Best Practices for Legal Oversight of 340B Programs in Turbulent Times

Emily J. Cook, Partner, McDermott Will & Schulte, and Kelsey Bagheri, Principal Counsel, UCSF Health, discuss how covered entities and their legal counsel can navigate the current legal and compliance risks associated with the 340B program. They cover recent developments in the 340B program, top 340B compliance myths, the role of pharmacies in 340B oversight, how covered entities can ensure that 340B risks are understood across the entire organization, issues related to vendor arrangements and manufacturer inquiries, and how in-house counsel can make the greatest impact. Emily spoke about this topic at AHLA’s 2026 Institute on Medicare and Medicaid Payment Issues in Baltimore, MD.

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Transcript

SPEAKER_01 0:04

This episode of AHLA Speaking of Health Law is brought to you by AHLA members and donors like you. For more information, visit AmericanHealthlaw.org.

SPEAKER_02 0:16

Hello, I'm Emily Cook. I'm a partner with McDermott, Will, and Schulte, and I'm here today with Kelsey Baghari to talk to you about best practices for 340B program Oversight. This podcast derives from a presentation that I did at the most recent, so that would be 2026 Medicare and Medicaid Institute for HLA on best practices for 340B Oversight. And I will turn it over to Kelsey to introduce herself.

SPEAKER_03 0:49

Thanks, Emily. Hi, I'm Kelsey Begeri and principal counsel at the University of California, San Francisco, or UCSF Health, where I advise on hospital operations and health regulatory matters, including 340B program compliance for UCSF's multiple covered entities that participate in the program. So to kind of kick it off, I mean, I, you know, I work in the space pretty regularly, and it seems like every day something is changing, and it's it is difficult to keep up. So, Emily, can you give us an overview of the most recent developments in the 340B program that in-house counsel and compliance professionals should know?

SPEAKER_02 1:33

340B space is very dynamic and it does often seem as though there is a new major development every day, particularly recently over the past several weeks. It has been a constant stream of 340B updates, information, developments to keep on top of. The 340B issues that most recently are of the most importance and certainly getting the most attention are the 340B payment cuts in the most recent OPPS proposed rule. CMS is proposing to cut the reimbursement rate for 340B drugs paid under the outpatient perspective payment system by about 40% below the amount that is currently paid. So quite a significant cut and certainly would be a challenge for 340B hospitals to navigate. In addition, we've seen two 340B legislative developments, not any 340B changes passing into law, but a recent proposed bill from Senator Cassidy that would make fundamental changes to the 340B program, and similarly a bipartisan bill actually introduced by members of the House that would make some similar but some very different changes to the 340B program. Having both of those bills to review again because they are somewhat similar and somewhat different has been very challenging. And then beyond those most recent developments this year, we've been seeing a lot of attention on the likely re-implementation of 340B rebate models, where the 340B price would be available only through a requested rebate rather than upfront as it currently is available now. There is ongoing litigation related to the 340B definition of patient that covered entities are certainly watching closely that would materially reduce the volume of 340B opportunity for most hospitals. And related to that, we are seeing increasing manufacturer restrictions on the ability to access 340B pricing, including recent data requests that many hospitals are really being challenged to determine how best to comply with, how to proceed, whether they can even submit the data that's being requested. So beyond those changes, which is certainly a large volume of changes, what are you seeing, Kelsey, on your side as it relates to recent changes that impact your day-to-day work in-house?

SPEAKER_03 4:21

Yeah, so you know, I've worked in the 340B space for a while now. And what's really noticeable to me, I think, most recently, is kind of the increased uncertainty around, you know, 340B. And in other areas of healthcare law, you know, I'm typically used to applying and ensuring compliance with well-established statutes, regulations, and guidance. And it's really different in the 340B space. I think, you know, recently we're seeing a lot of statutory interpretation kind of occurring through the courts, and I'm spending more time reviewing case law, kind of assessing risk and assisting the operations teams with navigating these areas where the law isn't always entirely clear. And so I think it's also unique in the 340B space recently, there's been long-standing HERSA guidance that's been vacated. And so, you know, Emily mentioned some of the ongoing litigation over the patient definition. There's also been litigation over the scope of the GPO prohibition. Also, you know, when a hospital outpatient department becomes eligible to participate in the 340B program as a child site, and then kind of the start and stop and litigation over Hearsa's efforts to implement a rebate model. So I spend a lot more time, you know, trying to help answer the question, what does this really all mean? And so I think you know these types of changes in the 340B program has required in-house counsel to be more involved in the day-to-day operations to kind of help navigate the changing landscape and translating all of these legal developments into kind of actionable, practical guidance that the teams can then implement. Emily I'm also seeing a lot of uh kind of an increase in misinformation and misconceptions about the 340B program. And we're not going to talk about today, you know, the various policy positions of all of the stakeholders in 340B, but what are some of the top compliance myths that you're seeing?

