How Will the 340B Rebate Model Pilot Affect Covered Entity Finances?

The Health Resources and Services Administration (HRSA) plans to implement a pilot switching 340B from an upfront discount model to a rebate model for drugs in the Medicare Drug Price Negotiation Program (MDPNP). This study uses calibration methods to predict the impact of the rebate model pilot (RMP) on covered entities’ net revenues from the 340B program. I quantify losses from averted duplicate discounts; denial of valid claims; manufacturers using data to exert influence; liquidity-related expenses; and administrative/staffing costs. I also project the effect of switching the full 340B program to a rebate model. I project net revenue losses from the RMP of $1.5 billion. Expansion to all of 340B would increase the predicted losses to $22.8 billion, cutting net revenue from the program by 32%. The majority of losses will come from administrative costs, which do not benefit manufacturers, implying a net negative effect. Covered entity losses from the RMP will be limited by the pilot only applying to a small percentage of 340B sales as well as restrictions HRSA’s guidance places on manufacturers. If the rebate model expands to all of 340B or if the restrictions are inadequately enforced, the losses will grow substantially.