340B Drug Rebate Pilot Program Approved

Overview of the 340B Rebate Pilot Program

The Trump administration has officially approved eight drugmakers’ rebate plans for a controversial 340B drug discount pilot program launching January 1, 2025. This groundbreaking initiative, unveiled earlier this summer, represents a significant shift in how safety-net healthcare providers access discounted medications.

The 340B Rebate Model Pilot Program consists of carefully selected drugs from manufacturers who submitted plans meeting specific criteria approved by the Health Resources and Services Administration (HRSA). This one-year test run fundamentally transforms the traditional discount structure that has defined the 340B program since its inception.

How the New Rebate Model Works

The Shift from Upfront Discounts to Rebates

The pilot program introduces a dramatic departure from conventional practices by swapping upfront discounts for after-the-fact rebates on a limited number of products obtained through the 340B Drug Discount Program. This transformation affects how healthcare providers and pharmaceutical manufacturers interact financially.

Under the new framework, providers eligible for 340B discounts—referred to as covered entities—must submit detailed data reports to drugmakers within 45 calendar days of dispensing the medication, with allowances for extenuating circumstances. Once the report is submitted, manufacturers must process the rebate payment within 10 days.

Limited Scope and Drug Selection

The test run strategically limits participation to the 10 drug products included on the Centers for Medicare and Medicaid Services (CMS) Medicare Drug Price Negotiation Selected Drug List. This targeted approach allows HRSA to evaluate the rebate model’s effectiveness on high-impact medications before considering broader implementation.

Participating Drugmakers and Covered Medications

The Eight Approved Manufacturers

The following pharmaceutical companies have received approval to participate in the pilot program:

• Bristol Myers Squibb
• Immunex Corporation
• AstraZeneca AB
• Pharmacyclics
• Merck Sharp & Dohme
• Boehringer Ingelheim
• Novo Nordisk
• Janssen Biotech

Covered Drug Products

The medications included in the pilot encompass widely prescribed treatments: Eliquis, Enbrel, Farxiga, Imbruvica, Januvia, Jardiance, Stelara, Xarelto, and multiple Novolog and Fiasp products. These drugs represent critical therapies for conditions ranging from cardiovascular disease to diabetes and autoimmune disorders.

Hospital Groups Voice Strong Opposition

Traditional vs. Rebate Model Comparison

The Model Pilot Program could fundamentally transform how price concessions flow through the 340B Program. Traditionally, the 340B Drug Discount Program operated as an upfront discount system where covered entities purchased medications at the discounted 340B price immediately. Under the rebate model, covered entities pay higher prices upfront and later receive post-purchase rebates reflecting the difference.

America’s Essential Hospitals Condemns the Program

Jennifer DeCubellis, president and CEO of America’s Essential Hospitals, issued a scathing statement condemning the initiative: “The Health Resources and Services Administration’s approval of 340B rebate models for nine drugs is a clear case of the fox guarding the hen house. 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.”

DeCubellis emphasized that hospitals now face an entirely new set of administrative burdens, requiring increased bureaucracy and paperwork without providing any benefit to patients’ ability to access discounted drugs.

Administrative Burden Concerns

Massive Time and Cost Projections

The American Hospital Association contends that HRSA has “vastly underestimated” the time and financial investment hospitals will require for compliance. The hospital lobby provided a conservative estimate of 11.2 million collective hours hospitals would need to devote to filing rebate applications with drugmakers—substantially exceeding HRSA’s September estimate of 1.5 million hours.

Cash Flow and Liquidity Challenges

Hospital groups have warned that the rebate approach forces their members, including institutions with limited liquidity, to float substantial funds while awaiting payments that manufacturers could potentially deny. 340B Health, an industry group representing participating hospitals, estimated an average float of $72.2 million for disproportionate share hospitals—a staggering financial burden for safety-net providers.

Public Comment Period Reveals Widespread Opposition

A tight public comment period generated more than 1,200 responses, predominantly from provider or provider-adjacent organizations opposing the plan. This overwhelming response demonstrates the healthcare community’s serious concerns about the pilot’s potential consequences.

Pharmaceutical Industry Supports the Change

The Pharmaceutical Research and Manufacturers of America (PhRMA) applauded HRSA’s approval, viewing it as progress toward program transparency and accountability.

Molly Jenkins, PhRMA’s director of public affairs, stated: “HRSA’s approval of eight rebate model pilot plans marks an important step toward improving transparency and accountability in the 340B program. This development reflects growing bipartisan momentum to address concerns about program integrity and ensure that 340B benefits patients rather than padding hospital coffers.”

PhRMA encouraged HRSA to expand the rebate model across all 340B covered outpatient drugs, arguing that broader implementation would strengthen program integrity while preserving support for genuine safety-net providers.

Legislative Response and Future Implications

In September, a bipartisan group of 163 lawmakers urged the Department of Health and Human Services to cancel the 340B pilot program or provide detailed information on protecting hospitals and the government from additional administrative costs and burdens. This legislative opposition highlights the program’s controversial nature across party lines.

HRSA has indicated the pilot will help “better understand the merits and shortcomings of the rebate model from stakeholders’ perspectives” and inform consideration of future 340B rebate models.

Historical Context of the Rebate Debate

Recent years witnessed drugmakers attempting to implement rebate models independently, citing the program’s rapid growth, lack of transparency, and instances of duplicate discounts. The Department of Health and Human Services (HHS) and HRSA, under the previous administration, blocked these rebates without explicit HHS secretary permission.

While drugmakers largely failed in challenging this authority in court, they achieved a significant victory when the new administration announced this pilot program, potentially setting a precedent for future drug discount program modifications.

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