HRSA is piloting a 340B rebate model similar to one that it just fought against. As the agency dips its toes into the 340B debate, hospital groups express concerns about the potential for cash flow disruptions.
HRSA has dipped its toes into the debate over the 340B Drug Pricing Program, announcing it that it will test a rebate model through a voluntary pilot program. The announcement comes shortly after the federal government scored a legal win against drug companies that attempted to unilaterally implement a rebate model.
While HRSA is framing the pilot as an effort to ensure access to critical medications, hospital advocacy groups say it could signal a future shift away from the program’s traditional upfront discount model.
A Program Under Scrutiny
The 340B program has been the subject of increased scrutiny on multiple fronts. Drug companies have long accused hospitals of breaking program rules.
More recently, Senator Bill Cassidy (R-Louisiana) issued a report calling for stricter oversight, claiming there are "transparency and oversight concerns that prevent 340B discounts from translating to better access or lower costs for patients.”
However, the American Hospital Association (AHA) recently turned the tables on those claims. In a review of HRSA data, the AHA found that participating drug companies are more likely to violate 340B rules than hospitals and less likely to be audited.
“Policymakers should reject the baseless claims made by drug companies of widespread program abuse by 340B hospitals and urge HRSA to increase their audits of drug companies,” the AHA said in its report.
“Greater oversight of these drug companies is necessary to ensure the continued success of the 340B program for the millions of vulnerable patients and communities nationwide who rely on it,” the organization added.
The Legal Battle Over 340B Rebates
The conflict over the 340B program escalated last year when several drug companies, including Johnson & Johnson, Eli Lilly, and Novartis, attempted to unilaterally replace the 340B program's upfront discounts with their own back-end rebate models.
HRSA denied the request, but Johnson & Johnson filed a lawsuit challenging the government’s ability to reject the rebate model. In June, a judge ruled against the drug company.
“HRSA has the authority to ‘provide’ for discounts, rebates, or both,” the judge wrote.. “This conclusion defeats J&J’s claim that HRSA lacked the authority to require prior approval of J&J’s rebate model.”
Provider Concerns Over the HRSA Pilot
The voluntary pilot program will test a post-purchase rebate system for a limited set of drugs for sickle cell disease. Under the pilot, participating hospitals will purchase these drugs at a higher, negotiated price and then work with a third-party administrator to submit a rebate request to the drug manufacturer.
Despite the stated goal of ensuring access to care, hospital advocacy groups have expressed concern.
340B Health, an organization that represents hospitals participating in the program, suggested that a shift to a rebate model would require disproportionate share hospitals to front an average of $72 million to drug companies while waiting for rebates.
“While we recognize the agency’s intent to test a limited rebate model tied to Inflation Reduction Act (IRA) implementation, we remain deeply concerned about the financial and administrative burdens the rebate approach will place on 340B hospitals,” 340B Health President and CEO Maureen Testoni said in a statement.
As the pilot moves forward, revenue cycle leaders relying on 340B discounts should keep an eye out for indications of future changes to the program.
Luke Gale is the revenue cycle editor for HealthLeaders.
KEY TAKEAWAYS
HRSA is launching a voluntary pilot program to test a rebate model for certain 340B drugs, a significant shift from the program's traditional upfront discount structure.
The pilot comes shortly after the federal government won a lawsuit to prevent drug manufacturers from unilaterally imposing their own, similar rebate schemes.
Provider advocacy groups were quick to express concern about the financial and administrative burdens the rebate approach will place on 340B hospitals.