On March 3, 2026, Judge Amit Mehta of the D.C. District Court issued a decision setting aside a policy adopted by the Health Resources and Services Administration (HRSA) that required hospitals to register their off-campus “child sites” before those sites could receive discounts for administering covered 340B drugs. Albany Med Health System v. Health Resources and Services Administration, 23-cv-03252, 2026 WL 592593 (D.D.C. Mar. 3, 2026). The case was brought by a group of over 40 hospitals that participate in the 340B Drug Discount Program. The court’s decision vacated HRSA’s policy, which means that hospitals should be able to receive 340B discounts for drugs administered at their child sites without complying with the registration requirement.
The 340B program requires drug manufacturers to sell drugs at discounts to certain “covered entities,” such as free-standing cancer hospitals, children’s hospitals, and safety-net hospitals that have a very high Medicare disproportionate share hospital (DSH) percentage.
Many hospitals deliver patient care at offsite locations that are not on their main campus. Common examples of this include off-campus outpatient departments, like an infusion center that treats cancer patients. HRSA refers to these off-campus locations as “child sites.”
In 1994, HRSA published a notice in the Federal Register that addressed 340B discounts at child sites. The Notice established two preconditions to a child site’s participation in the 340B program. First, the child site must be listed as a cost center on the hospital’s most recently filed cost report. Second, the child site must be registered as reimbursable in the Office of Pharmacy Affairs Information System (OPAIS). Collectively, these conditions are known as the registration requirement for child sites.
The registration requirement can result in a significant delay—up to 23 months—between the time a child site is first established and the time it can participate in the 340B program. Hospitals file cost reports annually within five months of the close of their cost reporting period. Once the child site is reported in the cost report, the hospital must apply to add the child site to OPAIS. Such applications are only accepted within 15 days each quarter. Once approved, the registration does not take effect until the following quarter.
HRSA temporarily waived the child site registration requirement in 2020 in response to the COVID-19 pandemic. But in October 2023, HRSA issued a notice in the Federal Register that it was reinstating the registration requirement and afforded hospitals 90 days to bring their child sites into compliance.
Within four days of HRSA publishing its October 2023 notice, a group of hospitals filed suit in D.C. District Court challenging HRSA’s registration requirement. The hospitals argued that the registration requirement is unlawful because, among other reasons, it imposes eligibility conditions that are not in the statute, and HRSA lacks authority to adopt legislative rules.
In his decision issued last week, Judge Mehta agreed with the plaintiff hospitals that HRSA’s registration requirement for child sites is unlawful because it creates conditions of eligibility beyond those set forth in the statute. The Court observed that Congress specified certain conditions that covered entities must meet to participate in the 340B Program, and the registration requirement was not among them. “The statute nowhere says that covered entities also must secure registration with HRSA as a ‘necessity’ or ‘condition’ of 340B program participation.”
The Court also found that the statute did not give HRSA discretion to adopt rules to implement the 340B program. “Simply put, there is no statutory hook that grants the Secretary discretion to add additional ‘requirements,’ including registration.”
HRSA had argued that in the absence of a registration requirement, it would be difficult for the agency to monitor compliance with the 340B statute. The Court acknowledged that concern but ruled that it must give way to the statutory language. “[P]olicy concerns cannot trump the best interpretation of the statutory text.” “HRSA may believe that a registration requirement best promotes transparency and accountability, but that is not the law Congress enacted.”
Having ruled that the registration requirement is unlawful, the Court found that the appropriate remedy was to vacate HRSA’s October 2023 notice. The effect of vacatur is not limited to the parties before the court. It applies nationwide. This means that child sites of hospitals should be able to participate in the 340B program without meeting the registration requirement. Of course, the court’s decision is subject to appeal to the United States Court of Appeals for the District of Columbia.
A copy of Judge Mehta’s opinion is available here.
