Re: Comments on the Proposed 340B Rebate Model Pilot Program

HHS Docket No. HRSA-2025- 14619

Submitted electronically via Federal eRulemaking portal September 8, 2025

 

Dear Director Britton:

Thank you for the opportunity to submit comments in response to the Notice to announce the availability of a 340B Rebate Model Pilot Program, and for soliciting comments on the feasibility and design of this program. Redesigning the 340B Program is crucial to ensure support for safety net patients and providers. Disproportionate share and critical access hospitals, rural health centers, and federally qualified health centers all provide care to vulnerable populations. The 340B Program is well-intentioned. Yet while straightforward in theory, this system has been fraught with disputes over distribution channels, contract pharmacy relationships, and patient eligibility, resulting in tensions between federal oversight authorities and manufacturer autonomy.

While the programmatic issues with 340B run deeper than this proposed rebate model, incremental correction and improvements in program stability promise more equal and efficient implementation.

Restoring Stability to the Program

The most immediate advantage of the rebate model is that it reduces litigation risk and helps bridge the divide between manufacturers and safety-net providers. Manufacturers have long argued that the upfront discount system exposes them to risk of diversion and duplicate discounts, particularly in the era of widespread contract pharmacy use. Rebates provide a clearer transaction trail, minimizing disputes.

By allowing manufacturers to participate voluntarily while ensuring Health Resources and Services Administration (HRSA) oversight, the rebate model demonstrates regulatory flexibility. That pragmatism is crucial for keeping all parties at the table – and maintaining the program’s credibility in the eyes of Congress, courts, and the public.

Enhancing Transparency and Accountability

A rebate system inherently generates a verifiable paper trail. Covered entities must submit claims, and manufacturers must document rebate approvals or denials. This structure makes compliance easier to monitor, both for HRSA and for independent auditors. In an era of skepticism about 340B, this added accountability may be the program’s best defense.

Greater transparency benefits everyone:

• Providers gain assurance that rebates are timely and justified.
• Manufacturers can demonstrate compliance and mitigate reputational risk.
• Policymakers gain clearer data to evaluate the program’s effectiveness.

Aligning With Broader Federal Pricing Reforms

The rebate pilot dovetails with Medicare’s drug price negotiation authority under the Inflation Reduction Act (IRA). By targeting drugs already subject to federal price regulation, the pilot avoids unnecessary disruption and ensures applicability to the broader industry.

Moreover, rebates are a familiar tool in U.S. health care markets. Commercial insurers and Medicaid programs already rely on rebate systems to manage costs. By aligning 340B with existing pricing frameworks, HRSA positions the program as an integrated – not exclusionary – piece of the health care financing landscape.

Protecting Covered Entities Through Safeguards

Critics worry about cash-flow burdens: Safety-net providers may face difficulty paying full price upfront before rebates arrive. HRSA addressed this concern directly. Rebates must be issued within 10 days of claim submission, a requirement that dramatically reduces financial risk.

Further, by prohibiting manufacturers from shifting IT costs to providers, HRSA ensures that covered entities are not saddled with hidden expenses. Mandatory technical assistance provisions also mean that smaller, rural providers won’t be left behind. These safeguards demonstrate that HRSA designed the pilot with provider needs squarely in mind.

Creating a Data-driven Path Forward

One of the persistent criticisms of 340B is the lack of comprehensive, standardized data on how discounts are used and how savings translate to patient benefit. The rebate model creates exactly that data set. Through claim submissions, HRSA can track utilization, rebate flows, and potential patient impacts with far greater precision.

This evidence base could prove transformative. It will allow HRSA and Congress to defend 340B with facts, not anecdotes, and to identify where reforms may be needed. If successful, the rebate pilot could evolve into a permanent option that enhances program integrity while preserving access.

Addressing Common Concerns

Concern: Rebates will burden providers with upfront costs.

Response: HRSA’s 10-day rebate requirement, coupled with manufacturer-funded IT support, limits adverse exposure. For many providers, the modest delay in realizing savings is outweighed by the program stability and data transparency the rebate model offers.

Requiring upfront purchase of drugs may be a fair worry, especially for rural hospitals and smaller community health centers with thin operating margins. The rebate model does invert the timing of savings. The question is whether the timing gap is manageable and protected by guardrails.

