The Health Resources & Services Administration has unveiled its formal plans for a revised version of its contentious 340B Rebate Model Pilot Program, a test run in which statutory upfront discounts for safety-net providers would be swapped out for drug manufacturer-directed rebates.
It’s the administration’s second attempt for such a program, after the first was blocked by a judge days before implementation on procedural grounds brought by hospital groups. This time around HRSA extended the public comment period to avoid a similar hiccup—but has notably increased the number of applicable drugs and eligible manufacturers.
Drugmakers have been vocal proponents of the pilot and 340B rebate models in general, which they have said will bring greater oversight and ensure that 340B transactions are genuine and not double-dipping on discounts from other government programs.
Hospitals and other covered entities that participate in the decades-long program have contended the integrity concerns are exaggerated. They’ve also argued that a rebate model will bring increased administrative and staffing costs, liquidity concerns for struggling organizations and the possibility that manufacturers improperly withhold funds.
HRSA has broadly sided with drug manufacturers on the debate. In its prior commentary and in responses to public comments shared Friday, the administration agreed that more oversight is warranted given the program’s substantial growth—up to more than $100 billion in 2025, per recently released numbers—and that the additional burdens on providers will likely be outpaced by the rebate process’ benefits.
“The 340B Program plays an essential role in supporting safety-net providers that serve rural and medically underserved communities,” HRSA Administrator Tom Engels said in a Friday statement. “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.”
Early reactions to the rebate pilot’s green light were glowing from drug industry groups and condemnatory from hospitals.
"The administration's rebate pilot is a positive step toward improving transparency and modernizing the outdated 340B program,” PhRMA Spokesperson Molly Jenkins said in a statement.
“HRSA’s initial attempt was blocked by federal courts that found the program likely violated federal administrative law, and it may be again,” 340B Health President and CEO Maureen Testoni said in a statement. “However, the fundamental problem is that rebates are bad policy that will harm safety-net hospitals and the patients who depend on them.”
What’s new in 340B rebates v2?
The revised pilot is now set to begin on Jan. 1, 2027, HRSA wrote in the Federal Register Notice shared Friday. Drug manufacturers who wish to participate are required to submit their plans to collect providers’ claims data and issue rebates by Aug. 24, 2026, and would receive any approval by Sept. 24, 2026.
The pilot program is slated to run for at least a year, with HRSA promising to release an evaluation of its performance by April 30, 2028 as well as interim findings on its website along the way.
Broadly speaking, HRSA wrote in its notice that the pilot will have drug manufacturers set up a secure IT system through which covered entities must submit data on their 340B purchases, with HRSA specifying that “all costs” for the platform must “be borne by the manufacturer.”
Covered entities will have up to 45 days from dispensation (“with allowances for extenuating circumstances”) to submit the data necessary for a rebate, and all rebates must be paid within 10 days of a completed data submission.
HRSA specified that manufacturers must provide “rationale and specific documentation for reasons claims are denied,” and outlined several potential manufacturer concerns for which “the manufacturer must raise those concerns directly with HRSA/[Office of Pharmacy Affairs] or utilize the 340B statutory mechanisms, such as audits and administrative dispute resolution, for addressing such issues.” Covered entities are also able to reach out to the administration with concerns of inappropriate rebate denials, with HRSA noting that it will review the reports for consistency and could remove misbehaving manufacturers from the pilot.
“If, for example, covered entities report that a manufacturer is consistently denying rebate payment without acceptable justification, then HRSA could review a sample of allegedly affected transactions over a sufficient period of time (e.g., 10 calendar days) and, if HRSA were to find that a significant portion of those transactions (e.g., 5 or more percent) were denied without acceptable justification, HRSA could initiate removal proceedings of that manufacturer from pilot participation for non-compliance,” the administration wrote in the notice in response to concerns of inappropriate rebate denials.
However, one clear change from the pilot program’s first iteration is the number of products and manufacturers HRSA said may be included. By including not just the products subject to the Medicare Drug Price Negotiation Program in 2026, but also those subject in 2027, HRSA grows the pilots scope from 10 drugs and eight manufacturers by up to 25 products from 13 companies.
