“Legal issues intersect with non-legal issues in [the] 340B space,” says Brandon Shirley, a partner at Krieg DeVault, who teams up with Jason Prokopik, PharmD, Senior Manager & Pharmacy Consultant at Blue & Co., LLC to host this rapid-fire 340B review. Following the 340B Coalition Conference in San Diego in February 2026, they tackled five hot topics: the CMS Medicare survey for 340B hospitals; a court ruling regarding child site activation; the status of the rebate model pilot; Indiana's new mandatory 340B reporting requirement and the proposed Indiana Medicaid restrictions on 340B drug submissions; and a Ninth Circuit False Claims Act ruling against drug manufacturers. Tune in to learn more about each of these developments.

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Welcome. This is Brandon Shirley.

I'm a partner at Krieg DeVault,

and I have a guest here, Jason Prokopik.

I'll let him introduce himself.

He's with Blue & Company,

but we're here to have a little bit of

an unscripted chat here about various hot

topics in 340B. Jason,

why don't you go ahead and

introduce yourself and what you do,

and then I'll briefly

mention what I do here.

Well, thank you, Brandon.

Welcome everyone.

This should be a fun 30 or 35

minutes of interesting 340B topics.

My role at Blue & Company is to

provide consulting advice on 340B.

Blue is a public accounting firm,

so we do a lot of financial work for

hospitals and health centers and all the

different healthcare entities out

there. And I'm a pharmacist by trade.

And because of that,

most of my work revolves around the

pharmacy space and really leads into the

340B program. So provide general

consulting services, mock audits,

all the different types of things

that you would think of in the 340B

environment.

Great. And I'm with Krieg

DeVault as a law firm.

So I have worked in 340B for, I think,

15 of my 16 years as a lawyer. And

it wasn't something I planned on,

but I don't know how many folks plan

on going into 340B as part of their

career,

but it sure has disappointed in terms

of different issues that keep us up and

keep us busy. So Jason

and I often work together.

Legal issues intersect with

non-legal issues in 340B space.

So because we both enjoy this area,

we wanted to get together and

talk about some hot topics.

I think we're going to just

pick about five of them,

even though there's more like a list

of 20, I think, if we think about it.

But Jason and I also were at the recent

340B Coalition Conference in San Diego

and had a chance to hear from experts

all around the United States and

with the federal government on some of

these 340B issues. So we thought it would

be great to regroup, reflect on

what we've heard, what we're seeing,

and kind of just kick things around

a little bit and then close out.

So as Jason said, we'll

be about 30 minutes or so,

but we have a list of topics we want to

cover and may need to do another one of

these again, depending on how

in depth we can get. So Jason,

why don't you start? What's keeping

you up? What's your top issue here?

I don't think there is more hot topic

than a couple of these that we're going to

talk about.

And some of them have some time

constraints and reporting requirements.

And so we'll probably spend some time

on those items that there are deadlines

that are coming up.

And the CMS Medicare survey for 340B

hospitals has been the hottest topic

over the last month.

And it's been rather confusing whether

the hospitals need to participate or not.

And really what they're trying to do,

the government's trying to collect drug

acquisition cost data and they're going

to use that potentially to change

reimbursement policies in the future.

And so there has been a discussion about

whether hospitals need to participate

or not. And then if

they don't participate,

is there any impact that could

come down the pipe from them,

from the government for non-participation?

And so what everybody in the hospital

community is worried about is how will

this affect them as the hospital and

potentially on part B drug reimbursement?

We went through this

That was a significant impact

to many hospitals out there.

Many large DISH hospitals were negatively

impacted on the financial side.

That was overturned in 2023, I

believe, by the Supreme Court.

And there was a laundry list of things

that had to happen after that to kind of

reconcile with the hospitals in 340B.

And so everybody's fearful of

something like that happening again,

so people are hesitant to just give up

their data right away without knowing

more about it. So we've gotten a lot

of question from our hospital clients,

and it really is a mix. I'm interested

to hear your opinion, Brandon,

from the legal perspective on what they

may or may not be allowed to do within

this requirement or

suggestion, as we might say.

