Health Headlines – March 9, 2026

D.C. District Court Strikes Down Child Site Registration Requirement for the 340B Program

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. 

Reporter, Alek Pivec, Washington, D.C., +1 202 626 2914, apivec@kslaw.com.

Court Finds States Waived Sovereign Immunity by Filing in Federal Court in FCA Case

On March 2, 2026, Judge Patti B. Saris of the District Court for the District of Massachusetts partially ruled in favor of Regeneron Pharmaceuticals on its motion to amend its answer in a qui tam case to assert contingent counterclaims for recoupment, offset, and unjust enrichment against state plaintiffs, but not the federal government.

The government in the underlying suit alleges that Regeneron improperly treated credit card processing fees related to its sales of the drug Eylea as bona fide service fees rather than as price concessions.  That treatment resulted in a higher average sales price being reported for Eylea as the fees were not deducted, which resulted in higher Medicare part B reimbursement for the drug to physicians from the federal government and a higher reimbursement from Medicaid from the state governments.

In its motion, Regeneron argued that because the fees were treated as bona fide services fees rather than price concessions, Regeneron also reported a lower average manufacturer price for Eylea, resulting in a higher rebate amount paid by Regeneron in the form of Medicaid rebates.  Regeneron argued that if the fees were found to have been improperly classified and that therefore the rebates it paid were inflated, it should be entitled to a reduction in any recovery for the amounts it overpaid.

In its holding, the Court ruled that the federal government enjoyed sovereign immunity with respect to the asserted counterclaims because they did not arise out of the same transaction since the government’s claims arose from a transaction between the federal government and physicians being reimbursed, while Regeneron’s counterclaim arose from a transaction between the federal government and the states.  However, the Court held the state plaintiffs had waived their sovereign immunity to any compulsory counterclaims by voluntarily invoking the jurisdiction of the federal court, and that because the claims were logically related or based on the same aggregate of operative facts, Regeneron was entitled to bring its counterclaims against the states.  Finally, the Court credited Regeneron’s argument that disallowing its counterclaims would be unfair, as it could “face unmitigated liability no matter how it decided to categorize its credit card processing fees” if it could not bring counterclaims against the states.

The case is U.S. et al. v. Regeneron Pharmaceuticals Inc., case number 1:20-cv-11401, in the U.S. District Court for the District of Massachusetts.  A copy of Judge Saris’ opinion and order is available here.

Reporter, Hamilton Craig, Washington, D.C., +1 202 626 8976, hcraig@kslaw.com.

Trump Administration Announces Crackdown on Medicare and Medicaid Fraud

On February 26, 2026, the Trump Administration announced “new steps to crack down on fraud in Medicare and Medicaid to protect patients and taxpayers and improve affordability.” This includes (1) deferring $259.5 million of quarterly Medicaid funding in Minnesota, (2) implementing a moratorium on Medicare enrollment for certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) suppliers, and (3) asking Americans to support fraud prevention and announcing a request for information (RFI) from stakeholders concerning CMS’s Comprehensive Regulations to Uncover Suspicious Healthcare (CRUSH) initiative.

Deferring Minnesota’s Federal Medicaid Funding

In January 2026, CMS notified Minnesota that it intended to withhold federal Medicaid funds until “it was satisfied with the state’s corrective action plan to address its program integrity shortcomings.”

CMS deferred $259,505,491 in federal matching funds after reviewing Minnesota’s Medicaid spending for the fourth quarter of 2025. This includes $243.8 million for “unsupported or potentially fraudulent Medicaid claims” and $15.8 million for claims involving “individuals lacking a satisfactory immigration status.” CMS implemented both traditional approaches and new program integrity strategies to identify high spending and rapid growth in specific service areas including personal care services, home and community-based services, and other practitioner services.

CMS’s press release states that it may defer more than $1 billion in federal funds over the next year if Minnesota “fail[s] to clean up its significant program integrity vulnerabilities or demonstrate that the expenditures are allowable.”

DMEPOS Enrollment Moratorium

CMS also implemented a six-month moratorium on new Medicare enrollment for certain DMEPOS suppliers, which applies to all applications for initial enrollment and changes in majority ownership for medical supply companies.

CMS’s press release states that it stopped more than $1.5 billion in suspected fraudulent billing in this area last year, and the moratorium will allow CMS to explore additional safeguards and mitigate ongoing fraud by certain DMEPOS companies. CMS also plans to publish information on providers and suppliers whose participation in the Medicare program has been revoked.

CRUSH Initiative

CMS is requesting stakeholder input regarding additional ways that it can prevent fraud and develop a potential future rule under CMS’s CRUSH Initiative. The CRUSH RFI seeks input from various stakeholders, including states, providers, suppliers, payers, and more concerning how CMS can strengthen its ability to prevent, identify, and respond to fraud, waste and abuse, as well as program inefficiencies in Medicare, Medicaid, the Children’s Health Insurance Program, and the Health Insurance Marketplace.

CMS’s press release also outlines examples of the fraud prevention progress it made in 2025.

The CMS press release can be found here. The full DMEPOS moratorium notice can be found here. Comments on the CRUSH RFI must be submitted by March 30, 2026. The full RFI can be found here.

Reporter, Lindsay Campbell, Los Angeles, +1 213 218 4032, lgreenblatt@kslaw.com

Upcoming Events

35th Annual King & Spalding Health Law & Policy Forum

• Thursday, March 12, 2026, 8:00 A.M. ET
• Atlanta, GA

Join us for our annual forum focusing on the foremost legal and political developments impacting the healthcare industry. This full-day program will feature thought-provoking sessions and a keynote address from award-winning legal affairs correspondent Nina Totenberg, whose deep knowledge of the inner workings of the Supreme Court will provide attendees with rare insights into today’s judicial headlines.

Highlights include:

• Leading practitioners providing policy and regulatory enforcement updates and other industry developments, including insights from in-house counsel on their priorities for the coming year 
• What’s next in strategic priorities for nonprofit health systems
• Perspectives from a former U.S. attorney on key issues facing the healthcare industry
• Regulatory and legislative impacts of the current administration on the healthcare industry 

Attendees will also enjoy multiple networking opportunities, including a reception following the sessions.

The registration fee for the full program is $95. For questions, or for information about registering, contact the K&S Events Team.

King & Spalding Reception at the AHLA Institute on Medicare and Medicaid Payment Issues

• Thursday, March 19, 6:00 – 8:00 P.M. ET
• Baltimore Marriott Waterfront
  700 Aliceanna Street
  Baltimore
  Laurel Room, 4th Floor

Join us for cocktails and conversation at AHLA’s Institute on Medicare and Medicaid Payment Issues.

For questions and to RSVP by March 12, contact Monique Wharton.

Editors: Chris Kenny and Ahsin Azim

Issue Editors: Doug Comin and David Tassa