HHS Is Reviving Its 340B Rebate Push — And Providers Are None Too Pleased

HHS unveiled a plan to reintroduce a rebate program for 340B drug discounts last week. The department, through the Health Resources and Services Administration (HRSA), is seeking to replace upfront discounts with rebates for a subset of 340B drugs.

This is not the first time HRSA has tried to instate a rebate model for 340B drugs. Its original rebate model was scheduled to go live on the first of the year, but courts blocked implementation before it could take effect, citing procedural and legal issues. Now, HRSA is trying again with a revised pilot program that is slated to start next year.

The 340B program allows hospitals to buy outpatient drugs at steep discounts, with the goal of helping them fund care for low-income and uninsured patients. Under HRSA’s new plan, drugmakers would pay providers back after their purchase rather than applying the discount at the point of sale — which shifts the burden of tracking and verifying eligible claims onto hospitals. 

The new rebate model applies to 25 drugs tied to Medicare’s negotiated “maximum fair price” under the Inflation Reduction Act. Some of these include Ozempic, Eliquis, Otezla and Calquence. Notably, none of the drugs on the list are among the key drivers of 340B spending — which tend to be high-cost specialty drugs, often cancer and immunology treatments like Keytruda and Biktarvy. HRSA data showed that specialty medications made up just 38% of 340B units purchased last year but accounted for 62% of total program spending.

HRSA argues that the rebates are needed to verify that 340B discounts are being applied correctly, noting the program has outgrown its original scope as a “narrow pricing safeguard” and become a sprawling, multi-billion-dollar system that needs stronger oversight.

“As the program has grown in both size and complexity, strengthening transparency, accountability and program integrity has become increasingly important. This revised pilot helps modernize program oversight by improving visibility into 340B transactions while helping preserve the program’s long-term sustainability for the patients and communities it was created to serve,” HRSA Administrator Tom Engels said in a statement.

Providers are reacting to the revised pilot program with concern and frustration. 

Maureen Testoni, CEO of trade group 340B Health, called it a “flawed approach” that has already failed once, noting that federal courts found HRSA’s original attempt likely violated administrative law — and that this could happen again.

Another vocal critic of rebates, American Hospital Association CEO Rick Pollack, said his organization is “considering all available options” to stop the pilot from taking effect. He warned that it would saddle already cash-strapped hospitals with new administrative and financial burdens they can afford to take on.

“The agency’s analysis dramatically understates the true costs of this program, ignoring the hundreds of millions of dollars in compliance expenses, cash-flow disruptions and operational burdens that will inevitably divert scarce resources away from patient care. At a time when many hospitals are already under severe financial strain, this policy will force hospitals in rural and other underserved communities to spend more on bureaucracy and less on the services and care that patients depend on every day,” Pollack’s statement read.

Still, the current pilot remains limited in scope, given it covers drugs that represent less than 5.5% of total 340B sales. Whether it expands further will likely hinge on the outcome of the legal battles that provider groups are already signaling they’re ready to wage.

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