HRSA Approves Limited 340B Rebate Model Pilot: What Safety Net Hospitals Should Know

The Health Resources and Services Administration (HRSA), an agency within the U.S. Department of Health and Human Services (HHS), recently announced a limited pilot program that allows select drug manufacturers to test a rebate-based model under the federal 340B Drug Pricing Program. This is a significant change from the traditional upfront discount model that many covered entities rely on. 

This pilot program has significant implications for cash flow management for all 340B covered entities, but it is particularly important in safety net hospitals and small rural providers, and it warrants close monitoring by 340B participants and stakeholders. 

What’s Included in the Rebate Model Pilot

Traditionally, 340B covered entities purchase outpatient drugs at the discounted 340B rate upfront. Under the new rebate model, hospitals would instead pay the full price initially and later receive a rebate for the difference between that price and the 340B rate. 

This shift was originally pursued by drug manufacturers without HRSA approval, but HRSA clarified that such a move would violate section 340B(a)(1) of the Public Health Service Act, which states that purchase agreements must account for rebates or discounts “as provided by the Secretary.” 

Rather than allowing manufacturers to implement rebate models unilaterally, HRSA has opted to study the impact of the rebate approach through a narrowly defined pilot program with the following parameters: 

• Participation is limited to manufacturers who apply and are approved by HRSA

• The model will apply only to a select group of outpatient drugs

• The study period is capped at one year

This structured design prevents broad disruption while enabling the federal government to assess operational impacts in a controlled environment.

Financial Concerns for Safety Net and Rural Hospitals

While the pilot program is narrow in scope, the rebate model it introduces poses real financial risks, particularly for hospitals already working within tight margins. 

By requiring hospitals to pay more upfront and wait for the rebate, the rebate model can create cash flow instability, especially for safety net and rural hospitals. The lack of predictability in rebate timing further complicates financial planning and operational stability. 

HRSA’s decision to contain the pilot program and prohibit unilateral manufacturer adoption is a critical safeguard that temporarily prevents this financial strain from becoming widespread. 

If your hospital participates in the 340B program, now is the time to assess potential vulnerabilities and plan accordingly. Our team of experts can support you in evaluating your institution’s readiness for evolving 340B reimbursement models and understanding the operational risks they may pose. We assist safety net and rural hospitals in analyzing potential cash flow disruptions, optimizing financial planning, and developing strategies to remain compliant and sustainable under shifting federal policies. As HRSA gathers data from this pilot program and considers future changes to the 340B program, Germane Solutions will continue to monitor developments and provide the strategic insight our clients need to stay ahead.