That said, per HRSA, those 25 drug are a minority of the program's total sales, representing less than 5.5% across 2025.
HRSA sidelines hospitals’ burden arguments; industry groups respond
The 64-page notice shared by HRSA includes the administration’s response to the more than 2,400 public and private comments it received in response to its February Request For Information.
Per the notice’s summary, input from covered entities was largely critical of the pilot, while those from “manufacturers, technology vendors, some employer and purchaser coalitions, several patient advocacy groups and other stakeholders generally support a rebate model.”
By and large, they show the administration was unswayed by providers’ arguments of substantial new burdens, potential mishandling of claims data and deserved rebates, and a satisfactory status quo.
“HRSA does not agree that exclusive reliance on an upfront discount model is reasonable or that such reliance foreclose consideration of alternative statutory mechanisms,” it responded on the latter issue.
On additional covered entity costs, perhaps the main sticking point, hospitals had told HRSA its published estimates—about $523.3 million in total, or $34,320 per entity—were severely off base and could exceed a billion dollars.
HRSA disagreed, writing in the notice that “that many projections of administrative burden rest on assumptions that do not align with the design of the Pilot or that do not accurately reflect what is needed administratively to implement a rebate approach.”
Though HRSA acknowledged there may be some “incremental or transitional” changes, covered entities and contract pharmacies already have “a mature operational infrastructure that can be leveraged, rather than replaced, under a rebate model to more effectively prevent duplicate discounts and address the program integrity concerns discussed in this Notice.” Commenters also did not take into account the likely potential of automation to reduce the need for manual administrative labor, HRSA wrote, and reiterated that manufacturers are required to shoulder the burden of rebate IT systems themselves.
“The overall costs of implementing a rebate model are likely to be modest, and in some cases, may be offset by efficiencies gained through improved data visibility and streamlined program administration,” the notice reads. “HRSA believes the anticipated benefits of the Pilot outweigh the costs.”
Beth Feldpush, senior vice president of policy and advocacy at America’s Essential Hospitals, said HRSA’s response “ignores” hospitals’ concerns.
“Adding insult to injury, HRSA argues that the new administrative burdens the rebate model proposes do not represent added costs to providers because manufacturers are already imposing their own onerous claims reporting requirements that are not required by statute or regulation,” she said. “We urge the administration to rethink its approach.”
Rick Pollack, president and CEO of the American Hospital Association, similarly said that HRSA’s analysis “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.
“As we continue to review today’s notice, the AHA is considering all available options to prevent this flawed program from going into effect,” he said.
Covered entity groups have also alleged that the public support for the rebate pilot has been overstated. Ryan White Clinics for 340B Access (RWC-340B), a lobbying group that lists dozens of clinic and system members providing primary care to HIV/AIDS patients, said earlier this week that its own analysis of the 2,351 publicly posted comments found 1,170 of those “were substantially identical submissions tied to an astroturfing campaign intended to mimic genuine grassroots engagement,” as templated by pharma-backed patient advocacy group Patients Rising. When excluding their review to unique comments, RWC-340B said submissions were 18:1 in opposition to the rebate model.
Regardless, HRSA announcement that it plans to move forward was welcomed with open arms by drug manufacturer associations.
"By leveraging data hospitals and clinics already collect, the pilot will help strengthen program integrity and crack down on fraud and abuse,” PhRMA’s Jenkins said. “We look forward to working with the administration on successful implementation and urge it to quickly expand the rebate model to all medicines in the program.”
“The evidence is clear. 340B is growing out of control, enriching hospitals and other businesses, and not helping patients,” John O’Brien, president and CEO of the National Pharmaceutical Council, said in a statement. “We need more transparency and accountability, and today’s announcement is an important first step from the Trump team.”
The 340B Drug Discount Program has been a hotspot of inter-industry conflict and a focal point for policymakers alarmed by its growth amid the public’s calls for cheaper healthcare. Lawmakers have proposed legislative fixes, the Centers for Medicare and Medicaid Services has moved to slash reimbursements and individual manufacturers have implemented mandatory data submission policies that have already sparked another wave of litigation.