Why HHS’s elimination of the 340B rebate program is a win for providers
The Department of Health and Human Services is repealing the rebate model of the 340B drug pricing program, according to court documents filed Thursday. Hospitals responded enthusiastically because the rebate model would add administrative headaches and force them to refund millions of dollars in rebates.
The model was due to go live early this year, but courts blocked implementation before it came into effect, citing procedural and legal issues.
The 340B program allows hospitals to purchase outpatient drugs at deep discounts, purportedly to help them fund care for low-income and uninsured patients. The now-cancelled rebate model would have invited drug manufacturers to voluntarily participate in a rebate-based discount system.
Basically, providers don't get the discount upfront at the time of purchase, but rather apply the 340B discount through rebates after the purchase, and are required to meet onerous data submission requirements.
The pilot is intended to increase transparency and prevent duplication of discounts, but it could create financial challenges and increase administrative burdens that could disproportionately impact smaller safety net providers, which the 340B program was originally designed to help when it was established in 1992.
For example, Bill Keeton, chief advocacy officer at Vivent Health, a nationwide provider of HIV care to low-income patients, told us. Medical City News Last November, the model would create cash flow problems for health care providers, especially organizations like his that must purchase extremely expensive HIV drugs.
Biktary is the most commonly used drug to treat HIV and costs about $4,200 per month. Under 340B, clinics pay about half of the cost, but the rebate model may force clinics to temporarily bear the entire cost.
Because of these problems, HHS faces several lawsuits seeking to kill the model, most notably one filed in December by the American Hospital Association (AHA) and a coalition of other hospital groups.
Now that the kickback model has been abandoned, hospitals are breathing a sigh of relief.
“Kickback programs that undermine the ability of safety-net hospitals to provide more comprehensive care only harm America's most vulnerable communities,” AHA CEO Rick Pollack said in a statement.
Tom Kraus, vice president of government relations for the American Society of Health-System Pharmacists, also praised the move, calling the kickback model “unworkable and a threat to program integrity” in a statement.
“Rebates in the 340B program and the Inflation Reduction Act negotiated pricing program inappropriately shift costs from manufacturers to suppliers, effectively raising drug costs in direct opposition to Congressional intent. Providers should not bear increased costs for programs designed to require manufacturer discounts,” he said.
If HHS seeks to reform the 340B program's administrative processes, it has agreed to issue new announcements and accept public comment.
Photo: Anastassiya Bezhekeneva, Getty Images
