Key Takeaways
- The term “scope of the grant” refers to the services provided under a grant program not to the disease indications listed on a drug’s FDA label.
- HRSA’s 1996 guidance explicitly rejected any rule that limits 340B purchases to drugs directly tied to the grant’s disease area.
- The Genesis v. HRSA (2023) ruling reaffirmed that overly narrow interpretations of “patient” or program scope are inconsistent with the 340B statute’s plain text.
- Novartis’s claim that Section 318 clinics cannot use 340B for its products because none treat STDs relies on a misreading of “scope of the grant.”
- If accepted, this approach could undermine 340B access for all grantee-covered entities, from STD clinics to Ryan White and Title X providers.
What the Law Actually Says About “Scope of the Grant”
In Part 1, we covered the original October 2025 letter that Novartis sent to all STD clinics. At the heart of Novartis’s letter is a phrase that’s been part of 340B discussions for decades: “Scope of the grant.”
Novartis argues that because its products are not indicated for STD treatment or prevention, no Section 318 grantee can purchase them under 340B pricing. That interpretation is not just narrow, it’s legally inconsistent with HRSA’s guidance, the 340B statute, and the reasoning affirmed in Genesis v. HRSA.
Let’s unpack that.
1. The Statute: 42 U.S.C. §256b(a)(4)(K)
The law defines an STD covered entity simply as:
"An entity receiving funds under section 247c of this title (relating to treatment of sexually transmitted diseases)… but only if the entity is certified by the Secretary."
That’s it.
Congress never limited eligibility based on which drugs a manufacturer makes, what indications they carry, or how closely they match the grant’s disease area. If a clinic receives Section 318 funding and is certified by HRSA, it’s a covered entity entitled to 340B pricing.
2. HRSA’s 1996 Patient Definition: “No Drug Limitation”
When HRSA first published its patient definition nearly 30 years ago, commenters asked whether covered entities should only be allowed to purchase drugs directly related to their grant-funded service.
HRSA’s answer was unequivocal:
"We do not consider a limitation on which drug products a covered entity may purchase to be a reasonable component of the definition of covered entity ‘patient.’”
— 61 Fed. Reg. 55156, 55158 (October 24, 1996)
HRSA went further, saying it would be inappropriate to “dictate to health care providers guidelines regarding the appropriateness of certain prescriptions.”
That statement has guided 340B implementation ever since. It means the “scope of the grant” attaches to the service provided, not to the drug’s label.
3. HRSA’s Current FAQ for STD (318) Clinics
HRSA’s Office of Pharmacy Affairs still affirms this approach:
"STD (318 grantee) clinics that participate in the 340B Program may purchase and dispense any 340B drugs associated with a service for which the covered entity is responsible, including contraceptives, to that patient, to the extent it aligns with the patient definition and is consistent with the scope of the grant."
That language “any 340B drugs associated with a service” directly conflicts with Novartis’s “only STD-indicated drugs” stance.
4. The Genesis v. HRSA Case: Why It Matters Here?
In 2023, the Genesis Health Care v. HRSA decision struck down HRSA’s narrow “patient” definition, ruling that the statute itself does not support restrictive readings that tie 340B eligibility to a specific type of encounter or disease service.
The court made three key findings that are highly relevant:
- The statute’s plain language governs. HRSA’s attempts to narrow the definition of “patient” beyond the statute’s text were unlawful.
- Program purpose matters. Congress designed 340B to help covered entities “stretch scarce Federal resources” and “serve more patients.” Narrow interpretations undermine that purpose.
- Disease-specific limitations are inconsistent with congressional intent. The court emphasized that nothing in the statute allows regulators, or manufacturers, to impose disease- or indication-based conditions on 340B access.
Together, those findings reinforce the same point: The 340B statute protects entities, not drug labels.
Why This Matters Beyond STD Clinics
If Novartis’s interpretation is allowed to stand, it could open the door for other manufacturers to carve out entire classes of grantee-covered entities i.e. Ryan White clinics, Title X family planning programs, Hemophilia Treatment Centers based on the same “scope of grant” logic.
It would mark a fundamental shift from a public-health program to a manufacturer-defined eligibility regime.
The Bottom Line
The phrase “within the scope of the grant” was never meant to serve as a manufacturer’s veto power. It was designed to ensure that 340B savings are used for grant-funded services not to let drug companies decide which grantees deserve discounted pricing.
That’s why HRSA’s 1996 guidance, its current FAQs, and the Genesis v. HRSA ruling all point in the same direction: 340B eligibility belongs to covered entities, not to product labels.
Up Next: Part 3 — The Human Impact
In the next post, we’ll explore what this means for STD clinics on the ground and how 340B savings fund critical testing, contraceptive access, and outreach programs that could be at risk if Novartis’s policy is allowed to stand.
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