The reason this was overturned

legally by the US Supreme Court was

because the statute that CMS relies

on for Medicare reimbursement

of separately payable outpatient drugs,

that statute sets the default price.

And that's what I think most

people are used to being paid.

The statute allows CMS to vary

reimbursement. So they could say,

"We'll pay these hospitals more and these

hospitals less." That statute says you

can do that if you conduct

they didn't do a survey. They just said,

"We're just going to take a report that

has come out on what they think the 340B

cost is. " And they said for

340B hospitals only, it'll be,

I think ASP minus 27 or

25% or something like that.

So it was a haircut, but it

was an arbitrary haircut.

And the Supreme Court said,

"You got to do a survey." So CMS fixes

everything and then comes out this year

and says, "Okay,

we're doing our survey." What's

OPPS rule, they said something to the

effect in a response to a comment of,

do hospitals have to do this?

They said, "Well,

we think because we have to do a

survey, hospitals have to participate,

but they haven't been able to articulate

why hospitals have to participate." And

all they've been able to do

is say, "Well, if they don't,

we will find ways to take that into

account." I think there was an FAQ

CMS put out that said,

"We'll take non-responses as a

response." And so what that could mean

is that they'll pick a

number and say, "Similarly,

situated hospitals reported this,

so we'll just put you at that amount."

The legal issue is if a survey

has to be conducted,

is it a valid survey if

you only get 25% of 100% of

participants? Is that legally valid?

Is it a proper survey if

you're arbitrarily picking

based on non-responses?

So I think that's going to be

the legal issue this time around,

depending on how the surveys go.

I think legally it is to the advantage of

hospitals to not submit anything

because I think the fewer people submit

something, the less likely

it is that it's valid,

but that's going to be the test.

So if this is contested again,

I think the level of participation

will be key and hospitals should really

look inwardly and say, "Is this a

decision we want to make or not?

" Because I don't see the

requirement to participate.

It's just what's the effect

of not participating?

Yeah.

And I would say just from being out in

the field and talking to clients in many

states,

a majority of the folks who

didn't immediately jump on

the data requirements and

start submitting data later

on, meaning more recently,

they've decided not to submit that data.

And we're not giving advice

one way or the other,

but if someone is going to submit data,

we could help them figure out what their

reimbursement and drug costs and all

those things,

but many of our clients are

not participating in the

survey and they're going to

just take their chances. And obviously

that's their right to do that.

Yep. And that's consistent with,

I was kind of informally polling folks

at the 340B Coalition Conference.

And what I understood and heard is that

I think most of them we're going to wait

and see, but we're leaning toward

not. But you've got 11 days to decide.

I think the survey's due in 11 days.

So keep that on your calendars.

If you haven't decided already,

then definitely make that decision.

And our final piece of advice there is

if you started the process and you get

halfway through it and it's difficult,

you probably have to finish and do the

best you can to finish that survey.

Can't probably back out at that point

because you've already kind of told them

you're going to do it. So I

would say if you've started it,

just finish it and do the best you can.

Some of the data isn't going to be

completely accurate because it's hard to

gather the information they're asking for.

All right, moving on.

So the second thing, and just

keeping with the national scene,

there was a federal court ruling. I

think it was just a couple of weeks ago.

I think it came out of DC.

It's related to hospital child

site locations and removing the

requirements for the Medicare cost

report and some of the stipulations.

What do you think about some of

the things that came out in that?

And I don't know that

HRSA's responded yet to it,

but our petition is that this is

really good for our hospital clients,

but we still want to sit and wait to

make sure that nothing else comes out.

I'm sure there's going to be

some legal challenges there,

but what are you hearing on this topic?

The legal issue has to do with when

you can start or at least activate your

child sites, correct?

So before it used to be,

if you registered a new child site,

it was because it had to show up on

the cost report and be active in OPACE,

I think, which is only

during a period of time,

it was usually up to 11 months before

you could start realizing benefit

from your child site. What happened is

many of you may remember during COVID,

CMS or HRSA backed off of that and said,

as long as it's an active site and

you're dispensing to eligible patients,

go forth and do, you don't have to

wait 11 or 18 months. In 20 what,

23, I think as HRSA pulled

that FAQ off and said,

now that the public health emergency's

over, this flexibility is gone.

