CAGW Files Comments on Health Resources and Services Administration 340B Rebate Model Pilot Program Request for Information

Before the

 

Health Resources and Services Administration

 

Washington, D.C.

 

In the Matter of

 

Health Resources and Services Administration Request for Information Regarding 340B Drug Pricing Program Rebate Model

 

Docket No. HRSA – 2026 – 0001 – 0001

 

Comments of

 

Thomas A. Schatz

 

President

 

Citizens Against Government Waste

 

April 16, 2026

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’s (HRSA) request for information regarding a 340B Rebate Model Pilot Program.

Federal healthcare programs are often well-intentioned but end up costing more than expected and become prone to waste, fraud, abuse, and mismanagement.  One of the worst examples of this scourge is the 340B Drug Discount Program, which is administered by 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 reform the program and restore its intended purposes, Congress should establish a clear definition of an eligible patient as an uninsured, low-income individual who does not qualify for Medicare or Medicaid; provide better verification of patient eligibility when a prescription is filled; establish a clear relationship between the patient and covered entities (CEs), verifying that services were provided within the past 12 months; eliminate duplicate discounts with improved oversight; revising reporting requirements; and increasing transparency to make it clear how hospitals are using 340B funds.[2]

Since its creation in 1992, the 340B program has expanded exponentially.  Annual purchases went from $2.5 billion in 2005 to $81.4 billion in 2024.[3]  Yet there is no system in place to ensure that 340B savings are used for patient care.

A September 2025 Schaefer Center at the University of Southern California report noted that because CEs do not have restrictions on how they use 340B revenue, they can use these funds on a wide range of purposes, from subsidizing uncompensated care to investing in infrastructure.[4]  The report also noted that due to the lack of transparency around how 340B revenues are spent, it is difficult to estimate how much of the 340B discounts are passed on to patients.[5]   An April 2025 Senate Health Education Labor and Pensions Committee Majority Staff report for Chairman Bill Cassidy (R-La.) provided further proof of a lack of transparency and accountability for 340B expenditures.[6]

A 340B Rebate Model Pilot Program would provide flexibility without burdensome oversight and give manufacturers the opportunity to select drugs on the Medicare Drug Price Negotiation list to provide post-sale rebates to 340B CEs.  The discounts would be determined by reimbursing the difference between the acquisition cost and the 340B ceiling price based on claims-level data.  The CEs must submit claims data within 45 days of drug dispensation, rebates must be issued within 10 days unless there is a documented reason for a denial, and disputes must follow the current HRSA process.

The pilot program would also 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 HIPAA compliance, secure transmission of information, and a prohibition against the use of personally identifying information.  Patient access would be preserved, and the cost would be 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 denial of payments.  The Centers for Medicare and Medicaid Services 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 that a rebate 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 standardized in pharmacy billing systems; therefore, rebates would be payable within 10 days, and manufacturers, not the government, would pay for the IT systems needed for the model.

A 340B Rebate Model Pilot Program would be 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 would increase transparency, move the program closer to its statutory intent, and reduce the abuse, uncertainty, and waste currently plaguing the 340B program.

CAGW supports the implementation of a pilot program.  But the most effective way to reform 340B if for Congress to enact legislation.

[1] Council for Citizens Against Government Waste, “340B Drug Discount Program,” https://www.ccagw.org/340B.

[2] Christina Smith and Thomas Schatz, “The 340B Drug Discount Pricing Program Needs a New Prescription,” Citizens Against Government Waste, March 2024, https://www.cagw.org/sites/default/files/pdf/The-340B-Drug-Pricing-Program-Needs-a-New-Prescription.pdf.

[3] Health Resources and Services Administration, “2024 340B Covered Entity Purchases,” https://www.hrsa.gov/opa/updates/2024-340b-covered-entity-purchases.

[4] Ryan Long, Karen Mulligan, Melissa A. Frasco, Erin Trish, and Michael Chernew, “Cui Bono? Misaligned Incentives in the 340B Program,” USC Leonard D. Schaefer Institute for Public Policy & Government Service, September 2025, https://schaeffer.usc.edu/research/misaligned-incentives-340b/.

[5] Ibid.

[6] Senate Health, Education, Labor and Pensions Committee Majority Staff, “Congress Must Act to Bring Needed Reforms to the 340B Drug Pricing Program,” April 2025, https://www.help.senate.gov/final-340b-majority-staff-reportpdf.