HRSA Tightens STI Clinic 340B Rules Amid Industry Lawsuit

The Health Resources and Services Administration (HRSA) proposed sweeping documentation requirements for sexually transmitted infection (STI) clinics in the 340B Drug Pricing Program on August 7, 2025, responding to pharmaceutical industry litigation that challenges how these safety-net providers qualify for discounted medications. The proposed changes would require STI and tuberculosis (TB) grantees to provide formal grant documentation during registration and recertification, marking a significant shift from current self-attestation practices as drugmakers intensify legal challenges to the program's scope.

The timing of these changes is significant. Congenital syphilis cases reached 3,882 in 2023 - the highest level since 1994 - while pharmaceutical companies Amgen, Eli Lilly, and UCB pursue litigation arguing that many STI clinics receiving only "in-kind" support like condoms and educational materials rather than direct cash grants should be ineligible for the program. The proposed documentation requirements emerge as HRSA faces pressure to tighten program oversight while maintaining access to discounted medications for safety-net providers serving communities most affected by rising STI rates.

Legal Pressure Drives Regulatory Response

The pharmaceutical industry's legal challenge against STI clinic 340B eligibility intensified in December 2024 when Amgen, Eli Lilly, and UCB filed suit against the U.S. Department of Health & Human Services (HHS), arguing that many STI clinics improperly qualify for the program. The manufacturers contend that clinics use 340B drugs for non-STI conditions, engage in prohibited drug diversion, and that entities receiving only "in-kind" contributions like condoms and educational materials rather than cash grants lack the statutory requirement of receiving federal "funds."

The lawsuit targets the ambiguity in Section 318 of the Public Health Service Act, which authorizes STI prevention funding but lacks clear definition of qualifying support. Most Section 318 grants involve state health departments distributing in-kind resources rather than direct cash transfers. The companies specifically challenge Nevada-based Sagebrush Health Services, where discounts totaled $27 million since 2022 across the three manufacturers. They allege Sagebrush subdivisions "use 340B drugs for purposes other than STI prevention and treatment" and "engage in diversion" by reselling discounted drugs improperly.

When Chief Judge James E. Boasberg refused to dismiss the claims on August 4, 2025, the litigation gained momentum. The manufacturers seek court declarations invalidating all 340B registrations for subgrantees using discounted drugs for non-STI purposes or receiving only in-kind support, potentially eliminating hundreds of safety-net providers from the program.

This threatens numerous county health departments and Ryan White HIV/AIDS Program participants that have operated under in-kind funding arrangements for decades. Provider advocates emphasize these grants are essential for clinic operations, enabling them to leverage limited federal resources into comprehensive sexual health services through 340B savings.

Documentation Requirements Target Program Integrity

HRSA's August 7, 2025, Federal Register notice proposes fundamental changes to how STI and tuberculosis grantees demonstrate 340B eligibility, requiring supporting documentation for the first time during initial registration and recertification processes. The new requirements mandate that entities provide federal grant notices of award identifying the grantor, grant number, funding period, and recipient information. At the same time, subgrantees must submit executed written subrecipient agreements detailing names, addresses, grant numbers, and specific terms of support.

This represents a significant departure from the current system, where STI and TB grantees could register based solely on self-attestation of their grant status. HRSA estimates the documentation requirements will increase registration burden from 1.0 to 1.25 hours per entity, affecting 341 STI/TB clinic registrations annually and 6,412 entities during annual recertification cycles.

Kalvin Pugh, CANN's Director of State Policy, 340B, views the proposed changes as progress toward needed reform. "This notice of recertification is additional momentum in the calls for greater transparency and accountability needed in the 340B Drug Pricing program to ensure it serves communities as it was intended, which are often the same communities that face disproportionate rates of STIs," Pugh said. "It will be a delicate balancing act to ensure that organizations are in compliance with 340B's intent, while ensuring that access to these vital treatments is not interrupted."

Public Health Stakes During STI Crisis

The timing of these regulatory changes coincides with an unprecedented public health crisis that has reached epidemic levels in states like Mississippi. The state now has STI rates of approximately 1,200 per 100,000 residents, ranking third nationally for syphilis cases, fifth for gonorrhea, and second for chlamydia. Mississippi's congenital syphilis crisis exemplifies the national emergency, with cases spiking 1,000% from just 10 cases in 2016 to 110 cases in 2022. Nationally, congenital syphilis cases have increased by 340% from 2019 to 2023, with the Centers for infection Control and Prevention emphasizing that 90% of these cases could have been prevented with timely testing and treatment.

The epidemic disproportionately affects communities of color, with rising rates particularly concentrated among people aged 14-24. STI clinics participating in 340B use program savings to provide free or reduced-cost treatments for uninsured patients, fund wraparound services including transportation and case management, and support community outreach and testing initiatives. Dr. Kayla Stover, professor and vice chair of pharmacy practice at The University of Mississippi, highlighted syphilis's particularly insidious nature, noting that "each of those stages has symptoms that could be mistaken for something else," earning it the designation as "The Great Imitator."

Deja Abdul-Haqq, director of the nonprofit My Brother's Keeper, pointed to systemic barriers in accessing prevention tools, observing that "the information regarding the solution to these issues usually gets to the Black communities late." She emphasized the potential of newer prevention medications like Doxy-PEP, noting that congenital syphilis cases could be dramatically reduced if "all of these mothers that were exposed to syphilis during sex would have gotten Doxy-PEP within 72 hours."

The potential loss of 340B eligibility for STI clinics would eliminate crucial cost savings precisely when public health officials are combating rising syphilis rates among pregnant people and working to prevent a resurgence of HIV transmission through expanded PrEP access programs.

Balancing Oversight and Access

HRSA's proposed documentation requirements represent a measured response to legitimate program integrity concerns while attempting to preserve essential safety-net access during a critical public health crisis. The enhanced oversight measures address years of Government Accountability Office (GAO) criticism and pharmaceutical industry pressure, acknowledging that some level of increased administrative burden is justified to ensure program resources reach genuinely eligible entities.

However, the broader legal challenges to STI clinic participation could force closures of safety-net providers precisely when public health needs demand expanded access to prevention and treatment services. Office of Pharmacy Affairs (OPA) Director Chantelle Britton acknowledged the ongoing uncertainty in July 2025, telling conference attendees to "stay tuned as these cases work through the courts."

The controversy over in-kind versus cash grant funding exposes fundamental ambiguities in the 340B statute that courts alone cannot resolve. The public comment period extends through October 6, 2025, giving stakeholders an opportunity to weigh in on how these changes will affect program operations and patient access. Whether the 340B program can continue stretching scarce federal resources while ensuring pharmaceutical manufacturers provide required discounts to genuine safety-net providers will depend on how policymakers resolve these competing demands during a worsening STI epidemic affecting the communities these clinics serve.