Hospitals Sue HRSA Over Post-COVID Child Site Requirements

Hospitals and other healthcare providers participating in the federal government’s 340B Drug Pricing Program have long faced restrictions relating to child sites. Among them are certain registration and cost reporting requirements that were waived during the COVID pandemic. Now that the public health emergency is over and the waiver has expired, a group of hospitals has decided to sue to keep the effects of the expired waiver in place.

Nearly four-dozen hospitals filed suit against the Health Resource and Service Administration (HRSA) in October of this year. Their lawsuit is the direct result of an HRSA notice reminding covered entities that the old rules for cost reporting and registration are once again in effect. Those rules dictate how covered entities can add child sites as participants in 340B.

The hospitals claim that allowing the waiver to expire violates notice-and-comment rulemaking requirements, goes above and beyond the administration’s authority, and conflicts with the statutory language of the law establishing the 340B program. They also say that HRSA’s decision was arbitrary and capricious. Now it is up to the DC District Court to figure it all out.

Registration and Cost Reporting

Prior to the onset of the COVID pandemic, hospitals, and other healthcare providers (also known as covered entities) participating in the 340B Drug Pricing Program could only begin purchasing and dispensing discounted drugs at off-site locations after complying with registration and cost reporting requirements. The problem for covered entities is that compliance is time consuming.

HRSA acknowledged as much during the pandemic, leading to a waiver that allowed off-site facilities (a.k.a child sites) to purchase and dispense discount drugs even while their registrations were pending. The point was to not slow down or inhibit access to low-cost medications during a public health emergency.

Under the waiver, covered entities could establish all sorts of child sites through which they could dispense discount drugs without having to immediately comply with the rules. But according to HRSA, the new freedom offered by the waiver has added complexity to their enforcement efforts and made it more difficult for them to determine whether covered entities are towing the line.

Time Constraints Are Back

At the heart of the lawsuit are the previous time constraints that are part of the equation once again. The hospitals claimed that complying with registration and cost reporting requirements could mean delays of up to 23 months before a child site can begin purchasing and dispensing discount drugs under the 340B program.

Covered entities will often utilize 340B firms like Ravin Consultants to help them establish new child sites in compliance with regulatory requirements. But even going through a 340B consulting firm does not change anything about the time constraints. It can still take anywhere from 8 to 23 months to get a child site fully registered.

Meanwhile, the hospitals complained that such a long delay could cost them “hundreds of millions of dollars” by forcing them to pay retail for covered drugs. The extra money is money that could go toward expanding access to healthcare in underprivileged communities.

An Administrative Nightmare

Though government regulation is often unnecessary and onerous, the registration and cost reporting requirements are necessary for effective 340B administration. HRSA cannot do its due diligence if child sites are purchasing and dispensing covered medications prior to actually receiving official approval.

It seems that HRSA had no other choice but to allow the waiver to expire along with the public health emergency. Doing so has not put any additional burden on covered entities. It simply returns them to the position they were in prior to COVID.