And legally,

this court said that's arbitrary to

just reverse policy like that. You

didn't do it the right way.

So the effect is whatever

starting a new child site, that is what

is applicable now. So that's great.

But I agree with you, Jason,

that sometimes we celebrate these

victories and then suddenly a court above

says, "Hold on a minute, I'm going to

stay that decision while we review this,

" depending on what their

mood is. But I will say this,

that the effect of the

decision is it did vacate

CMS's decision. So it does

apply nationally. As I read it,

it has a national application.

This holds,

this is really great for our hospitals

because you mentioned 11 months.

Sometimes based on the timing of

your cost report and the new clinics,

this could be an 18-month window that

allows for 340B savings much more quickly.

And what I've seen in HRSA audits,

obviously participating with clients

during these HRSA audits, during COVID,

there was a very loose interpretation of

some of these rules and it goes back to

the PHE, COVID emergency waiver and

everything that Brandon just talked about.

They've been more critical on having

the cost report and having it filed and

having all the registration pieces,

having revenue and expenses and the

proper worksheets in your cost report.

And so I think if this holds,

then we're going to have an influx

of new departments, new clinics,

new child sites, new provider,

rural health clinics,

all of those things that help with 340B

savings and help get savings back to

patients in need,

it'll happen much quicker. And so I really

hope that this thing holds on. Again,

we're a little bit hesitant to open the

floodgates with our clients and say,

"Go for it.

" But we think based on what you're saying

there and based on what we're reading

and hearing, we feel pretty good about it.

And so hopefully we'll know something

in the next couple months that either

solidify what we think is true or maybe

gives us a different opinion that we

want to put the brakes on it.

So do you know if there would be any kind

of timelines or I know the courts move

slowly when they want to and they

move quickly when they want to,

but do you have any estimates on

timelines for these kind of things?

There's a time to appeal. And

depending on how critical this is,

CMS or HRSA can ask the courts to ask for

emergency relief. They might ask the

judge who issued the decision to stay it.

They might ask for emergency relief from

an appellate court while they try to

brief this issue.

We saw something similar with the

rebate model where they tried to say,

"Hold on, put the brakes on this decision.

Let us litigate this before we get

there." So this is a fresh decision.

And I would at least say,

give it 30 days at least before

you check back in and say,

"What has been the status of this?

Because things can happen in the

meantime." So you hear the headline,

don't rush into it yet.

I would definitely wait and then kind

of see where courts are leaning on this

one.

And regardless,

you would normally have to wait anyways

until you have that cost report to

support all this activity. So if

you wait another month or two,

it's not going to kill you

to just sit tight for that.

Because if this all works out,

you don't have to worry about those

registration windows and you don't have to

worry about your cost

report. So theoretically,

if you change your policies and

procedures to support what you're doing,

you could turn this on immediately.

And if that's May 2nd versus April 2nd,

it's only going to save you a month,

but maybe you're protecting yourself

if something changes in the meantime.

You're definitely the guy to go to then

with once you want to get this rolling.

So it's great to hear. All right,

what else on your end, Jason?

That kind of leads into

how the government works.

And obviously during the government

shutdown back in October,

we had the rebate model pilot

be announced and pushed forward.

And within the 60 days, I believe it was

right around Halloween, that obviously,

as we all know, was put on hold

But the rebate model pilot idea is still

lingering out there and it's affected

some of the drug companies and current

things that they're doing and the

requirements that they're asking for.

But where do we stand with the rebate

model and what the next steps are?

And is it going to come back around and

is it going to be the same scope that we

recently saw or is it going

to be something different?

The rebate model as it was initially

piloted last year was going to be focused

on, I think, the drug subject

to the Inflation Reduction Act,

and it was only nine manufacturers I

think that were initially involved in it.

And HRSA was going to say,

for these limited amount,

limited number of drugs, covered

entities need to submit a rebate request,

basically claims data. They buy

the drug, not with a discount.

They buy it at cost, submit a

rebate, the manufacturers review it.