The pilot’s design directly targets the cash-flow risk: Rebates must be paid (or transparently denied with documentation) within a short window after data submission. With a 10-day turnaround, the interest cost of floating typical 340B exposure is often modest relative to the value of 340B savings. For example, if a covered entity temporarily “floats” $500,000 of 340B-eligible purchases for 10 days at a 5-percent annual borrowing rate, the carrying cost is about $685 ($500,000 × 0.05 × (10/365)). That is materially smaller than the savings realized on those same transactions. The key will be efficient planning to keep that float as low as possible.

The pilot also forbids cost-shifting of IT platform expenses to covered entities and requires advance notice and technical assistance. That matters because the two biggest drivers of cash stress are (1) long payment lags and (2) unexpected administrative costs – both expressly addressed here.

Covered entities can further de-risk the timing gap with common treasury and revenue-cycle practices:

• Daily (not batch) submissions of claims to compress the float.
• Dedicated “rebate receivable” tracking with dashboards showing average days-to-pay, denial rates, and exception aging; escalation triggers at, say, 12–14 days.
• Standing Service Level Agreements (SLA) with the manufacturer/platform (e.g., 99.5-percent system uptime; 24–48 hour ticket response times; standardized denial codes).
• Short revolving credit lines sized to the maximum expected 10–12 day float (often a fraction of monthly 340B volume).
• Wholesaler term alignment (e.g., net-15 or net-20 on IRA-selected National Drug Codes (NDC)) to match the 10-day rebate clock.
• Quarterly cash-reserve policy funded by a small fraction of realized 340B savings to buffer unexpected spikes.

Finally, covered entities can adopt a lightweight cash-flow scorecard for the pilot period: average days-to-rebate; 90th-percentile days-to-rebate; denial rate and top denial reasons; net financing cost per $1 of 340B savings; and provider time spent per 100 claims. With these controls and the pilot’s guardrails, the timing shift becomes a manageable operational issue and not a structural threat to safety-net finances.

Concern: Manufacturers may misuse the model to limit access.

Response: HRSA retains pre-approval authority for any rebate model and requires manufacturers to maintain existing distribution mechanisms. Providers’ access to drugs is safeguarded.

The fear is that a rebate construct could become a backdoor way to ration 340B – through throttled approvals, burdensome data demands, or de facto restrictions at contract pharmacies. The pilot framework is built to prevent precisely that. Core safeguards include: (1) HRSA pre-approval of any rebate arrangement; (2) preservation of existing distribution channels (i.e., manufacturers can’t “solve” alleged integrity issues by shutting off supply pathways the pilot doesn’t authorize them to alter); (3) no cost-shifting of platform expenses to covered entities; (4) data minimization, privacy, and HIPAA compliance; (5) a rapid payment clock with documentation for any denial. Together, these guardrails aim to ensure the model is about payment timing and integrity – not access restriction.

That said, covered entities can proactively lock in operational guarantees that translate those principles into practice:

• SLAs: uptime ≥99.5 percent; claim-file acknowledgment within 24 hours; automated status visibility; human support response within one business day; and a 10-day pay-or-deny commitment measured from complete claim receipt.
• Standardized denial taxonomy: a short, fixed list of denial codes; required documentation; and an appeal pathway with time-bound responses (e.g., five business days).
• Continuity-of-care provisions: automatic approval (or provisional payment) for claims tied to ongoing oncology, HIV, hemophilia, or other critical regimens where delays could harm patients, with retrospective audit authority preserved.
• Non-retaliation and non-discrimination: equal treatment across similarly situated covered entities and contract pharmacies; no selectively burdensome data demands.
• Fail-safe clauses: If the platform misses SLA targets (e.g., repeated >10-day delays or measured downtime), the manufacturer must implement immediate corrective actions – and, if unresolved, allow a temporary fallback to standard upfront discounts until compliance is restored.

On the provider side, adopt a readiness checklist: confirm payer-agnostic claim capture; test electronic health record/dispensing data extracts; validate contract-pharmacy routing; dry-run submissions; set up automated reconciliation; and appoint a “rebate integrity lead” for rapid issue escalation. Keep a monthly access and experience dashboard: fill rates, time to first dose for specialty regimens, platform downtime minutes, and denial heat-maps by NDC. If patterns suggest artificial friction, escalate with documentation; the pilot’s design and HRSA oversight provides opportunity for course corrections.

