‘Solution in search of a problem:’ AHA slams 340B rebates pilot

Modern Healthcare – Wednesday, August 27, 2025
By Bridget Early

The hospital industry is pressuring federal regulators to shut down a pilot program that will allow drugmakers to replace 340B Drug Pricing Program discounts with rebates.

The American Hospital Association blasted the plan in a letter sent to Health Resources and Services Administrator Thomas Engels on Wednesday, saying it would upend the way safety-net providers access lower-cost medications and lead to higher spending.

The pilot program is scheduled to begin in January, run for at least a year and may later be expanded, HRSA announced last month. Only medicines subject to the Medicare Drug Price Negotiation Program are eligible for inclusion. Pharmaceutical companies must apply by Sept. 15 and HRSA plans to announce the participants on Oct. 1.

Related: Clock ticks for hospitals as TEAM bundled payment model nears

Shifting to a rebate system would undermine 340B, increase administrative burdens and force hospitals to violate their cash-on-hand bond agreements, AHA General Counsel and Secretary Chad Golder wrote in the letter.

“HRSA should abandon this rebate model pilot program. It is a ‘solution’ in search of a problem. More accurately, it is a ‘solution’ that will create a host of problems for those who provide care for rural and other underserved Americans. But given the agency’s apparent interest in forging ahead, HRSA must impose stronger, inescapable safeguards,” Golder wrote.

For example, the agency should require drugmakers to cover all administrative costs, fine pharmaceutical companies that violate the program’s parameters through actions such as improper denials and reimbursement delays, mandate documentation of all denials, and establish a centralized, neutral platform for data submissions, Golder wrote.

“The pilot program must contain crystal clear guardrails — accompanied by robust enforcement mechanisms — to ensure that drug companies do not abuse it,” Golder wrote.

Under the 340B Drug Pricing Program, qualified safety-net providers such as hospitals and community health centers can access medications at 25%-50% discounts.

Drug companies such as Johnson & Johnson and Eli Lilly sought to switch to rebates last year, but HRSA ordered them to stop. Pharmaceutical companies challenged the agency in court but lost.

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