On July 31, 2025, the Health Resources and Services Administration (HRSA) released long-awaited guidance establishing a 340B Rebate Model Pilot Program (Pilot Program). The announcement marks a pivotal moment in the evolution of the 340B Drug Pricing Program, capping off months of litigation, regulatory proposals, and shifting agency priorities. The Pilot Program offers a structured pathway for manufacturers to provide post-sale rebates to covered entities in lieu of the traditional upfront 340B discounts. In introducing the Pilot Program, HRSA announced that “[the] Pilot Program addresses concerns we have received from both covered entities and manufacturers, while creating a measured approach to the process of approving manufacturer rebate models under the 340B Program.”

Program Overview

The Pilot Program is voluntary and limited to drugs selected for negotiation under the Medicare Drug Price Negotiation Program (Negotiation Program). Manufacturers with Negotiation Program agreements for the 2026 Applicability Year must submit plans to HRSA by September 15, 2025. If approved, those plans will take effect on January 1, 2026. HRSA has emphasized that manufacturers may not implement rebate models without prior agency approval, a position recently upheld by multiple federal courts, as described below.

The rebate model represents a significant departure from the traditional 340B replenishment model. Under the Pilot Program, participating manufacturers will offer post-purchase rebates to covered entities rather than upfront discounts. Covered entities will pay the wholesale acquisition cost (WAC) for selected drugs and later receive a rebate equal to the difference between the WAC and the 340B ceiling price. Covered entities may submit claims data up to 45 calendar days from the date of dispense. Rebates must be paid within 10 calendar days of data submission. HRSA’s guidance outlines detailed criteria for participation, including data security requirements, reporting timelines, and assurances that no administrative costs will be passed on to covered entities. Lastly, in the announcement, HRSA explains that rebates cannot be denied based on concerns about diversion or Medicaid duplicate discounts unless properly documented. HRSA adds that disputes must be handled through HRSA’s existing audit and ADR mechanisms.

Litigation Landscape

The Pilot Program arrives on the heels of a series of legal decisions affirming HRSA’s authority to require preapproval of rebate models. In June 2025, a federal district court in Washington, DC ruled against Johnson & Johnson (J&J), rejecting the company’s claim that HRSA lacked statutory authority to block its proposed rebate model. The court found that the 340B statute clearly delegates discretion to the Secretary of Health and Human Services to determine whether and how rebate models may be implemented. The court also upheld HRSA’s position that J&J’s model could not be implemented without prior approval and that HRSA’s reasoning was neither arbitrary nor capricious.

This decision aligns with earlier rulings in related cases brought by Eli Lilly, Bristol Myers Squibb, Sanofi, and Novartis. In each case, federal courts upheld HRSA’s authority to require prior approval of rebate models under the 340B statute. Together, these decisions reinforce the federal government’s ability to oversee and enforce rebate and discount mechanisms within the 340B program.

Regulatory Developments and Claims-Based Tracking

The rebate model also intersects with broader efforts to prevent duplicate discounts under the Inflation Reduction Act (IRA). The IRA requires manufacturers to charge 340B covered entities the lesser of the 340B price or the Maximum Fair Price. This has prompted the Centers for Medicare & Medicaid Services (CMS) to propose in the CY 2026 Physician Fee Schedule, for the first time, claims-based methods to identify 340B drugs in Medicare Part D.

CMS’s proposal includes two key mechanisms: voluntary reporting of five data elements per claim, and cross-referencing prescriber and pharmacy NPIs with known 340B relationships. The use of claim-level modifiers to identify 340B utilization is a notable development, as it lays the groundwork for more precise tracking and enforcement under both the 340B and Negotiation Program frameworks.

Stakeholder Reactions and Future Outlook

Initial reactions from covered entities have been cautious. The American Hospital Association (AHA) expressed concern that HRSA’s guidance “authorizes a significant departure from how the 340B program has successfully operated for decades and sets a dangerous precedent for possible harmful expansions in the future.” The AHA characterized the pilot as a response to a “non-existent program integrity problem” and warned that any delays or cost-shifting could pose serious financial risks to hospitals and the communities they serve. At the same time, the AHA acknowledged HRSA’s efforts to impose strict guardrails and emphasized the importance of ensuring that manufacturers bear all implementation costs and provide rebates expeditiously.

As the 340B program continues to evolve, the rebate model introduced in the Pilot Program may serve as a bellwether for future reforms. With no clear legislative path forward in Congress and the Trump administration proposing to shift 340B oversight from HRSA to CMS, the Pilot Program offers a glimpse into how federal agencies may reshape the program through administrative action.