AHA Raises Concerns Over 340B Rebate Model Pilot’s Administrative Burdens

The American Hospital Association (AHA) has strongly objected to the federal government’s estimates of the time and financial burden that hospitals will face under the upcoming 340B Rebate Model Pilot Program. In a letter, the organization said that the Health Resources and Services Administration (HRSA) has “vastly underestimated” the reporting workload that hospitals will be required to manage.

The one-year pilot is scheduled to begin on January 1. Under the program, drug manufacturers will replace upfront 340B drug discounts with rebates that hospitals must request through platforms maintained by the manufacturers. HRSA is expected to announce approved applications and rebate plans from participating drugmakers by October 15.

The initiative, which has been welcomed by drugmakers but opposed by many hospitals, comes after a brief public comment period that drew more than 1,200 responses. Many of those responses, submitted by provider and provider-adjacent organizations, expressed opposition to the plan.

In line with the Paperwork Reduction Act, HRSA released an information collection request in September to gather feedback on its own estimates of the pilot’s administrative demands. The agency projected that the roughly 14,600 covered entities—including hospitals, health centers, clinics and outpatient pharmacies—would each submit 52 rebate claims during the year, averaging one per week. Each claim was estimated to take about two hours to complete, resulting in a total of over 1.5 million burden hours across all entities.

By comparison, HRSA estimated that the nine drugmakers participating in the pilot would each be required to submit monthly purchase reports. These reports, estimated at two hours each, would amount to a collective 216 hours of work.

In its response, the AHA said these figures fail to reflect the actual administrative requirements hospitals will encounter. The group explained that many of its members expect they will need to dedicate as many as two full-time staff to manage the rebate process, translating into nearly 4,160 hours per hospital per year. With more than 2,700 hospitals currently in the 340B program, this would equal about 11.2 million burden hours across the sector, the association said.

The AHA also said its members anticipate operational costs ranging from $150,000 to $500,000 per hospital to comply with the pilot. This, the group noted, could be compounded by delays or denials in processing rebates. Based on these estimates, the AHA calculated that hospitals could face more than $400 million in collective compliance costs, in addition to carrying the upfront cost of drugs. A previous estimate from industry group 340B Health had placed that figure at an average of $72 million per hospital.

The AHA emphasized that these requirements would be significantly heavier than those imposed on drugmakers, who are voluntarily participating in the pilot. The association also warned that allowing each manufacturer to create its own rebate and reporting process could add further administrative complications for providers.

“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.

The group concluded its letter by calling on HRSA to either cancel or delay the program until revisions could be made.

The 340B program, which allows eligible providers to access discounted drug prices, has grown substantially in recent years. According to the Congressional Budget Office, total drug spending through the program rose from $6.6 billion in 2010 to $43.9 billion in 2021, averaging 19% growth annually. In 2021, about 50,000 providers participated, with hospitals making up 61% of facilities and 87% of all purchases.

Drugmakers, for their part, have argued that the program’s rapid expansion has gone beyond its intended scope. In comments on the pilot, the lobbying group PhRMA said the initiative should be expanded to cover all 340B outpatient drugs, describing it as an important step toward protecting the program while ensuring it supports safety net providers.

Pharmaceutical companies had previously attempted to introduce similar rebate systems independently, but those efforts were blocked in court, with judges ruling that federal approval was necessary.

The pilot has also drawn congressional attention. More than 160 bipartisan lawmakers sent a letter last month urging the administration to cancel the initiative, citing concerns about the potential financial strain it could place on hospitals.