Nonprofit health centers seek exemption from new 340B rebate model

The system would require covered entities to pay the full wholesale acquisition cost of drugs upfront and receive rebates after claims are verified. Proponents say the model is intended to reduce fraud by verifying discount claims before funds are returned.

Background on the 340B program Section 340B of the Public Health Service Act, established by Congress in 1992, allows certain providers to purchase drugs at federally mandated discounts and reinvest the savings in patient care. The statute states the program should stretch scarce federal resources to reach more eligible patients.

Federally qualified health centers have reported that the rebate model would require extensive claims data and create cash flow issues by forcing upfront payments they cannot afford. The National Association of Community Health Centers has sent more than 35,000 emails to the Health Resources and Services Administration asking that community health centers be excluded from the pilot.

Reported concerns and examples Federal spending critics have pointed to auditor reports and revenue growth at some centers. An independent auditor for Sea Mar Community Health Center in Seattle flagged discrepancies in the application of the sliding fee scale in 2024.

Sea Mar’s 340B-derived earnings rose from $35.9 million to $50.9 million between 2023 and 2024. Altamed Health Services reported average annual revenue of $1.5 billion and spent over $1 million on international art acquisitions while providing $12.8 million in charity care.

United Health Centers of the San Joaquin Valley saw 340B net pharmacy revenue increase from $9.5 million in 2021 to nearly $24 million in 2024, while charity care spending declined each year. The rebate model was originally scheduled to begin January 1 but has been delayed by litigation filed by the American Hospital Association.