Dive Brief:
- The Trump administration will pilot a voluntary program next year in which pharmaceutical companies can offer rebates for certain drugs to hospitals participating in the 340B drug discount program.
- The pilot is a significant departure from the traditional 340B model, which gives hospitals upfront discounts for certain medications. Under the pilot, hospitals would receive rebates coordinated by drug manufacturers, according to the Health Resources and Services Administration. To receive reimbursement, providers will submit data to manufacturers within 45 calendar days of dispensing the drug, allowing for some extenuating circumstances, and then receive a rebate within 10 days.
- The American Hospital Association immediately criticized the program on Thursday, warning diverting from the decades-old 340B program sets a “dangerous precedent” for the future.
Dive Insight:
The 340B Drug Pricing Program was created more than three decades ago to support hospitals with a large number of low-income patients by requiring drugmakers to offer those providers steep discounts on outpatient drugs — often about 20% to 50% off the list price of a drug. Since its conception, the program has grown greatly to over 55,000 covered entities in 2021.
The program has proved a flash point between drugmakers and providers, as pharmaceutical companies say the rebates, which cover billions of dollars worth of drugs each year, cut into their bottom lines. Some also argue hospitals are cheating the program.
Drugmakers say hospitals have diverted drugs to ineligible patients or, in some cases, received duplicative discounts for the same medications. Hospitals, however, say the 340B rebates are a needed lifeline for hospitals with low operating margins.
Research is mixed about the efficacy of the program. Some studies have found the program works as intended, allowing hospitals to expand services for low-income patients and subsidize uncompensated care. However, other studies find hospitals are not complying with basic tenets of 340B, including not reselling discounted medications.
Drugmakers have been pushing for a 340B rebate model to tamp down on what they say is waste, fraud and abuse in the program. Last year, Eli Lilly, Bristol Myers Squibb, Sanofi and Novartis sued the federal government to allow them to issue rebates for 340B drugs instead of upfront discounts.
However, a court shut down those plans earlier this year, ruling that HRSA would have to sign off on such a rebate plan. While the Biden administration sought to uphold the traditional 340B model, the Trump administration has signaled an interest in adding additional oversight to the program, including potentially putting CMS in charge of overseeing rebates.
Now, the Trump administration is introducing a pilot program that, in a limited capacity, offers a chance to test a rebate system.
The pilot, which will be limited to the 10 drug products included on the CMS Medicare Drug Price Negotiation Selected Drug List, is accepting applications from drug manufacturers until Sept. 15, with a start date of Jan. 1.
The program aims to address “concerns we have received from both covered entities and manufacturers, while creating a measured approach to the process of approving manufacturer rebate models under the 340B Program,” said HRSA Administrator Tom Engels in a statement Thursday. “We look forward to receiving comments and working with everyone to ensure that the program operates with accountability, transparency and adherence to the 340B statute, allowing covered entities to stretch scarce resources as far as possible.”
Hospital groups immediately reacted negatively to the pilot.
340B Health, an association of more than 1,600 hospitals, said that shifting to a post-purchase model would force some hospitals to pay an average of more than $72 million upfront, potentially straining their ability to provide patient care service. The group said in a statement Thursday that it worried about the administrative and financial cost of the program — particularly if the Trump administration chooses to expand the pilot beyond the initial 10 drugs.
“We are concerned that this guidance authorizes a significant departure from how the 340B program has successfully operated for decades and sets a dangerous precedent for possible harmful expansions in the future,” said Aimee Kuhlman, vice president of advocacy grassroots and government relations at the American Hospital Association, echoing 340B Health’s sentiments.
However, the AHA said it appreciated HRSA’s efforts to “impose strict guardrails on its limited pilot program.”
For example, manufacturers will be in charge of handling all IT costs related to submitting drug purchasing data. The notice also requires “no additional administrative costs of running the rebate model shall be passed onto the covered entities.”
In addition, HRSA mandates manufacturers cannot deny a rebate based on concerns of diversion or duplicate discounts.
