Pivot Point for 340B: HRSA Rebate Model Pilot Program Approaches Launch

The deadline for Department of Health and Human Services (“HHS”) to notify approved manufacturers of acceptance into the 340B Rebate Model Pilot Program has passed, and stakeholders across the healthcare industry should start planning for compliance and operational changes. The Model Pilot Program may also face legal challenges that could delay or disrupt implementation.

HRSA Pilot Rebate Program

This summer, the Health Resources and Services Administration (“HRSA”) announced a voluntary 340B Rebate Model Pilot Program that allows drug manufacturers to provide post sale rebates to covered entities participating in the 340B Drug Pricing Program instead of upfront discounts. The Model Pilot Program could potentially transform the way price concessions flow through the 340B Program. Although the Model Pilot Program is fairly limited in scope, HRSA has indicated the pilot will inform the development of a process for future models that may have broader applicability.

Under the Model Pilot Program, pharmaceutical manufacturers may provide after-the-fact rebates for pharmaceutical drugs subject to the Medicare Drug Price Negotiation Program. Instead of receiving up-front discounts for drugs subject to the Model Pilot Program, covered entities would submit claims data to manufacturers within 45 calendar days of the date an eligible drug is dispensed to claim a rebate. Manufacturers would pay approved rebates within 10 calendar days of receiving claims data from covered entities.

The deadline for drug manufacturers to apply to participate in the Model Pilot Program was September 15, 2025. HHS was expected to notify approved manufacturers by October 15, 2025 of acceptance into the program. Participants have not yet been publicly announced. The Model Pilot Program is slated to start on January 1, 2026.

Rationale for the Rebate Model and Stakeholders’ Responses

For years, drug manufacturers have raised concerns about duplicate discounts and diversion in the 340B program. The Senate health committee initiated an investigation of the 340B program in 2023 following multiple reports that certain covered entities were generating significant profits and failing to disclose whether 340B revenue was utilized to help patients. Shifting to a rebate model may address these issues by allowing manufacturers to require claim-level detail before paying a covered entity a rebate for a particular drug purchase. And the rebate model mirrors the process that many manufacturers currently use to provide price concessions on drugs dispensed outside the 340B Program.

But the Model Pilot Program fundamentally shifts the way price concessions flow through the 340B program. Consequently, the Model Pilot Program has sparked concern from some covered entities, who argue the change imposes heavy administrative burdens and fundamentally disrupts cash flow and compliance processes. Covered entities have urged HHS to require drug manufacturers to cover additional costs associated with implementing and maintaining the new program. Because the Model Pilot Program shifts price concessions to covered entities from up-front discounts to post-purchase rebates, these entities may need to manage data flows for two systems—one for drugs subject to the program and one for drugs that are not. They will also need to implement processes to address rebate submissions and denials.

Several covered entities have also argued the program raises legal concerns—including potential Administrative Procedure Act and antitrust issues. Several trade groups submitted comments on the proposed rule for the 340B Rebate Model Pilot Program, arguing that HRSA does not have authority to permit rebates through the 340B Program, and that the 340B statute does not permit rebates in lieu of up-front discounts. Multiple trade groups also contend that HRSA did not provide sufficient notice and opportunity for feedback.

The American Hospital Association also sent a letter to the Federal Trade Commission and Department of Justice asking them to investigate whether the rebate models violate antitrust laws. According to the AHA, manufacturers may have engaged in anticompetitive conduct by restricting access to 340B discounts through “coordinated imposition of rebate models.” For support, the AHA referenced a recent Second Circuit decision allowing antitrust claims to move forward based on allegations that drug manufacturers conspired to violate antitrust laws by restricting 340B discounts and raising prices for certain diabetes medications. The FTC and DOJ have thus far not publicly commented on the AHA’s letter.

Key Takeaways

The shift in the 340B program from up-front discounts to after-the-fact rebates is significant. Manufacturers participating in the Model Pilot Program may face litigation risk and should plan for potential implementation delays or disruptions from lawsuits challenging the program. Covered entities receiving up-front discounts should closely monitor which drugs are subject to the Model Pilot Program and establish data systems to ensure timely rebate submission and reconciliation. They should also track additional costs associated with compliance. Health plans and pharmacy benefit managers should consider any impacts on compliance policies designed to identify and eliminate diversion and duplicate discounts.