What Is the 340B Drug Pricing Program?
The 340B Drug Pricing Program was established in 1992 to help safety-net healthcare providers stretch resources and expand access to care for underserved populations. Pharmaceutical manufacturers must sell outpatient drugs at discounted prices to eligible hospitals and clinics, allowing these providers to reinvest savings into patient services, community health initiatives, and lower medication costs.
However, recent industry shifts threaten the program’s integrity. Major pharmaceutical companies, including Johnson & Johnson (J&J), Eli Lilly, Bristol-Myers Squibb (BMS), and Novartis, have proposed a 340B rebate model that fundamentally alters how discounts reach Covered Entities. While manufacturers claim this approach enhances transparency, it ultimately undermines the program’s core mission.
Why Are Drug Manufacturers Proposing a Rebate Model?
Instead of providing upfront 340B discounts, the rebate model requires Covered Entities to purchase medications at full price and then receive post-sale rebates. Drug manufacturers argue this change will prevent duplicate discounts—when a manufacturer provides both a 340B discount and a Medicaid rebate on the same drug—and improve oversight of 340B savings.
In reality, this model benefits pharmaceutical companies while creating unnecessary challenges for Covered Entities and patients. Delaying financial relief adds administrative burdens, disrupts cash flow, and limits the ability of hospitals and clinics to serve vulnerable populations. Additionally, new data-sharing requirements raise significant concerns about patient privacy and the operational viability of the program.
Why the 340B Rebate Model Fails to Lower Patient Costs
Drug manufacturers claim the rebate model will enhance accountability, but it does not address the underlying issue of high drug prices. Here’s why it will not reduce costs for patients:
- Delayed Cost Savings – Covered Entities must pay full price upfront, waiting for rebates that may take months to process. This delay disrupts financial planning and operational stability.
- Increased Administrative Burden – Managing post-sale rebates adds complexity, diverting resources away from direct patient care.
- Unpredictable Financial Impact – The current discount model provides immediate cost savings, while a rebate model introduces uncertainty, limiting a provider’s ability to maintain services and plan future investments.
- No Direct Benefit to Patients – The rebate model does not guarantee that savings will be passed to patients. Instead, manufacturers and intermediaries retain control over financial benefits.
- Higher Out-of-Pocket Costs – Pharmacy Benefit Managers (PBMs) use drug pricing benchmarks like the National Average Drug Acquisition Cost (NADAC) to determine reimbursement rates. Since the rebate model inflates upfront purchase prices, it may lead to higher patient costs at the pharmacy counter.
- Eligibility Verification Challenges – Manufacturers are requiring Covered Entities to verify patient eligibility through third-party portals, creating unnecessary delays and potential denials of 340B pricing that impact patient access to medication.
- Privacy and Cybersecurity Risks – The rebate model requires extensive data sharing with third-party vendors, increasing the risk of patient health information (PHI) exposure. Given the rise in cyberattacks targeting healthcare data, this introduces new vulnerabilities that compromise both patient security and compliance with privacy regulations.
This rebate model creates additional barriers to affordable care and contradicts the purpose of the 340B program.
How Covered Entities Can Advocate for the 340B Program
The proposed rebate model poses a serious threat to safety-net providers and the communities they serve. Covered Entities must take an active role in advocacy efforts to safeguard the integrity of 340B. Key steps include:
- Engage with Advocacy Organizations – Groups such as 340B Health, the National Association of Community Health Centers (NACHC), and the American Hospital Association (AHA) lead efforts to protect 340B. Hospitals and clinics should support and participate in these organizations.
- Educate Lawmakers and Policymakers – Direct outreach to state and federal representatives is essential. Sharing real-world data and patient stories helps demonstrate the positive impact of 340B savings on healthcare access.
- Participate in Legal and Policy Efforts – Collaborating with hospital associations can strengthen challenges to harmful policy changes through litigation and regulatory action.
- Increase Community Awareness – Patients and local stakeholders must understand how the 340B program benefits them. Public awareness campaigns can put additional pressure on policymakers to reject industry-driven changes that weaken patient care.
- Leverage Media and Public Relations – Hospitals and clinics should use press releases, op-eds, and social media to highlight the negative consequences of the rebate model and emphasize the importance of 340B in supporting vulnerable populations.
Protecting 340B and Affordable Healthcare
For decades, the 340B program has ensured that safety-net providers can deliver essential healthcare services to underserved populations. The rebate model proposed by drug manufacturers does not lower patient costs—it only adds financial strain to Covered Entities and weakens a vital program. The new requirements for data sharing, patient eligibility verification, and third-party involvement introduce serious risks that could compromise patient care and privacy.
To preserve 340B, hospitals, clinics, and advocacy groups must take strategic action through education, outreach, and policy engagement.
At Realistic Strategies LLC, we support healthcare providers in navigating policy changes and protecting essential resources like the 340B program. By taking a stand now, Covered Entities can safeguard their ability to serve communities and provide affordable medications to those who need them most.