SPEAKER_02 6:41

So I think the number one compliance myth that we see is that the 340B program is a pharmacy program. And it certainly is a program that involves the purchase of drugs, and in that regard, it is very much a pharmacy program. But the operation of 340B programs in today's 340B world really spans across all different operating divisions and administrative positions in a covered entity, and particularly in larger hospital-covered entities, that means there's a lot of folks that generally need to be involved. The real challenge with considering the 340B program to be a pharmacy program is that it can often mask many of the other risks associated with operating a 340B program. There are some misconceptions about the 340B program. And one of those primary risks is that because it is a program that does not involve federal dollars, that the risks are either low or mild, or that uh I think one we hear a lot is that there's no federal False Claims Act risk because the 340B program does not involve federal dollars. All of the 340B discounts are funded by manufacturers who are required to offer those discounts as a condition of having their drugs covered by Medicaid and Medicare Part B. And because we are increasingly seeing an intersection between governmental payer policies and 340B drugs, there is often a federal overpayment risk, federal false claims act risk associated with 340B program operations, which really heightens the need for folks at covered entities outside of just the pharmacy group to be involved. The penalties for the False Claims Act are severe. They are trouble damages and per claim penalties in the tens of thousands of dollars. And I think while we have been seeing more and more enforcement and risk associated with billing Medicaid for 340B drugs, because many states require that 340B drugs be identified on the claim and billed at their acquisition cost and then are paid at their acquisition cost, which is significantly lower than the rate that would otherwise be paid. So if you inadvertently bill a 340B drug as a non-340B drug, that can create a need to refund the Medicaid program. And if that is occurring on a frequent basis, that can add up pretty quickly. Assuming that CMS moves forward with their new proposal to reduce the amount that they pay for 340B drugs under Medicare, we will see similar risks associated with getting it right in terms of identifying 340B drugs on claims to Medicare. And I will note CMS did previously implement a payment reduction on 340B drugs. It was ultimately overturned by the Supreme Court. But what we did see in looking at some of the historical information about that prior effort to reduce the amount of payment on 340B drugs, there were a lot of hospitals that were really struggling to identify those 340B drugs properly and did in fact submit claims that would have resulted in overpayments had CMS not ultimately been required to unwind those cuts. So, particularly as we are going into a world in which there may be actual Medicare implications related to proper billing of 340B drugs, I think it is critically important to understand that in those scenarios, there are federal dollars involved and there are quite significant risks that are entirely outside of the 340B statute itself.

SPEAKER_03 10:47

So, what are some practical tips and best practices for in-house counsel who partner with their organization stakeholders on these issues?

