Drug discounts for safety-net hospitals up in the air and into the courts
Resource-challenged hospitals have been relying on a federal program to get automatic discounts from pharma suppliers for various drugs since 1992. That program, the 340B Drug Discount system, is set to shift to a new pilot model—one based on non-automated rebates—on Jan. 1.
However, a lawsuit and/or temporary restraining order may block the change from going live.
The actions were filed Dec. 1 by the American Hospital Association, the Maine Hospital Association and safety-net health systems in Arkansas, Maine, New York and North Dakota.
The named defendants are HHS Secretary Robert F. Kennedy Jr. and HRSA Administrator Thomas Engels (the acronym stands for HHS’s Health Resources and Services Administration), along with HHS itself and, with it, the United States of America.
The conflict has been brewing for some time. HHS has said it wants a rebate system because the automated model has produced concerns about fiscal trickery—or “program integrity,” in HHS’s polite parlance—as well as a lawsuit filed by pro-rebate pharma companies.
The AHA and co-complainants contend that a rebate system, something long pursued by drug companies, would erect an onerous roadblock between small health systems that largely serve the underserved and the drug discounts such systems need to operate at a manageable margin.
Specifically, a rebate system would “involve vast administrative costs to submit, track, recover and potentially resolve disputes over rebates,” the suit states. “Second, it would force 340B hospitals to essentially provide drug companies with interest-free loans while awaiting refunds due by law. Third, a rebate system would allow drug companies to slow and stymie rebates, thereby withholding statutorily owed discounts based on technicalities and other mischief.”
The plaintiffs also note the 340B savings they’ve been leveraging over the past 33 years have allowed them to fund programs for vulnerable patient populations.
So the battle is joined in Washington—both in Congress and in the courts. Will the sides settle their differences before Jan. 1?
More likely is a scenario in which the rebate model pilot goes into effect on New Year’s Day with the lawsuit and restraining order nipping at its heels for some time to come.
Pro-rebate model: PhRMA
Among the voices speaking in favor of the rebate model pilot program is the Pharmaceutical Research and Manufacturers of America, aka PhRMA, a trade group representing major biopharmaceutical research and biotechnology companies.
“The administration’s rebate pilot is a positive first step toward addressing hospital abuse of the 340B program,” Molly Jenkins, PhRMA’s senior director of public affairs, stated earlier this year. “The rebate model is a commonsense tool and should be expanded to cover all medicines and address broader program integrity concerns.”
More from Jenkins of PhRMA:
‘Rebates are standard practice for getting manufacturer price concessions on medicines to federal drug programs. It’s already used in Medicare, Medicaid, TRICARE and beyond. A rebate model will also help to spur a larger private sector role in addressing operational challenges created by the Inflation Reduction Act, lessening federal involvement and saving taxpayers money.’
Anti-rebate model: AHA
Those voicing opposition to the rebate model pilot include, unsurprisingly, AHA President and CEO Rick Pollack.
“When the government announced its new rebate program just a few months ago, it recognized that it would fundamentally shift how the 340B program has operated for more than three decades,” Pollack stated Dec. 1. “When making such a major change, with such far reaching consequences for patients and hospitals, it is important that the government follow the basic administrative rules of the road. Unfortunately, it did not do so here.”
More from the AHA via Pollack:
‘[G]iving hospitals only a few months to comply with these burdensome new requirements or risk losing millions of dollars in discounts they are entitled to under the law will harm patients and communities across the country. We are asking the court to act quickly to protect access to vital care services.’
For all things 340B from the Executive Branch’s vantage point, go here. For the ins and outs of the program’s rebate model pilot, go here.
Dave P. has worked in journalism, marketing and public relations for more than 30 years, frequently concentrating on hospitals, healthcare technology and Catholic communications. He has also specialized in fundraising communications, ghostwriting for CEOs of local, national and global charities, nonprofits and foundations.