AMERICAN HOSPITAL ASSOCIATION v. KENNEDY

Robert Nahoopii, Senior Vice President of Pharmacy Services at SpendMend LLC, submitted this declaration in support of a temporary restraining order sought by the American Hospital Association and co-plaintiffs against HHS Secretary Robert F. Kennedy, Jr. The plaintiffs challenge HRSA's 340B Rebate Model Pilot Program, announced in a notice published at 91 Fed. Reg. 48,883 (Aug. 3, 2026), under which HRSA approved rebate plans submitted by ten manufacturers covering eighteen drugs, posted as Approved Plans on October 1, 2026, with program implementation set for January 1, 2027. The Approved Plans all rely on the Beacon platform operated by Second Sight Solutions, LLC. The declaration contends that HRSA's estimate of five hours per week of staff time for claims submission does not reflect operational reality. Nahoopii states that SpendMend's implementation playbook, developed after HRSA approved an earlier rebate pilot in fall 2025, estimated a minimum of six weeks of preparation time requiring coordination across legal, accounting and finance, pharmacy, information technology, and analytics functions. He estimates startup costs of $15,000 or more per covered entity, and ongoing vendor support costs of $60,000 to $100,000 per year even for the smallest covered entities. The declaration describes three structural features of the program that, in Nahoopii's account, will cause some eligible dispenses to never receive the 340B price. First, unreplenished package balances existing at the January 1, 2027 transition date will be replenished at WAC, with rebates available only for up to two packages dispensed in the fifteen days before that date, which Nahoopii states is insufficient for high-volume drugs such as Eliquis and Jardiance. Second, because rebates are paid at the unit level but drugs are purchased by the package, a covered entity that dispenses only a portion of a package receives a rebate only on doses actually dispensed as 340B-eligible, bearing the WAC premium on the remainder. Third, the 45-day submission deadline will routinely be missed for emergency department and operating room drugs that are not billed until after inpatient discharge, and for infusion center claims where encounter data is compiled monthly and does not include all required fields. Nahoopii also describes reconciliation complexity arising from the overlap between the 340B rebate program and the Medicare Drug Price Negotiation Program. Because all eighteen approved drugs are also selected drugs under the MDPNP, each Part D dispense generates either a 340B rebate through Beacon or an MFP refund through the Medicare Transaction Facilitator, with Approved Plans taking varying approaches to that overlap. Tracing both payment streams, along with subsequent credits and denials, to a single claim requires manual reconciliation across two separate systems operating on different schedules. SpendMend's experience with the existing MFP reconciliation system showed error rates approaching forty percent in identification of 340B claims.