SPEAKER_02 10:55

I would say the number one concern consideration is to make sure that as in-house counsel you understand the full scope of laws and regulations that are applicable to the operation of 340B programs. Again, in the 340 B space, historically, there has been a lot of focus on whether particular program operation decisions, activities, proposals are compliant with the 340 V statute, whether HERSA, the agency that oversees the program, would take issue with the various operational decisions, what would happen if the covered entity were audited by HERSA? Would HERSA cite a particular instance of noncompliance if they were to audit the program? But what we're increasingly seeing is that the risks are entirely, again, outside of the 340B statute. So, no, if HRSA audits your 340B program and you are engaging in activities that result in the submission of federal false claims, HRSA is not going to cite that on audit because that's not within the purview of their audits. It's not within their oversight. But that doesn't mean that it isn't a problem that needs to be fixed and addressed. And so as in-house counsel, I think it's it's very important to understand the full scope of laws. Again, not just the Federal False Claims Act, there are also state considerations, licensure considerations. We're seeing a lot of licensure considerations, both individual professional licensure and hospital licensure considerations recently. So understanding all of those issues, and admittedly it's a lot. I'm not going to pretend that it's not a lot for in-house counsel, but in-house counsel needs to understand that because in-house counsel is often going to be the source of information for the individuals who are overseeing the program on a more day-to-day basis, the pharmacy operations folks and even consultants or vendors that are working with 340B programs. And the other important consideration, once you understand the laws and regulations that apply, is the organization's risk profile. I'll talk a little bit more about it at the end, but 340B is not a space where there are black and white answers. And so understanding what your organization is willing to do, do you want to operate a 340B program with no risk? Or are there risks that you are willing to take because of uncertainty or because of operational or financial considerations? Again, that is really a role for in-house counsel to play and to understand. So from an in-house perspective, how do you think that Cover 90s can ensure that there is this oversight of the 340V program from different folks within the organization and not just in-house uh counsel and not just the pharmacy staff, but really a multidisciplinary, cross-departmental team. And then in that team, since we've been talking a little bit about um having pharmacy not run the whole show, what role should pharmacy be playing in the oversight and coordination of 340B programs?

SPEAKER_03 14:08

Yeah, so you know, I think, you know, as a drug purchasing program, pharmacy really has the expertise to run the program, but because it touches on so many different areas of operations, as you mentioned, you know, pharmacy should not be running the show independently. And effective compliance really requires oversight by a multidisciplinary team. And that's because it touches so many different areas of operations rev cycle, IT, legal compliance, you know, finance, um, regulatory affairs, state and government relations, the political affairs team, and probably many others, you know, that I have forgot to mention. And so we really need an effective governance structure to kind of bring all of these groups together. And what that looks like at each covered entity will vary and depends on the existing uh governance structure that's set up within the organization, the resources that are available, the risk tolerance and profile, as you mentioned. But at a large academic health center like UCSF, this could include having a dedicated 340B compliance committee and an executive steering committee, where the compliance committee would be responsible for standard compliance review, um, oversight of the program. The committee would review industry updates as they're occurring in real time. They would review ongoing monitoring and auditing work and then corrective action plans depending on the outcomes of the auditing work. They would also be responsible for kind of ensuring compliance and reviewing significant operational changes, whether that's uh opening a new child site or starting an MTM or medication therapy management program. And then the committee would escalate issues of broader financial or strategic importance to the executive steering committee, which you know is made up of senior leaders to kind of weigh in on matters of strategic importance and also make decisions on those issues. I think another critical component of effective governance is also keeping the C-suite informed. Since everything is changing so rapidly, regular updates allow leaders to understand both the opportunities and the areas of risk within their 340B programs. And then having you know defined uh governance oversight and structure and providing regular updates also helps build a culture of compliance where stakeholders are able to identify and raise issues early.

SPEAKER_02 17:17

And what are some ways that covered entities can ensure that the 340B risks are being understood by different components within the organization so that uh different uh folks who have different monitoring or oversight responsibilities are aware when something may require correction or evaluation? And should those approaches be different when we're talking about pure 340B statutory compliance versus the other federal and state laws that may intersect with 340B and have different oversight considerations, compliance considerations and enforcement risks.

SPEAKER_03 18:01

Yeah, so I think the same framework applies for managing 340B risk and managing uh other regulatory risk. And whether you know we're talking about 340B compliance or compliance with other state and federal laws, the principles of an effective compliance program don't change. So this requires having uh clear ownership, you know, defined policies and procedures, ongoing monitoring, internal auditing, education, and a process for identifying and correcting issues. But as we touched on earlier, you know, the 340B is unique in that it touches so many different areas of an organization, pharmacy, IT, you know, legal compliance, and more. And so that's why having this effective governance structure is so important because you can bring multiple stakeholders together to identify the risk and then work collaboratively as you know issues are identified, which can help avoid larger problems down the road. And just an example of you know, I think this working well is that if your auditing reveals that modifiers aren't being attached to the claims as expected, you can work through the issues in real time with IT to kind of correct the systemic issues, depending on when the issue was caught. You know, work with RevCycle to correct and reveal claims or work with your 340B program staff to notify manufacturers and state Medicaid agencies. And then compliance can step in and do follow-up auditing to ensure that the issue was fixed. Um, so having this type of ongoing collaboration continues to kind of contribute to having the culture of compliance where people can raise questions and it allows legal and compliance to be involved in the decision-making process early or kind of at this, you know, when an issue is first identified and work through the corrective actions. And so, Emily, since you work with so many different covered entities, have you seen any governance models that work particularly well?

