The 340B Drug Pricing Program (“340B Program”) space continues to be a hive of activity. While 340B stakeholders continue to litigate ongoing manufacturer contract pharmacy restrictions, states legislatures are enacting various types of 340B legislation.[1] On top of navigating these state-level laws, 340B Program participants are also assessing how recently passed federal legislation may indirectly impact the 340B Program.[2] Perhaps the most closely watched developments, however, are ongoing manufacturer efforts to transition the 340B Program from an up-front discount model to a retrospective rebate model. This article details the history and background of these efforts, along with recently released HRSA proposed guidance that clarifies allowable model parameters for a “pilot program” designed to better assess viability of rebate models.
Background
Generally, drug manufacturers are required by the 340B statute to “offer” covered outpatient drugs to participating 340B-eligible providers (“covered entities”) at discounted prices.[3] Historically, manufacturers have met this requirement by offering the 340B Program discounted price at the time of purchase, allowing the covered entity to immediately realize the cheaper 340B price. However, several manufacturers have recently signaled that they seek to move to a retroactive rebate model. Under such rebate model, covered entities would be required to initially purchase drugs at a significantly higher wholesale acquisition cost (WAC), then submit a rebate request to the manufacturer with claim information justifying 340B eligibility for that purchase. The manufacturer would then review the submitted claim data and, if it agrees with the covered entity’s 340B eligibility determination, offer a rebate for the difference between the WAC and 340B price of the drug at issue.
From the manufacturer perspective, this proposed model would assist in addressing their concerns related to perceived 340B Program “bloat” and serve as a tool in reducing 340B diversion and Medicaid duplicate discounts by providing oversight over eligibility determinations before the 340B benefit is actually delivered. Covered entities, however, tend to be stridently against these proposed 340B rebate models for a variety of reasons, including (1) expected cash flow issues caused by making initial purchases at significantly higher WAC prices, (2) near-complete manufacturer control over 340B eligibility determination with minimal government oversight, and (3) lack of clear timeframes for claim review and 340B rebate payments. Covered entities also point to language within the 340B statute ostensibly indicating that rebate models under the 340B Program may only be implemented “as provided by the [HHS] Secretary,”[4] and that manufacturers have not obtained the requisite government approval. Importantly, HHS itself has indicated that government approval of a rebate model is required due to this statutory language, and that manufacturers who unilaterally implement such models are subject to significant civil monetary penalties and potential termination of Medicare Part B and Medicaid coverage for their medications.
This issue came to a head when Johnson & Johnson (“J&J”) formally filed a proposal with HRSA in mid-2024 to implement a rebate model. To the relief of covered entities, HRSA ultimately denied J&J’s request. Nonetheless, J&J indicated that it would be proceeding with the implementation of the rebate model despite HRSA’s rejection, leading to HRSA forcefully threatening to levy the civil monetary penalties described above along with potential Medicare/Medicaid loss of coverage for J&J medications.
In response to HRSA’s position, J&J filed a lawsuit seeking approval for its unilateral implementation of the drug rebate program, arguing that HRSA misconstrued the 340B statute and that its approval is not needed provided the rebate model otherwise meets 340B Program requirements. In a win for covered entities, the District Court sided with HRSA, finding that it acted within its authority in blocking the drug maker from implementing its rebate model.[5] On the same day that this decision was published, J&J appealed the matter to the Washington D.C. Court of Appeals, which is where the case remains today. Notably, other courts considering similar issues have thus far consistently ruled that 340B rebate models cannot be implemented without the requisite government approval.
Importantly, however, these decisions have not ruled that rebate model implementation would be per se illegal—just that they cannot proceed without approval from HRSA.
HRSA 340B Rebate Model Pilot Program Guidance
With that background in mind, and after several months of consideration, HRSA recently released first-of-its-kind proposed guidance pertaining to 340B rebate models and an initial “pilot program.”[6]
While the proposed guidance provides an avenue for certain manufacturers to offer 340B rebates in the near-future, the scope of the proposed pilot program is very narrow, and manufacturer rebate model proposals would need to meet extensive requirements to obtain requisite HRSA approval. Specifically, HRSA has limited the pilot program to drugs included on the Medicare Drug Price Negotiation Selected Drug List (“Pilot Program”), which necessarily limits the pool of potential manufacturers that could opt to participate. Importantly, HRSA maintains its stance that manufacturers must receive prior approval from HRSA before implementing a rebate model, including one under the proposed pilot program. Proposals for participation in the Pilot Program would be required to be submitted to HRSA by September 15, 2025, and, if approved, will become effective and available for implementation on January 1, 2026.[7] Manufacturers that are approved must also agree to participate under the Pilot Program for a minimum of one year.[8]
Additionally, HRSA’s proposed guidance also identifies several criteria that must be incorporated into the manufacturers’ rebate models. Generally, many of these requirements appear to address concerns previously raised by covered entities surrounding these models, including but not limited to the following:
- Defined timeframe for rebate payments: Rebates must be paid to the covered within ten (10) calendar days of data submissions;
- Limits on required data submission fields: Pharmacy claim data required to be provided to drug manufacturers upon request has been limited to eleven (11) readily available pharmacy claims fields, which include date of service, Rx number, 340B ID, among others;
- Applicable notice to covered entities: Manufacturers must provide covered entities and other impacted stakeholders with sixty (60) calendar days’ notice before implementing an approved rebate model; and
- Limited scope for manufacturer denial of rebate payments: Manufacturers are expressly prohibited from denying 340B rebates based solely on suspicion of diversion or Medicaid duplicate discounts.[9]
340B stakeholders have been given until August 31, 2025, to offer comments on the proposed guidance.
[1] These laws have primarily related to (1) requiring manufacturers to offer 340B pricing via all validly registered contract pharmacy arrangements for Covered Entities in the state, (2) introducing Covered Entity reporting requirements as to how 304B savings are being used, and (3) restricting pharmacy benefit managers (“PBMs”) and insurers from reducing reimbursement for 340B fills and/or denying network access based solely on 340B Program participation.
[2] See Inflation Reduction Act of 2022, Pub. L. No. 117-169; see also One Big Beautiful Bill Act of 2025, Pub. L. No. 119-21.
[3] 42 U.S.C.S. § 256b(a)(1) (“The Secretary shall enter into an agreement with each manufacturer of covered outpatient drugs under which the amount required to be paid . . . to the manufacturer for covered outpatient drugs . . . does not exceed an amount equal to the average manufacturer price for the drug under title XIX of the Social Security Act. [. . .] Each such agreement . . . shall require that the manufacturer offer each covered entity covered outpatient drugs for purchase at or below the applicable ceiling price if such drug is made available to any other purchaser at any price.”)
[4] See id.
[5] See Johnson & Johnson Health Care Sys., Inc. v. Kennedy, 2025 U.S. Dist. LEXIS 123021 (D. D.C. 2025).
[6] 340B Program Notice: Application Process for the 340B Rebate Model Pilot Program, Department of Health and Human Services, available at https://340breport.com/wp-content/uploads/2025/07/2025-14619.pdf (published July 31, 2025).
[7] Id.
[8] Id.
[9] Id.