The rebate model should not (and, under the pilot’s guardrails, cannot) be used to curtail access. With clear SLAs, transparent denial codes and fallback remedies, covered entities can ensure the model remains a payment mechanism, not a rationing tool.

Concern: This is a step toward weakening 340B.

Response: On the contrary, the rebate model strengthens 340B by addressing its critics. Without innovation, the program risks erosion through litigation and congressional skepticism. The rebate pilot shows HRSA is responsive and adaptive, which will help protect 340B over the long term. Supporters worry that moving away from visible point-of-sale discounts dilutes 340B’s identity and makes it easier to erode over time. The better framing is that the rebate pilot modernizes 340B in ways that make it more resilient.

Rebates generate structured, auditable data (who bought what, when, and under which eligibility conditions), reducing the very disputes – diversion allegations, duplicate-discount wrangles, contract-pharmacy contention – that have fueled litigation and program strain. Fewer disputes mean fewer headlines suggesting abuse and more confidence that the program is operating as intended.

The pilot’s narrow scope – voluntary participation; limited to IRA-selected drugs; time-bound; HRSA-approved – signals prudence, not retrenchment. It shows the agency can iterate to address stakeholder concerns while preserving access for safety-net patients. That kind of pragmatism tends to build bipartisan tolerance, particularly when paired with measurable integrity gains.

Crucially, the rebate pathway aligns 340B with mainstream U.S. drug-payment practices (commercial and Medicaid rebating), which lowers the sense that 340B is a sui generis outlier. Programs that integrate with prevailing market mechanics are harder to caricature and easier to defend. Alignment does not equal capitulation; it’s a way to make the program’s means less controversial while preserving its ends – stretching scarce resources to expand care.

To guard against “mission drift,” transparent evaluation criteria can be guardrails coming out of the pilot into official policy:

• Evaluation metrics: (i) realized price differentials vs. historical upfront discounts; (ii) days-to-rebate distribution; (iii) denial rates and reasons; (iv) administrative hours per 100 claims; (v) downstream patient-access indicators (e.g., time-to-therapy for oncology); and (vi) documented uses of 340B savings (e.g., uncompensated care, service expansions).
• Codification options: Enshrine the 10-day payment standard, cost-shift prohibitions, distribution-channel preservation, standardized denial codes, and appeals timelines in formal guidance or regulation after the pilot.
• Optionality: If pilot data show mixed effects by provider type, consider a hybrid regime where upfront discounts and rebates both exist with clear eligibility rules, letting entities choose the modality that best preserves patient access and financial stability.
• Transparency with privacy: Encourage reporting that demonstrates how savings support safety-net missions (aggregate and de-identified where necessary), strengthening the program’s public case without compromising patient privacy.

This pilot can be an integrity and continuity upgrade: a way to de-escalate litigation, create verifiable data, and ensure 340B remains viable in an environment shaped by IRA negotiations, site-neutral payment debates, and MA oversight. The question isn’t whether 340B looks exactly as it did a decade ago; it’s whether it can continue to deliver on its purpose over the next decade. A well-designed rebate program makes that outcome more likely, not less.

Conclusion

The launch of the rebate pilot should be seen in the context of broader health care financing reform. Federal policymakers are pursuing site-neutral payment reforms, Medicare Advantage oversight, and Medicare direct price negotiations. Within this landscape, 340B cannot remain static. By exploring a rebate model, HRSA signals that it is future-proofing the program. For safety-net providers, the model represents an opportunity to shape the future. By participating and providing feedback, they can help design a rebate system that works in practice, ensuring that patient care remains at the center.

The 340B Program has been a lifeline for safety-net providers and the patients they serve. But without adaptation, it risks collapse. The 340B Rebate Model Pilot Program is a pragmatic, forward-looking reform that strengthens transparency, aligns with broader policy trends, and creates a sustainable framework for the future. Supporters of safety-net care should embrace the pilot. By doing so, they help ensure that 340B remains a functioning and effective program for decades to come.

Sincerely,

 

Michael Baker

Director of Health Care Policy

American Action Forum

mbaker@americanactionforum.org