SPEAKER_02 20:14

So I really think it is the models to some extent that you've been describing where there are really meaningful and collaborative efforts across all portions of the organization that touch on 340B, legal compliance, um, pharmacy, but then also things like IT and accounting and facilities operations. There are so many elements of the 340B program now that uh again are really cutting across every possible department within the hospital. And you know, having that uh group that can come together and discuss the various ways that the 340B program intersects, and then also ensure that within the organization you're identifying the right component to address particular concerns or considerations. But it is also important to make sure that there are leaders involved within the organization who have the appropriate authority to direct people to carry out the tasks necessary to ensure compliance within the program and have the authority to make sure that various changes or oversight actually happen. Because one thing that is obviously challenging, again, particularly with much larger organizations, is that while there may be a scenario in which the pharmacy department would like to implement a new 340B initiative that requires the cooperation of the accounting and cost reporting teams, pharmacy can't direct the accounting and cost reporting teams typically to do things to effectuate uh their initiatives. And so it's important to have. Someone who is in a position to facilitate the communications between those two groups and make sure that everyone is on board with whatever it is that pharmacy may want to be doing, and that it does actually get carried out by the folks outside of pharmacy who can actually carry out the tasks, for example, making changes to the cost report that would need to happen to ensure 340B compliance and also in that instance compliance with Medicare cost reporting rules and the False Claims Act. So I think particularly as we see again the 340B program moving away from being a purely pharmacy program to this interdisciplinary whole organization program, the collaboration is very important. The ability to have meaningful discussions is very important, but also ensuring that there is appropriate leadership, accountability, and the ability to actually, I'll call it, make things happen across departments so that again, the organization as a whole can ensure that the 340 V program, as well as all the other areas that it touches, are within a risk profile that is consistent with what the organization is willing to tolerate.

SPEAKER_03 23:20

And building on that, you know, recently I've seen an increase in vendors and consultants kind of pushing more aggressive arrangements in the 340B space. And I think maybe in an effort to fill budget holes created by the manufacturer restrictions and other Medicare and Medicaid reimbursement cuts, you know, staff at covered entities may be more willing to kind of entertain these arrangements than they had in the past. So, Emily, what are some red flags and problematic vendor arrangements that in-house councils should be on the lookout for?

