340B rebate model pilot advances as providers warn of added costs

The Health Resources and Services Administration (HRSA) continues to take steps toward implementing a rebate model for the 340B Drug Pricing Program.

After soliciting comments on a planned model over a two-month period, HRSA sent an updated notice May 27 to the Office of Management and Budget (OMB) for a review that remains ongoing. That step came just five weeks after the deadline to submit comments as solicited in a February request for information (RFI).

On Monday, HRSA published a separate notice seeking administrative clearance from OMB to collect the information that would be involved in running the rebate model. Manufacturers would have to submit pilot participation plans and, once the new model is underway, monthly reports on 340B purchases. Providers would face a greater administrative burden, as they would be eligible for 340B pricing only upon submitting claims data to manufacturers for the included drugs.

The likeliest starting date for the model is at the outset of a calendar quarter, said Maureen Testoni, president and CEO of the provider advocacy group 340B Health. That could mean a launch date of Jan. 1, 2027, or possibly even Oct. 1, 2026, Testoni said during a session at HFMA’s Annual Conference last week in National Harbor, Maryland.

How the 340B rebate model would work

The rebate model would allow manufacturers to sell certain drugs at full price and then provide the 340B discount via a rebate after receiving claims data to review. Initially, the pilot would be limited to the 11 manufacturers and 25 products (or product lines, e.g., Ozempic/Rybelsus/Wegovy) that are part of CMS’s Medicare Drug Price Negotiation Program in 2026 and 2027.

In the new notice, HRSA estimates roughly 15,250 covered entities would sustain an annual burden of nearly 4 million hours through the rebate pilot. That comes out to almost 260 hours per entity, with obvious variances based on how much an entity uses the 340B program.

On a weekly basis, the average covered entity would face five hours of additional work, according to HRSA, which acknowledges that hospitals commenting on the February RFI argued that the estimate was too low.

Among the tasks anticipated for hospitals to comply with the rebate pilot are identifying eligible claims and extracting claims data, formatting data as required by each manufacturer, submitting claims data, tracking rebate status, and managing denials and disputes.

HRSA says the required data already exists in providers’ billing systems and much of the data can be automated. Many providers differ with that assessment.

“The 340B program is going to have a whole revenue cycle, where we’re going to have to submit data that’s catered exactly to each specific manufacturer’s needs,” Charlton Park, CFO with University of Utah Health Care, said during the Annual Conference session. “Then we’re going to have all kinds of denials and follow-up work, and you can see how this is just going to balloon into all kinds of additional expense for covered entities just to get the benefit that we currently have.”

Warnings of cash-flow and margin pressure

A 340B rebate model was scheduled to begin Jan. 1, 2026, before litigation forced HRSA to rewrite the proposed model and incorporate a notice-and-comment period and a more substantive assessment of the industry impact. An appellate ruling that upheld the initial ruling referred to the planned rebate model as requiring “interest-free loans” from providers to manufacturers.

“That’s how I think covered entities definitely look at it as well,” Testoni said.

Hospitals commenting on February RFI described the likelihood of cash-flow problems stemming from higher short-term drug acquisition costs and delayed access to savings. Patients could lose access to medications, and hospitals foresee having to cut back on charity care and community benefit programs.

Another worry for providers is that even though guidelines call for manufacturers to pay rebates within 15 days, that cannot be taken for granted.

“We don’t know how easy that’s going to be, and how likely they are to accept what you send [or] challenge what you send,” Testoni said. “We just don’t have any idea.”

Operationally, covered entities would need to incorporate new IT systems and a claims reconciliation infrastructure, along with hiring new staff and handling ongoing dispute management, according to provider feedback.

Other articulated concerns include the possibility that privacy would be compromised if providers have to turn over patient-level dispensing information and, potentially, protected health information. There also are broader questions about whether HRSA has statutory authority to alter the payment structure of the 340B program, an issue that could foreshadow legal challenges.

In the new notice, HRSA did not substantively address any of the points aside from administrative burden. Other issues are expected to be discussed in the notice that’s on file with OMB.

HRSA sees the pilot as a program integrity measure

In the RFI and the newly published notice, HRSA framed the pilot as a matter of program integrity, saying it will give manufacturers a way to avoid paying duplicate discounts between 340B and both the Medicare Drug Price Negotiation Program and the Medicaid Drug Rebate Program. The model also will help manufacturers verify that a 340B drug is being dispensed to an eligible patient.

Another goal of the pilot is to improve 340B transparency, with manufacturers required to submit transaction-level purchasing data.

At a time when margins of 1% to 2% are common in the industry, “The idea of having to float additional dollars to pharma manufacturers who have plenty of money doesn’t sit well when we are trying to move things forward,” Park said.

He encouraged providers to ramp up their advocacy efforts.

“A lot of people think, ‘rebate — no harm, no foul, nobody’s hurt.’ Hospitals and covered entities will definitely be hurt by rebate models,” Park said. “While we can, we need to expend all the energy we have to advocate against rebate programs.”