 340B-eligible patient is critical to a CE’s ability to benefit from 340B participation because CEs can generate 340B savings by purchasing outpatient drugs at discounted prices, administering or dispensing them to eligible patients, and receiving payer reimbursement. The scope of the 340B patient definition determines how widely CEs can use 340B drugs and generate 340B savings.