SPEAKER_02 23:58

Yes, we have seen a somewhat troubling uptick in um, I will call them unscrupulous vendors in the 340B space. Now, to be clear, there are many very legitimate uh vendors in the 340B space with long tracker track records of well-established uh programs and compliance. So it's not to say that all 340B related vendors are a concern, but again, we've seen this uptick in vendors and some arrangements that do raise some red flags. And I would say in particular, the first thing to look at is whether or not a vendor is reaching out as a cold call or an unexpected solicitation. Generally, it is better for 340B program initiatives and changes to originate with the covered entity and then send out an RFP or otherwise reach out to vendors that have already been vetted. That is not always possible, and certainly there are some opportunities when you do have a vendor that reaches out in an unsolicited manner. But it is always important to be particularly careful in those scenarios. One of the ones that we see a lot lately are uh unrealistic promises of revenue. Um, as Kelsey mentioned, I think some of this is the result of hospitals being under extreme budget pressure in some instances and looking to fill some of those gaps with additional 340 V revenue. And so it can be very appealing and enticing to get fancy slide decks that have a lot of dollar signs attached to them. But it is always important to look behind those presentations and those promises to understand what is actually being proposed and whether it is in fact realistic. Um tied to that in many circumstances are opportunities that are pitched as being at no cost to the covered entity. So it is all upside to the covered entity. Often these are uh framed as well as being no risk to the covered entity. So as long as you sign this contract, you can just sit back and watch the dollars roll in and uh don't worry about how that's happening or what might be going on to produce those dollars. Um, again, those really require a lot of attention, particularly with programs that are of no cost to the covered entity. So the vendor may be footing the bill for all upfront or capital costs, and sometimes they're quite significant costs. There are additional fraud and abuse considerations associated with those. So it's very important to ensure that there's proper legal review. Again, not by just someone who understands 340 V, but someone who understands all of the laws involved with those arrangements. An area where I would say there is very much a red flag is vendors who propose agreements that they will not negotiate. So it's a take it or leave it arrangement. Again, many times these present themselves as cold calls, very attractive dollars associated with them, uh, so long as you agree to everything that the vendor has proposed in their contract and sign their contract as is. Um, these are tied to uh extreme pressure to sign the agreements quickly. You know, if you don't sign this agreement within the next five days, then uh you don't have the ability to pursue it. Um uh and occasionally those will result in circumventing in-house legal review. Legal review does take some time. And so if there is an expectation that the agreement has to be entered into right now, um, we do see occasions where folks within the organization will sign those agreements so that they can uh take advantage of the dollars and they will ask questions of legal later and expect uh in some cases in-house counsel to fix what are unfixable uh problems uh with those arrangements. So I think the biggest tip for dealing with uh vendor arrangements is to look to see whether the vendor has a legitimate proven track record uh of, I don't want to call it success, I would say of working well with covered entities to achieve mutual goals. Um, and don't be afraid to check references. Um, you know, if a vendor is a legitimate vendor, they will be willing to share with you other covered entities that they have worked with. Um, and you should reach out to them, um, particularly in-house counsel, reach out to other in-house counsel to find out what has been happening with the arrangement. Obviously, there can be some privileged considerations, but um, again, you know, you don't want to be the guinea pig for a new vendor or a new model. Um, you want to make sure that what you're doing has been vetted many times by many other covered entities and has been shown to be an arrangement that is worth pursuing. Um so to that end, uh, Kelsey, what are some ways that in-house counsel can reduce the risks of folks within the organization, maybe pharmacy staff, 340B staff, other individuals entering into contracts without in-house oversight? Um, and what is the best way to educate non-attorney staff about the importance of reviewing vendor arrangements and the risks that can arise in those agreements, particularly again, these ones that are all upside to the organization?

SPEAKER_03 29:37

Yeah, so you know, I think you know, there's practical controls that can be implemented, and you know, sophisticated covered entities probably already have um you know policies and procedures governing contract management, you know, who has signatory authority, who can enter into an agreement, you know, what areas of the organization need to kind of weigh in on different parts uh of a contract before it's executed, you know, certain stop gaps like ensuring that payment is not issued to a vendor until you know there's a signed written agreement that has gone through the internal contract review process, you know, and stored in your internal contract management database. But I don't really think that policies alone um can solve the issue. And the most effective way to kind of reduce the risk that individuals are circumventing um legal review or you know, staff are entering into contracts without legal and compliance uh involvement is to really um try to move away from simply being a legal advisor and becoming more of a strategic thought partner. And you know, once you kind of dig in um to the weeds and kind of work through these issues, understand the goals and objectives of the business team, you know, the team won't want to sign a contract until you know you've weighed in. And it's a way for in-house counsel to provide more value, um, you know, and also reduce risk on top of just having uh policies in place. And then to your second question about educating non-attorney staff about the risks related to suspect vendor arrangements, I found that this happens best just through kind of informal conversations and not formal presentations. Um, I think you know, in-house or internal staff, you know, may roll their eyes if there is another mandated um training. I know that there's quite a bit of training fatigue with the amount of kind of formal presentations um that are uh provided um in large organizations. And so, you know, as I'm working through a contract, I really like to try to um explain, you know, what it is that I'm looking for, why certain questions and the answers to those questions are important and really you know, not just send red lines back and forth, but kind of treat it as a conversation and issue spot together. And then also, I think, you know, as you mentioned, it's always if it's too good to be true or it sounds too good to be true, to watch out. And those are really the arrangements where it's important to bring in legal and compliance from the very beginning. So, Emily, in addition to kind of an increase in uh vendor arrangements that you know require additional um in-house and compliance review, I'm seeing manufacturers also getting more aggressive, either directly or through the vendors they've engaged in their outreaches to covered entities. And in the past couple of years, I think kind of the nature of the inquiries and the volume of the inquiries has really changed. So, what are some best practices you can provide for covered entities fielding these inquiries?

