HHS revives 340B rebate model idea, seeks industry feedback

HHS is looking to restart a controversial 340B drug rebate model that shifts pricing from upfront discounts for covered drugs to a backend coupon system.

Through the Health Resources and Services Administration (HRSA), HHS released a new Request for Information (RFI) on Feb. 13 seeking industry feedback on implementing a rebate model in the 340B Drug Pricing Program. The RFI comes one week after HHS scrapped a rebate pilot program set to take effect this year, which was delayed by a court ruling that paused its implementation.

HRSA is now looking for comments through March 19 on whether it should move forward with a 340B rebate model and how the rebate framework should work. HHS intends for the rebate model to quell challenges the 340B program has encountered with duplicate discounts. These duplicate discounts occur when participating hospitals claim a discount on a 340B covered drug that is also subject to Medicaid and the new Medicare Drug Price Negotiation Program.

However, provider groups have opposed a rebate model in the 340B program, arguing that a pay-then-reimburse system would threaten the financial viability of safety-net hospitals.

Operational costs associated with a rebate model could also range from $150,000 to over $500,000 per 340B hospital, with additional costs excepted from payment delays and denials, the American Hospital Association (AHA) previously reported. It was the AHA, Maine Hospital Association and four nonprofit health systems that had sued HHS in December over the 340B rebate pilot program.

HRSA encourages industry stakeholders to include "supporting facts, research, and evidence" in their comments on the RFI -- a directive AHA is taking to heart to support its continued opposition to the rebate model.

"The AHA welcomes HRSA’s attempt to gather detailed information about the impact of a rebate model. We look forward to working with the agency to answer the many specific questions it has posed to 340B hospitals and other stakeholders," Aimee Kuhlman, vice president of advocacy and grassroots at AHA, said in a statement. "We hope that after careful consideration of comments from 340B hospitals and other stakeholders, HRSA will recognize that imposing hundreds of millions of dollars in costs on hospitals serving rural and underserved communities is not a sound policy."

AMGA also continues to see problems with a 340B rebate model, although the RFI signals that HHS has heard providers' concerns.

"One of the things that jumped out to me was [HRSA] trying to address the timeframes and they've acknowledged the potential cash flow problems for covered entities and providers," Darryl Drevna, senior director of regulatory affairs at AMGA, told RevCycle Management.

Within the RFI, HRSA specifically included a section on payment timing and potential cash flow impacts for covered entities. This section indicates that a potential rebate model could require drug manufacturers to pay or deny a rebate within 10 calendar days of claim submission.

"I think [HRSA] heard our concerns, which is a positive, but ultimately, a rebate model is still going to force providers to chase down a rebate, so from our perspective, it's still a problem," stated Drevna.

Providers use the upfront discounts on 340B drugs to expand access to care, he continued. But the effects of a rebate model could impact those savings and how providers use them to support patient care. Retraining staff and restructuring IT systems to align with a rebate model will also sap already-stretched resources from providers.

Upfront discounts "provide hospitals with predictability and stability, enabling them to stretch scarce resources to meet community needs," according to Maureen Testoni, president and CEO of 340B Health, an industry group representing 340B safety-net hospitals.

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.