Just days and weeks away from key deadlines, the hospital industry’s leading trade organization is still calling for the administration to scrap a one-year pilot of drugmakers’ preferred approach to statutory drug discounts.
The test run, announced late last month in a notice, would swap out upfront discounts for a limited number of products obtained through the 340B Drug Discount program for after-the-fact rebates as coordinated and distributed by manufacturers. Applications from drugmakers to participate are due Sept. 15, with approvals given a month later and the pilot kicking off at the top of the new year.
In a public comment letter submitted Wednesday, the American Hospital Association (AHA) outlined “bare minimum requirements” for the program—but also made clear its belief that the experiment should be scrapped entirely.
“As the agency recognized in its Notice, any approval of a rebate model will ‘fundamentally shift how the 340B program has operated for over 30 years.’ There is no sound reason for HRSA to make such a profound change,” AHA General Counsel and Secretary Chad Golder wrote in the organization's comment letter to the Health Resources and Services Administration (HRSA).
Still, with deadlines approaching, “it seems clear that the agency is committed to pursuing this pilot program,” Golder continued. “Although we wish that the agency would not go down this path, we are confident that what it calls a ‘test’ will ultimately fail. In the meantime, however, it is critical that the pilot program do as little harm as possible to hospitals, patients and communities during this one-year experiment.”
Over the past several years of statements and court filings, as well as in the majority of Wednesday’s letter, the AHA reiterated its position that the 340B program “does not have an integrity problem” as alleged by drugmakers who have described duplicated discounts and diversion in need of oversight. It also wrote that “most hospitals lack the necessary cash reserves” for manufacturers to review purchases and then issue rebates “even for 10 days.”
“Before piloting the rebate model, HRSA must balance these adverse impacts on providers and their patients against the unavoidable costs of fundamentally changing the 340B program to appease drug companies,” Golder wrote. “When doing so, the scales will surely tip firmly in favor of maintaining an upfront discount model.”
If nothing else, the threat to hospitals’ financial stability is enough to warrant additional, more explicit safeguards than what the agency outlined in last month’s notice, the letter reads. Specifically, the AHA called for the HRSA’s pilot to:
- Require drug companies cover the full range of costs associated with a rebate model. Though the burden of standing up an IT platform for data submission was already outlined in the notice, the AHA pointed to additional spending related to new hires, payments to third-party administrators to manage data flows and legal costs.
- Establish strict enforcement guidelines for drug company non-compliance. Currently, the notice only threatens revocation of a manufacturer’s pilot application, which the AHA said “does not go far enough to penalize a drug company.” The AHA also asked for more clarity on how noncompliance will be determined.
- Establish a centralized platform for data submissions that are managed by HRSA or a neutral third party. The current plan for each drugmaker to stand up their own IT platform, process and data requirements would leave hospitals navigating multiple rebate requirements, imposing more burden than a single system, the AHA said.
- Create a separate, dedicated process to resolve rebate disputes. The HRSA currently notes that hospitals could “raise concerns” but does not specify how they should do so.
- Require denial documentation providing thorough explanation for why denied rebates won’t be paid. Here, the AHA suggested drugmakers could twist the rules of the program to improperly deny rebates, which detailed documentation would help prevent.
- Clarify that drug companies cannot deny rebates based on unilateral contract pharmacy restrictions. This suggestion speaks to policies many manufacturers adopted to limit discounts based on hospitals’ use of contract pharmacies, an area of contention between the industries that is still being hashed out in courts.
- Explain how the HRSA will measure and determine the pilot’s success. The AHA said the agency must outline its definition of success to justify moving from the subsidy program’s established practices.
The AHA submitted its critiques well ahead of the public comment period’s Sept. 8 deadline. As of Wednesday, nearly all of the 51 comments on the notice listed on regulations.gov were from provider organizations strongly opposed to the pilot in its proposed form.
The AHA previously joined six other provider groups in a letter asking the HRSA to bump back the comment, application and approval timelines of the pilot program to allow more time for public feedback to be incorporated into the pilot program.
Alex Schriver, senior vice president of public affairs at drugmaker lobbying group Pharmaceutical Research and Manufacturers of America (PhRMA), described the pilot last month as a "positive first step toward addressing hospital abuse of the 340B program."
Recent years had seen drugmakers attempting to implement a rebate model for 340B drug discounts on their own, citing the program’s rapid growth, lack of transparency and instances of duplicate discounts. The Department of Health and Human Services (HHS) and the HRSA, under the prior administration, stepped in to block the rebates without explicit permission from the HHS secretary. Drugmakers were largely unsuccessful arguing against that authority in court but scored a win when the new administration announced its pilot.
"Manufacturer rebate models have been used for decades in other federal programs and are one of the most effective tools to prevent duplicative discounts," PhRMA’s Schriver said shortly after the pilot notice was released. "If we want to lower drug prices in the U.S., Congress and the administration must fix the 340B program, starting with expanding this rebate model. We look forward to commenting on the notice and working with the administration on this pilot."