SPEAKER_02 33:15

It's been very interesting over the past year or so because the guidance and approach to responding to manufacture inquiries has really changed. Um, under HERSA guidance, uh, manufacturers are permitted to reach out to 340B covered entities to make what are known as good faith inquiries regarding compliance with the prohibition on 340B drug diversion, that is, providing 340B drugs to individuals who are not patients of the covered entity, and duplicate discounts, which are scenarios in which a manufacturer is asked to provide both a 340B discount and a state Medicaid drug rebate on the same drug. And it used to be that manufacturers would reach out and covered entities could largely ignore those uh outreaches and nothing would happen. Um, so you could just uh move on to other business when you got an inquiry and uh the manufacturer would just go away. And those days are over. And what we are now seeing is that uh when manufacturers reach out to covered entities, it is typically because they already know that the covered entity is engaging in purchasing patterns that they believe from their viewpoint are diversion or duplicate discounts. And to be clear what the manufacturer may view as diversion and duplicate discounts, and what the covered entity may view as diversion and duplicate discounts, and actually what HERSA may view as diversion and duplicate discounts are not all the same thing. But current entities should always assume that if a manufacturer is reaching out with one of these good faith inquiries, the manufacturer already knows the answer to their questions. They are not asking you about whether your purchasing volume changed because they don't know. They uh in some instances are playing a little bit of a game of gotcha. They know what the answer should be or what the answer actually is, depending on what data they have, and are really looking at the way in which the covered entity responds and using that to gauge whether or not they want to uh request the authority from HERSA to audit the covered entity. Manufacturers can engage in their own audits of covered entities. It is a provision in the 340B statute. So it is something Congress gave to them and intended that they would exercise when necessary. Um so when a manufacturer reaches out, it's important to not ignore that outreach, um, not be uh cute or passive aggressive in the response. We've been seeing some responses lately along the lines of, you know, thank you for reaching out. We're very committed to 340B program integrity. We reviewed our records and have not identified any noncompliance. Um that might have gotten a manufacturer to go away two, three, four years ago. Uh, that is going to uh result in further pushing by manufacturers and possible audit requests in the current environment. So uh it is, I would say, number one importance. Um, you know, as in-house counsel, you should be sure that you have communicated with the individuals who are likely to receive those requests, that as soon as they receive one of those requests, they contact you as in-house counsel. The individuals who will receive those uh outreaches for manufacturers are what are known in the 340B world as the authorizing official and the primary contact. They are individuals listed in the online public 340B database. So that is who the manufacturer will contact. You should make sure those individuals know to alert you immediately if there is manufacturer outreach. The second thing to keep in mind is assume all communications with the manufacturer will be made public. We have seen manufacturers making those communications public and uh generally doing so in circumstances that are really not a good look for the covered entities. Um, and uh their covered entity responses, in some instances, you can fairly easily determine why it is the manufacturer decided to pursue an audit because the covered entity from an outside perspective of a lay person was being evasive, throwing up roadblocks, um, largely being uncooperative. So you don't want to be viewed in that manner. Um, and so your responses really do need to be coordinated appropriately from that perspective. And then take the inquiry seriously. Um, it is very often the case that whatever it is that the manufacturer is asking about it is in fact correct. So often with particularly duplicate discount inquiries, um, a covered entity will determine that, yes, in fact, there was some error in their claims processing and the appropriate codes were not applied to claims uh to state Medicaid programs. That is certainly not always the case. Um, but in those circumstances where the manufacturer, I will say, is right, it is important to again recognize that fact. Now, again, there are differences in the interpretation of the statute from covered entities and manufacturers, and covered entities do not have to agree with manufacturers. And there are some boundaries to what manufacturers can request. If they want to complete an audit, they have to obtain approval from HERSA. So a good faith inquiry cannot be an audit if they are requesting to review all of the information about your 340B program. That's an audit. Um, and they need approval from HERSA. Um, although again, be careful because it doesn't really require anything more than them asking HRSA for audit approval and showing that they reached out to the covered entity and did not get exactly what they wanted to get that audit approval. So just proceed with caution. Um, make sure that you are taking those inquiries seriously, that you're not ignoring them. And quite honestly, what we're seeing right now is that covered entities that are cooperative with manufacturers, um, the manufacturers are largely going away. And covered entities that are making things more difficult for manufacturers, the manufacturers are requesting audit authority. Um, and so I would say the easiest way right now to avoid the potential audit risk is to be as cooperative as reasonably appropriate with the manufacturer. So in terms of day-to-day operations of covered or of covered entity 340 V programs, Kelsey, what what do you think is the best way for in-house counsel to really understand what is happening uh given the complexity of 340B programs?