They're supposed to have, I think,

10 days to decide should

this be paid and pay it.

So it was fundamentally

changing everything that you

would think of that you're

used to with the upfront discount.

When it was supposed to

take effect January 1st,

a court in federal court in Maine and

then the First Circuit Court of Appeals

effectively said, "Nope, you did not

do this the right way." Effectively,

they told CMS,

"You received thousands of comments

talking about how burdensome and different

this model is going to be. All these

entities have relied on this approach for

decades and you're just changing it

all of a sudden with no consideration."

HRSA, CMS, they lost and lost badly.

So they allowed their rule to be vacated.

And I guess maybe sooner than I thought

they sent out a new proposal and

said, "Okay, fine.

Let's spend more time looking at what

needs to be looked at so that we can

survive a court challenge down the road,

which will probably come." And I think

they just extended the deadline into,

was it April or May?

Yeah, into April, I believe. Yeah.

April. Yeah.

So they're asking for a lot of information

in this request for information.

I think some things we want to look at

and make sure as this moves along is,

are they going to make this a rebate

model applicable to all drugs,

not just the limited drugs that were

on the IRA? Is it going to be broader?

Is it going to be more narrow?

Definitely keep an eye on CMS's activity,

HRSA's activity as they start to roll

this out because either it could be a big

deal, it could not be, but they're

definitely spending the time on it,

so they want to get it right this

time, but it's not going away yet.

And what I would say is that we just

need to continue to prepare for it as if

it's going to happen. And if it doesn't,

we all can celebrate at a later time.

And what I've seen just recently,

and actually there's a deadline today

for some changes to some of the drug

companies. And I believe, and

this is just Jason's opinion,

but I believe this change is in response

to the drug companies losing their

fight with the rebate model

and that pilot program.

But there has been some changes in the

claim submissions and the requirements

needed through the second site

solution family of platforms,

specifically this one from ESP.

And some of the requirements for

specifically Eli Lilly and Novo Nordisk,

the two drug companies that

have made major changes,

they're asking for medical claim

data and in- house pharmacy data,

meaning entity-owned pharmacy data.

In addition to all the data they've asked

for over the years and mostly

from the contract pharmacy arena,

this information is really hard to gather.

It's similar to the information that will

be part of any rebate potential pilot

or rebate program in the future.

And so I think this is kind of a flavor

of what we might come across down the

road, but it really has

been put in place now.

And I think Lilly started

their requirements in

February with a 45-day window,

which were past that day already.

And Novo started theirs effective on

April 1st and have some of the same

requirements,

but gathering this data and having

software to help us gather this data and

submit it is really cumbersome.

And if we add in that we're going to have

to pay full price for the drug on the

front end as the rebate

model pilot suggests,

this is going to be an

administrative burden,

potentially administrative nightmare

for a lot of covered entities out there.

And obviously, as Brandon mentioned,

just relying on this money in the

savings to help their patients,

treat their patients, add services

that they may be not able to afford,

this could put a significant burden on

a lot of covered entities out there.

So real quick on that,

is the policy that Lilly does not give

the front end discount unless they have

this data,

or are they doing this to audit and go

back and see if they should have given

the discount in the first place?

Well,

this is a little bit different than

the rebate model pilot where they asked

for you, the covered entity

to pay upfront the full price.

This is a after the fact

data submission requirement.

The thought is if you

don't submit enough data,

then they will shut your pricing

off at some point. So in essence,

you will be paying full price down the

road if you don't have enough data to

support the claims.

And what we've seen from the ESP platform

and the current contract pharmacy

submissions is these companies

are paying attention to this.

They submit purchase data to ESP and

theoretically your claims data coming

from your own submission is supposed

to match in terms of quantities.

And when it doesn't, then the drug

companies will shut your pharmacy off.

So if you've designated one pharmacy and

now you don't submit enough data or it

doesn't match up or line up

with the purchasing activity,

then Lilly or Novo or any of the drug

companies will shut off your pricing. So

in essence,

at some point they will take away that

340B benefit for you if you don't meet

their requirements.

