340 Drug Program Proposed Policy Reform

As federal policymakers continue to evaluate changes to the 340B Drug Pricing Program, the U.S. Department of Health and Human Services (HHS) has introduced a proposed rebate-based model that could significantly alter how hospitals and clinics access discounted medications. Through a recent Request for Information, HHS is exploring whether to replace the program’s longstanding upfront discount structure with a system in which providers would pay full price for certain drugs and later seek reimbursement through rebates.

This proposed shift—currently under consideration as part of a potential pilot program—aims to test an alternative approach to achieving 340B pricing compliance and transparency. However, it also raises important questions about cash flow, administrative burden, and the overall impact on safety-net providers who rely on immediate savings to fund patient care services.

In response, healthcare organizations across the country are weighing in. Below is our formal letter outlining concerns and recommendations regarding the proposed 340B rebate model and its potential implications for the communities we serve.

The Honorable Thomas J. Engels 

Administrator 

Health Resources and Services Administration 

U.S. Department of Health and Human Services 

5600 Fishers Lane Rockville, MD 20852 

Re:     Request for Information:  340B Rebate Model Pilot Program, HHS Docket No. HRSA-2026-03042 

Dear Administrator Engels: 

We at Community HealthCare System (CHCS) are grateful for the opportunity to provide comment on the Department of Health and Human Services’ (HHS) “Request for Information:  340B Rebate Model Pilot Program.” CHCS is a Critical Access Hospital in northeast Kansas. We have seven clinics that serve our rural communities, five of which are 340B registered child sites. The 340B program is vital to CHCS’s ability to provide access to care for our patients. In your RFI you seek to ascertain whether HRSA should implement a 340B rebate model rather than the upfront discount that has worked successfully for decades. At CHCS, we firmly believe that the answer to that question is “no.” 

As explained in further detail below, any rebate mechanism will be extremely costly and burdensome to CHCS. The perceived benefits of a rebate model are entirely outweighed by the enormous costs and detriments this change will impose upon covered entities, particularly Critical Access Hospitals (CAH) providing care in our underserved, rural communities. HRSA’s desire to balance the interests of 340B hospitals and drug companies is counterintuitive to the purpose of the 340B program and will not help covered entities to “stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” Preserving the upfront discount mechanism which CHCS has relied on for years is the best way to fulfill that purpose. 

CHCS has done its best to provide detailed answers to the questions posed in the RFI. To estimate costs, we have assumed that any future Rebate Program will include the 10 original drugs that HRSA had originally approved for the Pilot Program and those that have been approved under the Medicare Drug Price Negotiation Program (MDPNP) for 2027, per HRSA’s February 25, 2026 Information Collection Request. More drugs subject to a rebate mechanism will result in more claims to submit, rebates to track and reconcile, money we will need to pay for the drugs while we wait to receive our statutory discount, disputes over pricing delays and denials, and therefore less money and resources that CHCS can dedicate to serving our rural patients and increasing their access to care. 

• Administrative Costs Under a Potential 340B Rebate Program: CHCS estimates a greater than $1M increase in our direct, up-front drug acquisition costs with a switch from an up-front discount to a rebate model. That is over half of our entire pharmaceutical budget for our rural health system. To float that cost to the pharmaceutical manufacturers while we wait to receive our statutory discount will have a significant impact on our days cash on hand and limit our ability to make necessary capital improvements to our facilities and to increase our patients’ access to care.  

CHCS anticipates needing to hire or re-allocate 1.5 FTE, in addition to our current 340B staff, to manage the increased administrative burden associated with a switch to a rebate model. We have additional implementation costs with labor hours to configure the reports necessary to submit the data that are very difficult to quantify. CHCS is currently working with our third-party administrator (TPA) to prepare medical claims files for submission due to new manufacturer restrictions. This has been going on for over a month, and the reports are still not consistently conforming with the data requirements for 340B ESP. A rebate model would be considerably worse to implement and manage. 

Our entire program benefit last fiscal year was $450,000. The 340B program was intended to help covered entities “stretch scare federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” In fiscal year 2026 our uncompensated care/bad debt was $340,000. CHCS relies on our 340B program benefit to be able to provide our rural patient population access to care. A rebate model will essentially eliminate any benefit to our rural hospital. 

• Staffing Impacts Under a Potential 340B Rebate Program: A shift from an up-front discount to a rebate model would result in CHCS needing to hire or reallocate 1.5 FTE. Hiring qualified 340B experts in our rural area is quite challenging. The 340B program is very specialized and the labor pool is not as large as in more populated areas, unfairly creating an even larger administrative burden for Critical Access Hospitals. CHCS has one full-time pharmacist who serves as the knowledge lead for our 340B program as well as the clinical pharmacist for our system. Additional 340B program needs divert pharmacist time from patient care. Even if we can hire additional staff to assist with the excessive administrative burdens posed to covered entities, the training required to become proficient with the program is extremely time-consuming and therefore incredibly costly. 

• Systems and Infrastructure for Implementation of a Potential 340B Rebate Program: While preparing for the 2026 rebate pilot program, our TPA worked to develop a means for preparing and submitting the necessary reports to the Beacon platform. To have them submit these reports on our behalf will cost CHCS an additional $6,000 a year on top of the administrative costs that we have already incurred with our TPA. CHCS estimates it to take 10-20 hours per week to reconcile the rebates and ensure that our 340B pricing remains intact based on our experience with submitting claims data to 340B ESP. That is considerably more than the HRSA estimate of 5 hours per week 

• Data Collection by Covered Entities/Beacon IT Platform problems: CHCS has been submitting claims through 340B ESP, who shares a parent company with the Beacon platform utilized for the rebate pilot, for quite some time. We frequently experience issues with the platform related to claim mapping and what are considered non-conforming claims. Each quarter, one manufacturer cuts off our access to 340B pricing even with 100% conforming claims. Previously we could contact 340B ESP and they would serve as our go between with the manufacturer and help get the pricing restored for our patients, but increasingly they are having us reach out to the manufacturers directly. This causes a significant delay in pricing restoration. We often discover these pricing discrepancies when our patients of greatest need who rely on the 340B program for access to affordable medications experience a significant price increase at our contract pharmacies. Converting the 340B program from an upfront discount to a rebate model will more than double the time it takes to submit claims to the manufacturers. That is a particularly significant burden to our rural hospital and our patients in need. At CHCS, we have no faith in the Beacon platform based on our experience with 340B ESP. 