SPEAKER_03 39:44

So, yeah, so I think you know understanding the operations is really essential to being able to advise effectively. Um, you know, as in-house counsel, I can't advise if I don't understand how the 340B program operates. But as I found, you know, it takes time. Um, the best way that's worked for me is asking as many questions as possible and really spending time with my operational partners. I think I probably spend you know more time kind of in the weeds on 340B operations than any other area of uh hospital operations. Um, you know, I try to attend operational meetings when appropriate. This can be difficult, kind of with how leanly staffed a lot of in-house departments are. Um, but you know, an investment of time kind of upfront to uh understand the operations really kind of pay off in the value that you can provide is in-house counsel. Another way is you know, ask one of your operational leaders to kind of walk you through the 340B life cycle, both on the purchasing side, you know, patient qualification and then claim submission. Um, and if you yourself weren't involved in drafting your organization's 340B policies and procedures, um, I suggest, you know, reading them. It can provide a great roadmap for how your program is structured. Um, but ultimately, you know, the goal for in-house counsel isn't to be an operations expert. You know, you have those already internally, um, but to know enough to really ask the right questions, know when you need to call in outside counsel for additional expertise, and being able to kind of identify where the greatest areas of risk lie. So, Emily, you know, you've worked in the 340B space for a long time. What advice would you provide to a new attorney advising on 340B program compliance?

SPEAKER_02 41:54

340B has an extremely steep learning curve that in some ways never ends because the program is constantly evolving on a day-to-day basis. And what I would suggest, if you can, is if you know anyone uh who is an attorney in the 340B space, see if you can borrow some of their time, maybe go out for a drink with them and see if they'll talk to you about uh the 340B program and how it's structured from a legal perspective and what uh the challenges are uh related to advising on 340B legal and compliance issues. The 340B program is an unusual federal program in that uh the federal agency overseeing the program, HERSA, does not have uh notice in comment rulemaking authority over the program, which means the entire program to some extent is operated through guidance, some of which is written down, most of which is not. And the way that most attorneys in the 340B space um really learn about the risks, the ways to advise clients, the current enforcement climate uh from a HERSA perspective is talking to other 340B attorneys. Um there really just is not some place you can just go to learn everything about 340B. There's um, to my knowledge, not a book anywhere that would tell you at least what is currently happening with 340B outside, again, the language of the statute and the very minimal regulations. Um, so it again really is important to talk to other folks in the space uh to learn about what the issues are and how to manage them. To the extent that you are looking for actual materials, uh, there are some. I would say that from a day to day update perspective, um, the larger hospital associations typically have good 340B resources and are tracking the issues, and then um 340B health. Is the major association for largely 340V hospitals, the 340B covered entities in general. There is a very niche publication, the 340V Report, that publishes information on a very, very up-to-date basis several times a week about 340B. And that's just to tell you how much information there is. There is a publication that publishes multiple articles several times a week on developments in the 340B space. From just a fundamentals and structure of the program perspective, there are some free resources available. The government funds a technical assistance contractor called Apexis that provides government-approved information regarding the 340B program, and they have a series of free webinars and in-person programs called 340B University. That can be very helpful as well. But I will just note if you're coming to those programs or looking at those webinars as an attorney, keep in mind all of that information is the government's view of the statute and the government's view of the program. And they are not going to provide nuanced legal analysis of the enforceability of their interpretations of the 340B statute. Ultimately, though, a lot of on-the-job training. So given that, Kelsey, as uh someone who does work in-house in 340B, um, what are what are some shortcuts, if any, that are available uh to cut through all this information to help advise your internal clients?

