HHS revives 340B rebate model despite hospital pushback

The Department of Health and Human Services is taking another stab at a 340B rebate model that would require safety-net hospitals to pay full price for certain prescription drugs before getting a discount.

The Health Resources and Services Administration, which runs the 340B Drug Pricing Program, issued the public notice for the rebate model on Friday. The notice details the revised 340B Rebate Model Pilot Program, which aims to launch by Jan. 1, 2027.

However, the revised program is largely unchanged from the HRSA's previous attempt to establish a rebate model, which was scrapped at the start of the year before the agency could implement it.

Hospitals, including the American Hospital Association, successfully sued over the pilot program last year, arguing that the Trump administration failed to follow proper notice-and-comment rulemaking processes.

Major drug manufacturers, including Novartis and Johnson & Johnson, also recently lost their appeal to implement their own rebate models.

The HRSA received over 2,400 public comments in response to a Request for Information about reviving the pilot program. In the comments, hospital groups said the rebate approach would cost safety-net providers hundreds of millions of dollars, threatening their abilities to deliver affordable, quality care.

Safety-net hospitals in the 340B Drug Pricing Program typically pay a cheaper price for covered drugs through an upfront discount from drug manufacturers. But these companies have raised concerns that the program's accelerated growth, particularly through contract pharmacies, has led hospitals to claim duplicate discounts. A 2021 report found that 3-5% of 340B discounts and Medicaid rebates were duplicates, costing as must as $1.6 billion in 2019.

HRSA said in the announcement that the program has grown from $53.7 billion in 2022 to more than $100 billion. This has created "new operational and oversight challenges," the agency stated.

The new pilot program will provide more transparency into the 340B program by allowing manufacturers to validate eligible claims before providing a discount to qualifying providers, HRSA explained. They must then provide rebates within 10 calendar days after a covered entity submits the required data.

The agency also said the rebates will prevent duplicate discounts, especially those overlapping with the new Medicare Drug Price Negotiation Program, which allows the U.S. government to directly negotiate maximum prices for high-cost drugs covered by Medicare. In fact, the pilot is limited to drugs included on the MDPNP selected drug lists for initial price applicability years 2026 and 2027, according to the public notice.

Drug manufacturers will also face limits on how much data collection they require of covered entities participating in the pilot program, according to the notice. Now, data collection requirements will be restricted largely to standardized pharmacy and medical claims data.

Additionally, the HRSA said in the notice that it intends to monitor rebate denial patterns and could terminate a manufacturer from the program if it inappropriately denies a significant portion of rebate requests.

Hospital groups remain deeply opposed to the pilot program.

"The agency's analysis dramatically understates the true costs of this program, ignoring the hundreds of millions of dollars in compliance expenses, cash-flow disruptions, and operational burdens that will inevitably divert scarce resources away from patient care," Rick Pollack, the president and CEO of the AHA, said in a statement on Friday.

Pollack said the AHA is considering ways to prevent the rebate model from going into effect.

Maureen Testoni, president and CEO of 340B Health, a nonprofit representing hospitals in the 340B program, also said in a statement that the revised pilot program is "effectively a rerun of the flawed approach HRSA tried to take earlier this year," which was blocked by federal courts for violating administrative law and "it may be again."

"However, the fundamental problem is that rebates are bad policy that will harm safety-net hospitals and the patients who depend on them," she continued.

The HRSA said in the public notice that it considered the financial concerns raised by hospital groups but "believes that the Pilot is unlikely to result in unstable cash flow for covered entities," based on available research on a rebate model.

Jacqueline LaPointe is an Executive Editor at Xtelligent Healthcare Media, covering revenue cycle management, healthcare payers, health policy and health IT since 2016.