• Adverse Impacts of These Additional Costs and Burdens: At CHCS, our patients are our neighbors, our family, and our friends. Because of this, we are proud to say that a huge part of our program is our pass-through savings program at our contract pharmacies. CHCS does not have an in-house pharmacy, so we have already been hit hard by the continued manufacturer restrictions that have made our patients travel greater distances (up to 50+ miles) to access affordable medications. A switch to a rebate model will force CHCS to significantly limit or eliminate our pass-through savings program to be able to reconcile the volume of claims and ensure that we are getting timely rebates. A rebate program will create a significant cash flow issue.  

CHCS has seen 3 neighboring hospitals stop offering obstetrical services in the last 2 years. The 340B program enables CHCS to continue providing critical services, like obstetrics, in our rural area that break even or sometimes operate at a loss. When your entire program net benefit is $450,000 and your system’s annual uncompensated care is nearly equal to that, any reduction in 340B program benefit threatens those services.  

CHCS feels strongly that a rebate model will lead to poorer control of our patients’ chronic health conditions by reducing their access to affordable medications, subsequently increasing their risk for hospitalization and emergency department visits, and result in negative health outcomes.  

• Reliance Interests: The RFI expressly invites comment on “reliance interests in continuing to obtain the 340B ceiling prices through upfront discounts and whether such reliance interests are reasonable in light of the Secretary’s express statutory authority to provide for discounts via ‘rebate or discount.’” Respectfully, that framing rests on a flawed premise. There mere existence of statutory authority does not imply that the agency will—or reasonably may—exercise it in a particular manner. That is especially so here, where the 340B Program has, since its inception, consistently provided discounts through upfront pricing rather than post-sale rebates. CHCS reasonably relied on this history when designing its internal operations, staffing, third-party contractual relationships, and financial planning for the use of 340B savings—all based on an upfront-discount model. A fundamental switch now would disrupt these settled reliance interests engendered by the agency’s prior policy. Absent any identified problems with the upfront discount model and given the massive costs that this disruption will impose on 340B hospitals like ours, there is no reason to switch to a rebate mechanism, even in so-called “pilot” form. In addition to CHCS’s reliance on the up-front discount for the necessary cash-on-hand predictions used in our long-term planning and capital purchasing, our patients rely on the upfront discount to purchase what would be otherwise unaffordable medications.  

• Efforts To Avoid 340B/MDPNP Duplicate Discounts: HRSA has already made clear that drug companies have other available options to address the need to deduplicate 340B and MDPNP pricing. Given the tremendous costs that a rebate mechanism will impose on CHCS, HRSA should rely on those other options. Any other decision would impermissibly privilege the interests of drug companies over those of covered entities, their patients, and the communities they serve. 

Likewise, we support the AHA’s position that there are viable, lawful and less burdensome alternatives that could achieve the same potential benefits as a rebate mechanism. In particular, we urge HRSA to adopt a third-party clearinghouse, rather than a rebate mechanism, to advance 340B/MDPNP deduplication, program integrity, and any other potential benefits. At a minimum, HRSA must provide a reasoned explanation for why the third-party clearinghouse is neither viable nor less costly than a rebate mechanism. 

CHCS does not own a community pharmacy. We rely on relationships with our independent community pharmacy partners. We’ve inquired with them to see if they are having any issues with deduplication and we hear consistently that they do not have the staff available to reconcile these rebate payments to even know if they are having issues with it. Rural areas and small businesses do not have the infrastructure to reconcile and manage the deduplication process. A neutral clearinghouse for deduplication and an upfront 340B discount is the only way to ensure a 340B benefit to rural America.  

For all these reasons, Community HealthCare System respectfully submits that the costs of any Rebate Program will outweigh any expected benefits. HRSA therefore should abandon the concept altogether and embrace a neutral, third-party clearinghouse. 

If HRSA chooses to move forward with a Rebate Program, it must allow Community HealthCare System and other covered entities the opportunity to comment on specifics of its new program. We have attempted to be very specific in answering your RFI, however, we lack precise knowledge of critical details (data requirements, possible grounds for denial of rebates, dispute resolution processes, other guardrails) necessary to implement a Rebate Program. If CHCS and other covered entities are not permitted the opportunity to provide additional comments on specific features of the 340B Rebate Program, proper consideration of these important aspects will not have been accomplished.  

We thank you for the opportunity to submit comments and urge HRSA to carefully consider our concerns. Please do not ask rural hospitals, and therefore the patients they serve, to bear the burden of this significant alteration of the 340B program. CHCS patients rely on the 340B program to gain access to care and to affordable prescription medication. They will be the ones who suffer if we allow extremely wealthy pharmaceutical manufacturers to dictate when and how they provide the 340B discount. We look forward to working with HRSA on this important issue. Please contact me if you have any questions. 

Sincerely, 

Hali Brown, PharmD., BCPS 

Pharmacy Manager/340B Director 

Community HealthCare System 

120 West 8th St, Onaga, KS 66502