SPEAKER_03 45:39

I wish there were shortcuts. Um, you know, I think that would make it easier. Um, but it is a lot of on the job kind of training. And the changes are really occurring from so many different areas. Um HERSA, new bills introduced in Congress, the manufacturer actions, the ongoing litigation, you know, and all of the various state laws um that are being passed. Um, and so I think the 340B report that you mentioned has been very helpful and 340B Health as well. I think in-house, you know, subscribe to the news sources that your pharmacy team is uh accessing on a daily basis. And if you're at a covered entity, um check with your pharmacy team for which subscriptions you know they already have for these types of um publications. It's usually as easy as just you know adding you to the roster and you can start uh getting the updates. But I think you know, 340B report has been great. You can skim it and kind of uh see which changes might require legal analysis or you know have a legal impact and which are more kind of developments in the policy space. I thought it's also helpful to subscribe to um law firm uh newsletters and webinars. Those are usually free. And then um the you know uh conferences like AHLA, there's typically at least you know one um session that is directly on point for um recent developments in 340B or is you know related, and then also just regular check-ins with my own pharmacy team has really helped um keep me up to date. And you know, pharmacy teams they're very well connected kind of throughout the industry, and a lot of times I hear about updates you know from my own team before they even hit the trade press. Um so uh Emily, to close out, you know, we've talked a lot about recent 340B developments and managing risk. Of all the recent developments, where do you think in-house council can provide the greatest value or which development will have the greatest impact on in-house council?

SPEAKER_02 48:04

So, from an in-house perspective, I think what is most important is to understand uh where there are actually legal issues and what can be done about them. And so with current 340B hot topics, I will call them, there really are a range of perspectives that in-house counsel should be looking at and certainly using the legal, I will say, pathways uh to help manage time and focus. So uh there are currently two pieces of legislation that I mentioned that are getting a lot of attention. One of them has been introduced in Congress, one of them has just been proposed. From an in-house perspective, from a day-to-day operations standpoint, there's not much to do with those right now. There are no actual changes in the law. So it may be helpful at a very high level to understand what is being proposed so you can understand what the views of the 340B program are in certain corners of the stakeholder community, but you certainly don't want to expend time and resources trying to develop a legal response or strategy to provisions of proposed legislation that have not yet come into law. Similarly, with some of the current manufacturer restrictions on 340B pricing, it's important to understand what, again, is possible and what isn't possible from a legal perspective and what that framework for those requests look like. So in terms of those manufacturer requests, there is a body of existing case law as it relates to what information and what restrictions manufacturers can place on sales of 340B drugs. There is also a whole other body of case law that relates to whether or not covered entities can take legal action against manufacturers for imposing restrictions and what types of legal actions they can take. So, again, understanding the basic framework of what is and is not possible. So you're not going down a rabbit hole or the wrong path of uh using limited resources and time. Also, in terms of payment cuts that are being proposed and uh proposed rules, um, the rebate models, which again will be a proposed um pilot program, really understanding the organization's approach to providing comments to uh proposed uh rules and proposed federal policy changes. In some organizations, in-house counsel is heavily involved in that process, in others, it's entirely done by government relations. So, understanding, again, where to utilize your time based on what in-house counsel can actually do to um effectuate changes and uh address the 340B program concerns of the operations folks. Because sometimes they'll come to in-house counsel and in-house counsel really can't do much, um, and you may just need to refer them elsewhere. So I think with that, uh we we have uh come to the end of our uh best practices here, and um you know really appreciate uh the time that you have spent with us. And Kelsey, thank you so much for sharing the perspective of in-house counsel. I think uh in the 340 base space in particular, um, we don't hear from in-house counsel a lot, so I think it is really a voice uh that everyone can learn a lot from.

SPEAKER_03 51:30

Thank you, Emily, for sharing uh your expertise with the audience.

SPEAKER_01 51:39

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