Background

In recent years, several drugmakers have attempted to implement a rebate model for 340B drug discounts. Instead of receiving upfront discounts for drugs, hospitals would have to pay the full price and then apply for a rebate later.

Several drugmakers, including Johnson & Johnson, Eli Lilly, Bristol Myers Squibb, Novartis AG, and Sanofi, have tried to implement 340B rebate programs, but were blocked by HRSA under the Biden administration.

However, the Trump administration appears to be more in favor of the program. Last November, HRSA approved its own 340B Rebate Model Pilot Program, which originally intended to begin Jan. 1, 2026, and run for one year.

According to HRSA, the pilot was designed to "better understand the merits and shortcomings of the rebate model from stakeholders' perspectives" and inform the consideration of potential future 340B rebate models.

In December, the American Hospital Association (AHA), the Maine Hospital Association, and four safety-net hospitals filed a lawsuit against HRSA to block the 340B rebate pilot program. In the lawsuit, Judge Lance Walker of the U.S. District Court of Maine ruled against HRSA, saying that the program would likely violate the Administrative Procedure Act and could potentially harm hospitals. Since then, the program has been paused under a preliminary injunction from Walker.

HRSA announces revised 340B rebate model

Last week, HRSA announced a revised version of its 340B Rebate Model Pilot Program. According to HRSA, the revised pilot program involved "extensive stakeholder engagement" and "reflects feedback received from hospitals, health centers, manufacturers, pharmacies, patient advocates, and other stakeholders."

A significant change from the original pilot program is the number of drugs and manufacturers included. While the original program only included drugs involved in the Medicare Drug Price Negotiation Program in 2026, the revised program also includes drugs subject to price negotiation in 2027. This increases the pilot's scope from 10 drugs and eight manufacturers to 25 drugs and 13 manufacturers.

"The 340B Program plays an essential role in supporting safety-net providers that serve rural and medically underserved communities," said HRSA Administrator Tom Engels. "As the program has grown in both size and complexity, strengthening transparency, accountability and program integrity has become increasingly important. This revised Pilot helps modernize program oversight by improving visibility into 340B transactions while helping preserve the program’s long-term sustainability for the patients and communities it was created to serve."

Similarly, AHA president and CEO Rick Pollack said the pilot program "will force hospitals in rural and other underserved communities to spend more on bureaucracy and less on the services and care that patients depend on every day."

Pollack added that HRSA's analysis of the financial impact of the rebate model "dramatically understates the true costs of this program, ignoring the hundreds of millions of dollars in compliance expenses, cash-flow disruptions, and operational burdens that will inevitably divert scarce resources away from patient care."

According to Gina Lohr, a managing director at Advisory Board, "while 340B covered entities are justifiably focused on cash flow disruptions and administrative burden, the bigger story [around the rebate program] may be the creation of a new data infrastructure around 340B transactions."

"The pilot gives regulators unprecedented visibility into program utilization and could establish the foundation for broader oversight well beyond the pilot itself," Lohr said. "It will also — hopefully — create an opportunity for health systems, manufacturers, and policymakers to operate from the same set of facts, creating a foundation for more constructive conversations moving forward about the ultimate goals and impact of the program."

Overall, "this may be the first step toward a fundamentally different 340B program," Lohr said.