August 11, 2025

HRSA Launches Pilot Program to Reform 340B Drug Discount

News Summary

The Health Resources and Services Administration has announced a pilot program to reform the 340B drug discount program, a vital source of savings for hospitals serving low-income patients in New York. The new rebate model will allow drug manufacturers to charge full price upfront, reimbursing hospitals later for discounts. This change has raised concerns among healthcare leaders about the potential impact on hospital finances and patient care. Stakeholders can submit comments on the program through early September, as discussions continue regarding transparency in the program’s revenue use.

New York City – The Health Resources and Services Administration (HRSA) has announced a new pilot program that aims to reform the 340B drug discount program, which provides significant discounts to hospitals that serve a high volume of low-income patients. This pilot program is raising concerns among hospitals across New York, as it is set to begin as soon as January.

The 340B program traditionally allows participating hospitals to receive discounts ranging from 25% to 50% on medications, significantly reducing their drug costs. Over 100 hospitals in New York rely on this program, making it a critical source of savings for safety-net providers that cater to low-income communities.

Under the new pilot program, pharmaceutical companies will be permitted to implement a rebate model instead of offering discounts at the time of purchase. This means that hospitals would pay the full price for selected outpatient drugs upfront and would then be reimbursed retrospectively for the discounts they would have otherwise received. The reform is specifically limited to 10 outpatient drugs that fall under federal price negotiations, including popular medications such as Pfizer’s Eliquis and Johnson & Johnson’s Xarelto.

The 340B program has seen considerable growth, with an estimated total sales volume of $66.3 billion in 2023, reflecting a 23% increase from the previous year. This growth has led some pharmaceutical companies to criticize the program, suggesting that it primarily benefits hospitals rather than the low-income communities they serve.

Executive leaders in New York’s healthcare sector, such as the CEO of the Greater New York Hospital Association, have expressed strong opposition to the rebate model. They argue that this approach could undermine the effectiveness of the 340B program, potentially impacting the financial stability of hospitals that depend on these discounts to serve their patient populations.

The federal government previously banned rebate models without an adequate review process, which led to lawsuits from drug manufacturers keen to push for such changes. Earlier this year, the Trump administration indicated its intention to test a rebate model as part of efforts to streamline the program.

Comments from stakeholders regarding the pilot program are being accepted through early September, with a deadline for approval for participating drug manufacturers set for October 15. As part of ongoing legislative discussions in New York, there is also a move to increase transparency regarding how hospitals utilize revenues from the 340B program. Proposed state legislation is expected to mandate that participating hospitals report their fund usage to the Department of Health to ensure accountability and clarity.

There are growing concerns about the appropriation of profits generated by the 340B program, specifically that not enough is being done to benefit uninsured and indigent patients. Legislative efforts are in place to prevent pharmaceutical companies from imposing stipulations that could discourage hospitals from participating in the 340B program altogether.

The distribution of medications at discounted rates under the 340B program faces scrutiny over its transparency and regulation. Critics argue that more oversight is necessary to ensure that the funds are effectively used to support low-income communities and are directed toward enhancing patient care.

As the implementation date for the pilot program approaches, the healthcare community in New York and beyond continues to watch attentively, weighing the potential implications on hospital finances and patient care outcomes.