The AHA and several safety-net providers argue that an upcoming mandatory rebate pilot violates administrative law, imposes millions in costs, and threatens patient care in vulnerable communities.
A coalition of providers, including the AHA and the Maine Hospital Association, filed a lawsuit to block HHS from implementing a planned rebate model for the 340B Drug Pricing Program.
Providers argue that the mandatory pilot program violates administrative law and that the move would add hundreds of millions of dollars’ worth of annual costs on hospitals and other covered entities.
“When making such a major change, with such far reaching consequences for patients and hospitals, it is important that the government follow the basic administrative rules of the road,” Rick Pollack, AHA president and CEO, said in a statement.
“Unfortunately, it did not do so here. And giving hospitals only a few months to comply with these burdensome new requirements or risk losing millions of dollars in discounts they are entitled to under the law will harm patients and communities across the country.”
A ‘Pilot’ in Name Only
Since it was established more than 30 years ago, participating providers have been able to purchase eligible drugs at an upfront discount. Until recently, HHS itself had fought attempts by drug makers to unilaterally introduce a rebate model to the 340B program.
However, a core complaint of the lawsuit is that the pilot is mandatory for hospitals, but voluntary to drug makers.
“The newly announced rebate program is a ‘pilot’ in name only,” the lawsuit reads, noting that to each of the approximately 14,600 participating provider entities. “Participating is compulsory for those covered entities; they are required to participate or lose their statutorily-owed discounts.”
Another complaint is that the shift to a rebate model will add significantly to the already massive administrative burden that hospitals face. HHS estimates that covered entities will need to spend 1.5 million hours annually on compliance at a cost of around $200 million. The lawsuit contends that these figures actually underestimate the full cost that hospitals will face.
Dallas County Medical Center, a safety-net hospital in Arkansas listed as a plaintiff, relies on $1.1 million in 340B savings for staff and equipment. Without these savings, the hospital says it will need to reduce its current level of services.
A Sign of Change to Come?
Providers fear that the move to test a rebate model, shortly after fighting drug companies in court to prevent them from doing the exact same thing, signals the potential for broader shifts in federal policy.
If the rebate moves forward, it could set a precedent that validates rebates as the standard mechanism for 340B reimbursement, fundamentally altering the cash flow and administrative reality for hospitals that rely on revenue through the program.
Luke Gale is the revenue cycle editor for HealthLeaders.
KEY TAKEAWAYS
The lawsuit argues the program is not a true pilot because it forces participating providers to join or lose discounts on high-volume drugs.
HHS estimates the rebate model will require 1.5 million hours of labor annually for compliance and cost an estimated $200 million in administrative expenses.
The mandatory pilot program could signal future changes to the 340B Drug Pricing Program.