AMERICAN HOSPITAL ASSOCIATION v. KENNEDY

This declaration, submitted in support of a motion for a temporary restraining order in American Hospital Association v. Kennedy (D. Me. No. 1:26-cv-00515), challenges HRSA's 340B Rebate Model Pilot Program announced at 91 Fed. Reg. 48,883 (Aug. 3, 2026). HRSA approved rebate plans for ten manufacturers covering eighteen drugs, with the rebate mechanism set to take effect January 1, 2027. The declarant, Robert Nahoopii, Senior Vice President of Pharmacy Services at SpendMend LLC and a 340B ACE, attests that the program replaces the longstanding upfront discount structure with a post-dispense rebate system administered through the Beacon platform operated by Second Sight Solutions, LLC. The declaration contends that HRSA's estimate that claims submission will require approximately five hours per week is inconsistent with real-world operations. Nahoopii attests that implementation requires a minimum of six weeks of coordinated preparation across legal, accounting, pharmacy, information technology, and analytics functions, with startup costs exceeding 200 project hours and external vendor costs of $15,000 or more per covered entity before recurring monthly work begins. Third-party vendors are quoting $60,000 to $100,000 per year for ongoing claims submission and reconciliation support. The declaration identifies three structural features of the program that it attests will result in permanent loss of 340B pricing on eligible dispenses: (1) unreplenished virtual inventory balances at transition will exceed the two-package rebate allowance HRSA provided at 91 Fed. Reg. 48,902; (2) package-level purchasing against unit-level rebates means covered entities pay WAC for entire packages when only a fraction of units are dispensed to 340B-eligible patients; and (3) the 45-day claims submission deadline will routinely be missed for emergency department, inpatient, and infusion center drugs due to billing cycle timing that is outside the covered entity's control. The declaration further attests that HRSA's assumption that existing reconciliation workflows will transfer to the rebate mechanism is incorrect. Under the rebate model, each claim must be individually tracked across Beacon and, for Part D dispenses of the eighteen selected drugs under the Medicare Drug Price Negotiation Program, the Medicare Transaction Facilitator, because manufacturers' approved plans take varying approaches to the overlap between 340B rebates and Maximum Fair Price refunds. The declaration estimates error rates approaching forty percent in Second Sight's existing Medicare Transaction Facilitator system and states that disputes require 10 to 20 minutes of manual staff time per claim before submission. Nahoopii attests that HRSA acknowledged there is no federal estimate of the financial extent of duplicate discounts at 91 Fed. Reg. 48,887, and that SpendMend's more than 4,000 mock audits have not identified duplicate discounts as a significant compliance issue.