And it's kind of a mystery where the

data is coming from on the manufacturer

side, which you would expect that,

but it's become cumbersome to even keep

those things active and running because

of all the data requirements now.

So real quick then,

why couldn't they say the data you

sent doesn't show this is an eligible

patient,

so we should be able to get paid back the

discount because you can't justify it.

Why isn't it something like that and

why are they going to straight to like,

"We're going to shut you off?".

They're not validating patient activity

or patient eligibility as part of this

process. They're not auditing

the claim data to say, "Yes,

this was a 340B patient of the hospital

or health center or Ryan White Clinic."

They're just matching up the claims you

provide to the purchasing data that they

have that comes from the same covered

entity based on the RX number,

the prescription number. So they're

not testing the claim eligibility,

they're just testing quantities.

And if your quantities don't match

up to what they would expect,

they give you a couple warnings and

then eventually they say, "Sorry,

you haven't reconciled the purchasing

data to match the claims data that you've

given us. Therefore, we're going to

shut your price off your pricing off.".

Is the definition of eligible

patient part of this?

It is not.

This analysis. Okay.

And claims that folks are

submitting sometimes aren't

even claims that have been

replenished. They will be

replenished in the future.

So there's a lot of data being sent back

and forth and it's hard to marry up and

reconcile the matching process.

That obviously is to the advantage of

the drug manufacturer because they can

just shut off your pricing if they want,

and then they can claim that you haven't

submitted enough data to support it.

Oh, on top of that, they have

timelines. So either in 30 or 45 days,

those claims expire. So giving data, if

we were to give data back in January,

the drug companies can say, "Sorry,

you didn't submit it on time." And

regardless if it's eligible or not,

they just don't accept it.

And so that's where some of the

issues are really happening today,

but could happen even in

greater amounts in the future.

HRSA has not, to my knowledge,

published or sent or rebuked

or anything this policy.

And so I think a lot of us are waiting

to hear what HRSA thinks about this

because legally the statute says

manufacturers shall offer the discount.

And at some point, even the courts,

federal courts that have upheld

manufacturer restrictions

have said there is a

line that will be crossed at some point

where you're no longer quote unquote

offering a discount.

So I think everyone's testing that line

and these types of policies I think

get us close to that. And so

we'll maybe know someday. Well,

I know we've got just a

couple more topics here.

I think a little bit local and national.

Indiana is doing some interesting

things that may have ...

At least Jason and I are

both based in Indiana,

and we're seeing some things that may

have some national implications or that

aren't strictly local. What are

you seeing, Jason, around Indiana?

There are two big topics.

And the first one is the

hospitals now have to report 340B

activity and operational expenses and 340B

savings. They have to report it to

the state. This happened last year,

but it is in effect as of

April 1st of this year.

And there is a fine if

you don't participate.

So there's a financial consequence if

you don't play ball with the state of

Indiana.

And they're looking for data globally

from how much revenue is created by

340B claims, how much

is being spent on drugs,

administrative costs, and all the things

that go into operating the program.

And they're just looking for large

due here on April 1st or March 31st.

That has created a significant burden

for a lot of our hospitals here in the

state of Indiana.

And that's going to be just hospitals.

It's going to be every year,

so it isn't a one and done thing.

And we'll get the published reports are

supposed to come out in November from

Department of Health.

Yeah. Sometime in the fall,

they're supposed to put all

the information together

and give it back to us.

And the hardest part is that a lot of

yet because they haven't finished their

Medicare cost reports for the year.

And the accuracy of the data will be

in question because we might have to

estimate some of this information because

we don't have the final results from

2025 yet.

And so there's a timing problem with some

of it for some hospitals in the state

of Indiana. At the end of the day,

we're not really sure what they're

going to do with the information.

Everyone's a little bit nervous about

that as well, but more importantly,

it's people are freaking out because

they wanted the data to be accurate.

They want to give the right information,

but it's hard because we don't have

that information yet. And obviously

financially,

running a hospital is very complicated

and they're asking for some data that is

just hard to compile and put together.

The headaches that folks have been

calling us about and really people are

nervous about giving that data up because

it might not be as accurate as they

want it to be.

