Before the

Department of Health and Human Services and Health Resources and Services Administration

Washington, D.C.

In the Matter of

Department of Health and Human Services Request for Comments Regarding Health Resources and Services Administration 340B Rebate Model Pilot Program

Docket No. HRSA –2025-0001

Comments of

Thomas A. Schatz

President

Citizens Against Government Waste

September 8, 2025

Citizens Against Government Waste (CAGW) is a private, nonprofit, nonpartisan organization dedicated to educating the American public about waste, fraud, abuse, mismanagement, and inefficiency in government.  On behalf of the more than one million members and supporters of CAGW, I offer the following comments regarding the Health Resources and Services Administration (HRSA) request for comments regarding the 340B Rebate Model Pilot Program.

Federal healthcare programs are often well-intended but end up costing more than expected and become subject to waste, fraud, abuse, and mismanagement.  One of the best (or worst) examples of such a result is the 340B Drug Pricing Program, which is administered by the HRSA.  CAGW and its lobbying arm, the Council for Citizens Against Government Waste (CCAGW) have long been concerned about the misuse and abuse of the 340B program.[1]

To improve and reform the 340B program, CAGW has recommended that Congress establish a clear definition of a patient as an uninsured, low-income individual who does not qualify for Medicare or Medicaid, providing better verification of patient eligibility when a prescription is filled, establishing a clear relationship between the patient and covered entities (CEs) verifying that services were provided within the past 12 months, eliminating duplicate discounting with improved oversight, revising reporting requirements, and increasing transparency to make it clear how hospitals are using 340B funds.[2]

HRSA’s proposed 340B Rebate Model Pilot Program is also a helpful step in the effort to reform 340B and CAGW supports its implementation.  It provides flexibility without burdensome oversight and gives manufacturers the opportunity to select drugs on the Medicare Drug Price Negotiation list to provide post-sale rebates to 340B covered entities.  The discounts would be determined by reimbursing the difference between the acquisition cost and 340B ceiling price based on claims-level data.  The CEs must submit claims data within 45 days of drug dispensation, rebates must be issued with 10 days unless there is a documented reason for its denial, and disputes must follow the current HRSA process.  This system is similar to Medicaid and Medicare Part D, making its implementation less burdensome.      

Since its creation in 1992, the 340B program has expanded exponentially.  Annual purchases under 340B went from $2.5 billion in 2005 to $66.3 billion in 2023.[3]  Yet, there is no system in place to ensure that 340B savings are used for patient care.

An October 2021 USC Schaeffer Center report noted that many hospitals profit from 340B discounts without clear reinvestment in services.[4]  Similarly, a 2024 JAMA Health Forum article found little evidence that patients benefit from lower out-of-pocket costs.[5]  And an April 2025 Senate Health Education Labor and Pensions Majority Staff report for Chairman Bill Cassidy (R-La.) provided further proof of a lack of transparency and accountability for 340B expenditures. 

The proposed rebate model pilot program would eliminate duplicate discounts by preventing manufacturers from offering Medicaid and 340B discounts on the same drug; increase the transparency of transactions and rebate timelines and provide a better audit trail through claims-based tracking.  Privacy is protected through compliance with HIPAA, secure transmission of information, and a prohibition against the use of personally identifying information.  Patient access is preserved, and the cost is paid by manufacturers. 

If the initial test is successful, the model should be expanded to all 340B-eligible drugs, through a unified claims portal or certified and secure platforms.  CEs should be required to report how 340B funds are being used and manufacturers should be required to provide timely payment of valid rebates and subject to investigation for invalid denials of payment.  The Centers for Medicare and Medicaid and its Office of Inspector General should work with HRSA to provide performance metrics and report on the pilot program’s result prior to a notice of proposed rulemaking.

Stakeholders may argue the model is burdensome or that they are using 340B funds as intended by Congress and therefore no reforms are needed.  But the evidence of abuse of the program and the growth that has made it the second largest prescription drug program in the federal government belie claims that nothing needs to be done.  The required data is already standard in pharmacy billing systems, rebates must be paid within 10 days, and manufacturers, not the government, is paying for the IT systems needed for the model.

HRSA’s 340B Rebate Model Pilot Program is a positive step in the effort to reform a program that is failing to provide the intended benefits and has grown out of control.  The model increases transparency, moves the program closer to its statutory intent, and reduces the abuse, uncertainty, and waste currently marbled throughout the 340B program.

CAGW supports the implementation of the proposed pilot program.  We suggest again, as we often have in the past, that Congress should enact legislation to reform 340B.