Background

In recent years, several drugmakers have attempted to implement a rebate model for 340B drug discounts. Instead of receiving upfront discounts for drugs, hospitals would have to pay the full price and then apply for a rebate later.

Last year, Johnson & Johnson (J&J) announced plans to apply a rebate model for two of its drugs in the 340B program: Stelara and Xarelto. The change would have applied to disproportionate share hospitals, which make up around 1,200 of the roughly 2,700 hospitals in the 340B program.

At the time, HRSA said J&J's 340B rebate program "is inconsistent with the 340B statute" and threatened to sanction the company if it implemented the program. Several healthcare organizations, including the American Hospital Association and America's Essential Hospitals, also criticized J&J's 340B rebate program.

Although J&J filed a lawsuit against HHS and HRSA over its proposed 340B rebate model, a judge earlier this year ruled in favor of HHS, upholding the agency's authority to oversee and regulate proposals to the 340B program.

Despite ongoing pushback from hospitals and other healthcare organizations, several other drugmakers, including Eli Lilly, Bristol Myers Squibb, Novartis AG, and Sanofi, have also proposed implementing their own 340B rebate programs. 

HRSA launches new 340B rebate pilot

While the Biden administration blocked drugmakers' efforts to implement rebates for 340B drugs, the Trump administration appears to be more in favor of the change.

HRSA in July announced the 340B Rebate Model Pilot Program, which starts Jan. 1 and will run for at least one year. Under the pilot, 340B providers will purchase drugs through their wholesaler account and then request rebates on the drugs when they're dispensed to patients. After the rebates are approved, drugmakers have to pay the rebates within 10 days. 

According to HRSA, the pilot will be used to "better understand the merits and shortcomings of the rebate model from stakeholders' perspectives" and inform the consideration of potential future 340B rebate models.

The selected drugs are also part of CMS' Medicare Drug Price Negotiation Selected Drug List. Although the pilot is currently limited to these drugs, HRSA said it might consider expanding the pilot to include other drugs that aren't subject to Medicare price negotiations in the future.

Reaction

Hospital groups and other healthcare organizations have been highly critical of the program, saying it will increase providers' administrative burden, decrease hospital funds, and potentially impact patient outcomes. 

"Drug manufacturers are the only winners under these rebate models, which will directly harm patients and the essential hospitals they depend upon for affordable, high-quality care," said Jennifer DeCubellis, president and CEO of America's Essential Hospitals. "Hospitals now have to manage a whole new set of administrative burdens, requiring more bureaucracy and more paperwork, with no benefit to patients' ability to access discounted drugs."

According to Advocate Health, savings from direct discounts in the 340B program have allowed it to invest $6 billion in free clinics, charity care, and community-based programs — things that will be directly impacted by the switch to a rebate model for certain drugs.

"A shift to a rebate model, as opposed to the current discount model, would undercut our ability to continue this level of care," Advocate leaders wrote in a comment letter to HHS earlier this year.

Community health centers will also be significantly impacted by the new program. "For some health centers, it's like a death blow," said Amanda Pears, CEO of Advocates for Community Health. "They can't afford the upfront cost.

Although the current rebate program is only a pilot, "some harm that might come from this won't be easily reversed," Pears said.

Meanwhile, the pharmaceutical industry has praised HRSA's decision to approve the 340B rebate pilot program.

"HRSA's approval of eight rebate model pilot plans marks an important step toward improving transparency and accountability in the 340B program," said Molly Jenkins, director of public affairs at the Pharmaceutical Research and Manufacturers of America. "This development reflects growing bipartisan momentum to address concerns about program integrity and ensure that 340B benefits patients rather than padding hospital coffers."

"We encourage HRSA to move swiftly to broaden use of the rebate across all 340B covered outpatient drugs, enabling wider use of rebates within the program," Jenkins said. "Expanding this pilot would help strengthen program integrity while preserving critical support for true safety-net providers and the patients they serve."