Yeah. And the point of a lot

of these laws is to, I guess,

get to the issue of how 340B dollars

are being spent, where they're going,

who's getting them. And if

you don't have reliable data,

I think that feeds into that narrative

of confusion and may lead to some bad

policy decisions if it's

misused or misunderstood.

The second thing in Indiana,

there's some proposed changes

to how managed Medicaid

is handled in the state of

Indiana. And I know, Brandon,

you know more about that than I do with

your background in Medicaid here in the

state. So I know that it's going

to affect a lot of our hospitals,

health centers, and all covered entities.

And so can you kind of give

us your insight on that?

The quick summary of it is that what

Indiana Medicaid is doing is essentially

saying for managed care claims and

for Medicaid fee-for-service claims,

all of those will now be

claimed as rebates by the state.

To prevent a duplicate discount,

they're basically saying drugs acquired

through the 340B program cannot be

submitted to Medicaid managed

care or Medicaid fee for service.

That's the way they prevent

duplicate discounts. They just say,

"We're shutting off the

spigot. You will have to,

if you acquire the drugs through 340B,

you can't use those through

the Medicaid managed care,

Medicaid fee for service benefit.

You have to use drugs that you've acquired

at WAC or at cost or whatever it is

and submit them at that

amount." It diverts the stream.

So the state now gets the

claim as rebates more money,

the covered entities lose

that. To my knowledge,

this is new territory.

And I don't know,

I can't find any states that have done

this and I question some of the legal

bases for it.

So that'll be something that I'm

interested in looking at moving forward as

either this sets a trend for other

states or it's legally challenged and

found wanting, I think.

But again, we'll see.

And to be continued on that,

because I think there's a public comment

period that's happening right now,

and I think that goes

for another month or so.

Actually, I think it ends in a few days.

The public comment on the Medicaid

State Plan Amendment ends in a few days.

So that will be over and then it goes

to CMS and then we'll see what happens.

Awesome. I think the last thing we had

is a short kind of blurb about the,

you mentioned the False Claims Act,

something new that just happened within

the last couple of days that you wanted

to touch on.

I mean, this is one of those like,

should we be paying attention

to this kind of items or not?

Is this going to change the way

things work or not? Just Monday,

the Ninth Circuit Court of

Appeals upheld claim against

manufacturers under the False Claims Act.

Essentially what the covered entities

did is said the manufacturers were

overcharging Medicaid for the 340B drugs.

So instead of the ceiling price

where it should have been,

they were paying above that and they

have reasons to show that that happened.

But what they did under the False Claims

Act is they didn't dispute that they

were underpaid or that they

were not paid enough. They said,

"We're going to sue you under the False

Claims Act for overpaying Medicaid." The

False Claims Act allows them to sue on

behalf of the government and make claims

that these claims were all false.

And the court said, "Yeah,

that's fine." What the manufacturers,

there was four manufacturers who were

sued. They all said, "Wait a minute,

if you want to dispute the price,

that's under the alternative

dispute resolution process.

You shouldn't be in court.

You've skipped all that.

Plus you as covered entities can't sue

on your own under the 340B statute." And

the court said, "We

don't disagree with you,

but this is a False Claims Act case.

They're allowed to bring this

case." So it is interesting and it's

query how this plays out because if

you don't like what you're being paid,

there's maybe a mechanism to

not only force that change,

but also penalize drug manufacturers

for every false claim that was

submitted.

So there's penalties and treble damages

and all this stuff that goes with it if

it's found to be okay.

I don't know how often this happens.

So maybe this is just a novel case out of

California that's happened,

but if it stands as precedent

and can be used elsewhere,

then that could introduce a whole

new wrinkle into this program.

So much going on.

Well, thank you, Jason, for your

time and your expertise. Obviously,

when I kind of talk about what you

and I do, I help with legal issues.

Jason is the boots on the ground

details person, knows pharmacy,

knows the ins and outs of how things work.

So depending on who's

running into what issue,

I think we compliment each other

well and add great dimensions to this

discussion. So thanks

for being here today.

Well, thank you, Brandon.

This was great. I enjoyed it.

All right. Take care.

Thank you.

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