On March 3, 2026, the U.S. District Court for the District of Columbia (“Court”) issued a seismic ruling effectively vacating several components of Health Resources and Services Administration’s (“HRSA”) 340B registration requirements for qualifying off-site hospital facilities (“Order”). The Order represents a victory for 340B participating hospitals that will permit these entities to begin utilizing discounted 340B medications at newly established child sites on a significantly expedited timeline.
Link to Background Background
HRSA generally allows 340B-participating hospitals (i.e., “covered entities”) to utilize 340B medications both at its main hospital location and its off-site provider-based hospital departments (i.e., “child sites”). Before a hospital covered entity may use 340B drugs at its child sites, HRSA has historically required that the child site (1) be included as a reimbursable facility on the hospital’s most recently filed Medicare cost report, then (2) registered on the covered entity’s 340B Office of Pharmacy Affairs Information System (“OPAIS”) profile during a subsequent quarterly registration period, with an effective date on the first day of the following quarter.1 These registration requirements are not directly addressed in the federal statute authorizing the 340B Program.2
Because of these conditions, child sites have traditionally had to endure a waiting period between when the facility becomes operational and when it becomes 340B eligible. Depending on the hospital’s cost reporting timelines, this lag between a child site becoming operational and obtaining 340B eligibility could extend up to 12-16 months.
Notably, HRSA introduced flexibilities during the COVID-19 public health emergency that permitted child sites to access 340B drugs prior to being listed on the most recently filed Medicare cost report or formally registering with OPAIS – provided the location was truly a part of the covered entity (i.e., met hospital provider-based requirements for off-site departments). Although HRSA had previously communicated to at least one industry trade publication, along with several 340B covered entities, that it intended to make these flexibilities permanent even after the pandemic ended, HRSA published a notice on October 27, 2023 putting an end to the waiver exception for child sites (“Notice”).3 This decision by HRSA was quickly followed by the filing of this action by the various health systems (“Plaintiffs”) that, among other items, challenged HRSA’s statutory authority to impose these stringent child site registration requirements in the first place. Plaintiffs requested that the Court set aside and vacate HRSA’s 2023 Notice and find that child sites can become 340B-eligible as soon as they qualify as part of the larger covered entity.
Link to Court Ruling Court Ruling
After hearing oral arguments from Plaintiffs and HRSA, Judge Amit Mehta determined that the child-site registration requirement “conflicts with the text of the 340B statute” and “is contrary to law.”4 Specifically, Judge Mehta expressed that, while the HRSA may believe that a child site registration requirement promotes transparency and accountability in the 340B program, such requirements were not expressed in the law enacted by Congress. As a result of this finding, Judge Mehta vacated the Notice and found that it was unlawful “insofar as it reverts to a regime that requires a child site of a covered hospital both to appear on the hospital’s Medicare cost report and to secure certification from HRSA for listing in the OPAIS database before the child site becomes eligible to treat “patient[s] of the [covered] entity” using 340B discounted drugs.”5 In practice, this Order will permit hospital covered entities to utilize 340B medications, and realize 340B benefit, at its new child site locations much more quickly. Importantly, however, the Order does not expand the types of locations that a hospital covered entity may consider a child site for 340B purposes—it simply permits them to begin utilizing 340B medications ahead of formally registering that site with HRSA.
Link to Remaining Unknowns Remaining Unknowns
- At this stage, it is unclear if HRSA intends to appeal this decision.
- As part of the Order, Judge Mehta noted that “nowhere” does the 340B statute require covered entities to secure registration with HRSA as a necessity or condition of 340B program participation.6 While the Order was ultimately limited to vacating HRSA’s child-site registration requirements as detailed in the 2023 Notice, the language could conceivably lay the groundwork for arguing that eligibility delays tied to registration timelines for covered entities themselves may also be unlawful.
- The Order may have significant implications for both drug wholesalers and manufacturers. What additional information, if any, will wholesalers require before agreeing to ship 340B drugs to child sites that are not yet registered on OPAIS? Will these child site facilities be subject to increased scrutiny and audit activity by drug manufacturers?
Given the significant implications of this Order, we will continue to closely monitor any subsequent activity and relevant stakeholder reactions relating to child site 340B eligibility. In the meantime, if you have questions or would like to further discuss the impact of the Order, please reach out to your contact at Quarles or:
- Richard Davis: 414-277-5844 / richard.davis@quarles.com
- Michael French: 312-715-5261 / michael.french@quarles.com
- Brenda Maloney Shafer: 602-229-5774 / brenda.shafer@quarles.com
- Jake Pallotta: 317-399-2810 / jake.pallotta@quarles.com
END NOTES
1 Notice Regarding Section 602 of the Veterans Health Care Act of 1992 Outpatient Hospital Facilities, 59 Fed. Reg. 47884, 47885 (Sept. 19, 1994), available here.
2 42 U.S.C. 256b.
3 Notice – Registration Requirements in the 340B Drug Pricing Program, Health Resources and Services Administration, available here.
4 Albany Med. Health Sys. v. Health Res. & Servs. Admin., Memorandum Opinion, available here.
5 Id.
6 Id.