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As we endure Spring 2025, many covered entities (CEs) continue to perform their ordinary and necessary duties to operate their 340B programs. This may include conducting an annual independent audit, financially reconciling the previous fiscal year, getting ready to dissect the newly filed Medicare Cost Report or process a renewal for their grant, implement an enhancement to their 340B program, or other related activities. One set of ongoing responsibilities that happens weekly (if not daily) is the current manufacturer restrictions and ensuring designations and claim submissions are properly managed. In 2020, we saw one manufacturer kickoff the restrictions and virtually all major manufacturers quickly followed. CEs had to redefine their job responsibilities and expand their workloads to include managing these restrictions. As of early 2025, close to 40 manufacturers participate in this process and counting.
How We Got Here
So what is the rebate model that a number of drug manufacturers have tried to implement but have been blocked by the federal government? It is a systemic overhaul of 340B program where the traditional discount is no longer achieved via an up-front discount but instead is achieved through a rebate as approved by each participating pharmaceutical manufacturer. Last August, Johnson and Johnson (J&J) announced it was no longer going to provide 340B discounts in the traditional manner. This provocation was met with heavy resistance by the Health Resources and Services Administration (HRSA). The department warned the company that it would expect to see per transaction penalties and possible termination of their pharmaceutical pricing agreement with the government should they pursue this model.
A few months later, Sanofi introduced the credit model, which effectively is the same concept as the rebate model but with further elaboration from the company on what it expected from CEs in order to receive the credits. As 340B Report explained, Sanofi’s model would have required providers to purchase 25 of its 340B-priced drugs at the wholesale acquisition cost (WAC) and then submit claims data to drug industry vendor Beacon Channel Management. If Beacon determined the claims were 340B eligible, it would then send covered entities a post-purchase “credit” of the difference between the WAC and the 340B price. Under Sanofi’s plan, the French giant would have additionally required hospitals to submit “healthcare encounter data elements,” which the drugmaker would use to “operationalize HRSA’s 1996 patient definition.”
Providers are concerned that under this approach, Sanofi, not the government, would effectively be determining patient eligibility. Fortunately, the government stepped in and blocked the credit model from going into effect. However, Sanofi, like several other drug manufacturers, are suing the government in an effort to move forward with this controversial model.
Where Is this Going?
As of April 1, 2025, the rebate model is on hold and no CE is currently required to follow it to obtain 340B savings. But does that mean it will stay that way? A few things to consider:
- Since J&J kicked this off, the Berkley Research Group (BRG), who developed Second Sight Solutions (340B ESP), has continued to develop a platform to manage this proposed model called Beacon Channel Management.
- BRG has continually worked with 340B Third Party Administrators (TPA) on troubleshooting the infrastructure of how data would be shared with Beacon to ensure a rebate model can effectively happen.
- Currently, the rebate model would require that patient encounter, prescription, and drug purchasing data be shared with Beacon in order for any rebate to be issued. Much of this data is not required today and therefore, unavailable to the Beacon platform.
- On April 1, 2025, Beacon released their software developer kit (SDK), which TPAs and other similar vendors can use to start developing an interface directly with Beacon. This interface would allow automated uploads of the required information to allow for Beacon to process the requested rebate.
- If the rebate model is eventually approved by HRSA or if the manufacturers are successful in their legal challenges against the government, it is very likely that this approach will become more widespread despite its harm to CEs and their patients.
- If the rebate model becomes reality, there is real concern that 340B pricing would be removed immediately when CEs do not provide the many data requirements that the drug industry would require.
Be Proactive
Consider this one question: can you afford to not prepare yourself for the possibility of rebates coming at some point soon? While we have yet to identify one CE in support of this model, we know that the drug industry is very powerful and influential. Therefore, it is imperative to be ready in case our worst fears become reality.
Justin Ott is Principal, Account Management, Affiliate Solutions at AuthorityRx. He can be reached at Jott@authorityrx.com
