The federal agency overseeing the controversial 340B Rebate Model Pilot Program has “vastly underestimated” how much time and money hospitals obligated to participate will spend on reporting burdens, the American Hospital Association (AHA) wrote in a Tuesday letter.
The one-year test run—largely supported by drugmakers and denounced by hospitals—is set to kick off Jan. 1, with the Health Resources and Services Administration (HRSA) set to announce manufacturers’ approved application and rebate plans by Oct. 15.
The pilot would swap out the drug subsidy program’s upfront discounts for after-the-fact payments that hospitals would need to request through a reporting platform maintained by the drugmakers.
A tight public comment period yielded more than 1,200 responses, many of which came from provider or provider-adjacent organizations opposing the plan. In compliance with the Paperwork Reduction Act, the HRSA also issued an information collection request in September for stakeholders to review its estimates of the program’s burden.
A table in that request showed the government’s collective estimate that 14,600 covered entities (hospitals, health centers, clinics and outpatient pharmacies) would each need to submit 52 reporting claims across the year (roughly one per week) and that each reporting claim would take two hours to finish, for a collective total of more than 1.5 million hours of total burden.
Conversely, the pilot’s nine participating drugmakers are expected to submit monthly purchase reports requiring an average of two hours each, a total of 216 collective hours, the HRSA estimated.
The American Hospital Association (AHA), in its response to the request, said the HRSA’s estimate for covered entities was “extraordinary” in its own right but also a substantial undercount.
“Our 340B hospital members have informed us that the rebate model pilot will require them to devote, on average, up to two full-time equivalents to manage the entire rebate model process,” the AHA wrote. “Assuming each full-time employee works 40 hours/week, that would result in nearly 4,160 hours across two full-time employees per year per hospital to comply with the rebate model. With currently over 2,700 340B hospitals, that would amount to nearly 11.2 million burden hours—a far cry from the agency’s estimates.”
The AHA said its 340B hospital members estimated operational costs tied to program compliance would run from $150,000 to $500,000 per hospital and could increase with any rebate delays or denials.
Collectively, that means a “conservative estimate” of more than $400 million in annual compliance costs due to the pilot program, the AHA wrote, and doesn’t include the burden of fronting the discounted amount to drug manufacturers (previously estimated by industry group 340B Health (PDF) as an average $72 million per hospital).
The burdens are “particularly unfair” when placed against those of drugmakers, for whom the pilot is voluntary. Additionally, the current draft requirements as outlined by HRSA when unveiling the pilot could lead each of these drugmakers to establish their own rebate process and reporting platforms, further increasing providers’ administrative burdens.
“Ultimately, when calculated accurately, there is no way the benefits of this pilot program outweigh the burdens that will be inflicted on hospitals, health systems and other covered entities,” the AHA wrote. “… At best, this rebate model introduces a pointless administrative middleman into the process, adding the costs and burdens discussed above without making the 340B Program work any more efficiently or effectively for providers, patients or communities.”
The AHA closed its letter by again urging the government to, if not cancel, at least delay the program and “take the time to get it right.”
Annual total spending on drugs through the 340B program has grown from $6.6 billion in 2010 to $43.9 billion in 2021, or an average of 19% per year, according to a recent analysis from the nonpartisan Congressional Budget Office. About 50,000 hospitals, clinics and other providers participated in the program in 2021, with 61% of participating facilities representing 87% of all purchases being hospital-based.
Drugmakers have pointed to this rapid growth as evidence that the subsidy program has exceeded Congress’ intent as a support pillar for struggling safety net hospitals. In comments on the proposed pilot program, lobbying group PhRMA told the administration it “should quickly expand this Rebate Pilot to all 340B covered outpatient drugs and allow for the broad use of rebates in the 340B program. This would be an important step towards safeguarding the program, without sacrificing support for true safety net providers and the patients they serve.”
Citing a need for transparency, pharmaceutical companies had also tried to implement their own versions of the to-be-piloted rebate models last year—though the effort was blocked by judges who said the federal government must sign off on such a change.
The issue has drawn the attention of Congress, with some calling for reforms and others siding with hospitals to denounce the rebate pilot. In terms of the latter, more than 160 bipartisan lawmakers penned a letter last month urging the administration to cancel the rebate pilot out of concern for hospitals’ financial well-being.