An Existential Threat to 340B Providers

My association, 340B Health, represents hospitals that participate in the federal 340B drug pricing program. It has been an incredibly busy summer, with many new proposals targeting 340B. I’m going to focus on two issues today.

First, legislation was recently introduced in Congress to protect 340B hospitals from harmful drug company policies that have stripped billions of dollars from the healthcare safety net. And, second, the administration just last week announced plans to test a fundamental and highly concerning change to 340B that would allow manufacturers to switch paying 340B discounts at purchase to paying the 340B price by way of back-end rebates.

It is no exaggeration to say that this would be the biggest change to the 340B program since it began more than 30 years ago.

I’ll start with Congress.

In 2020, pharmaceutical companies representing a significant percentage of expensive specialty drugs began cutting hospitals’ ability to partner with community and specialty pharmacies to dispense 340B drugs to their patients.

This action allows drugmakers to avoid paying 340B discounts on those drugs, retaining additional profits for themselves. It also reduces crucial resources for 340B hospitals, threatening access to care and support for patients with low incomes and those in underserved rural areas.

In July, Congresswoman Doris Matsui from California and Senator Peter Welch from Vermont re-introduced the 340B Pharmaceutical Access To Invest in Essential, Needed Treatments & Support (PATIENTS) Act, which would prevent drug manufacturers from avoiding 340B discounts. Many of our hospital members joined us in visits to Capitol Hill to raise support for the 340B PATIENTS Act, and to urge lawmakers to oppose any further 340B restrictions.

It’s a scary time for 340B hospitals, which are already facing significant future cuts.  I’m referring to upcoming Medicaid cuts from the recently enacted One Big Beautiful Bill, decreases in 340B savings under the Inflation Reduction Act, and likely Medicare payment cuts for 340B drugs.

In addition to those cuts, the Health Resources and Services Administration (HRSA), the agency that oversees 340B, just announced that drugmakers may replace upfront 340B discounts with backend rebates, under a pilot program covering certain drugs starting this January.

This is very concerning for hospitals, as they would be required to pay the high list price for drugs up front and then wait to be a paid a rebate at a later time. This means that safety-net hospitals, which have low to no operating margins, would be required to essentially float money to profitable drug companies, only later receiving the difference between the drug’s list price and the 340B ceiling price. 

Though currently planned as a pilot program, HRSA makes clear that rebate authority could be expanded to more drugs, depending on its evaluation of how it all worked.

340B Health remains deeply concerned about financial and administrative burdens this will impose on 340B hospitals. In addition to floating revenue to drug companies, hospitals are likely to face high administrative costs, and the possibility that drugmakers will deny legitimate rebate claims.

Our recent analysis shows that shifting to rebates for all 340B drugs would force the largest group of 340B hospitals to front an average of more than $72 million per hospital to drugmakers while waiting for rebates. This would significantly limit their ability to deliver critical care services. For all these reasons and more, we continue working with the administration and lawmakers to ensure 340B remains strong and sustainable.