PhRMA's lawsuit argues CMS overstepped its demonstration authority by tying Medicare Part B rebates to international prices.
News|Articles|October 22, 2026
Inside the 340B Rebate Pilot Standoff: Court, Congress, Drugmakers
Author(s)Stephen Appezzato
With a lawsuit, a House delay bill and drugmaker intervention motions in play, here's where HRSA's 340B rebate pilot stands ahead of Jan. 1.
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With the Health Resources and Services Administration's (HRSA)
The plaintiffs sued Oct. 9 and requested a temporary restraining order to keep the pilot from launching on schedule.2 The same court granted a preliminary injunction against
Why Does a 340B Rebate Pilot Exist?
HRSA has tied the pilot to the program's rapid growth. 340B purchases rose from $53.7 billion in 2022 to more than $100 billion in 2025, according to HRSA, nearly doubling in three years.3 Covered entities bought about $81.4 billion in 340B drugs in 2024, making 2025 growth roughly 23%.4 HRSA partly attributed that growth to increased drug utilization, innovative therapies, price increases and the shift of care to outpatient settings. In 2025, the top 10 drugs covered under 340B represented approximately 28.6% of the total program spending.5
According to HRSA, growth in covered entity sites, contract pharmacy arrangements and specialty drugs, along with the increasing complexity of federal drug pricing programs, has created new operational and oversight challenges.3
HRSA's pilot followed manufacturer efforts to move to rebates on their own. In 2024, manufacturers proposed switching to post-purchase rebate models, and HRSA responded that the HHS secretary had not provided for one. On July 21, the U.S. Court of Appeals for the D.C. Circuit held that Section 340B permits rebate models but that manufacturers may not impose one unless the secretary has provided for it.6
How Does the Revised Pilot Work?
HRSA has approved rebate plans from AbbVie, Amgen, Astellas, AstraZeneca, Bristol Myers Squibb, Boehringer Ingelheim, GSK, Merck, Pfizer and Teva, covering drugs including Eliquis, Jardiance, Enbrel, Xtandi, Farxiga, Januvia and Ibrance, with a Jan. 1, 2027, start date. Covered entities order selected drugs at wholesale acquisition cost (WAC) and submit claims data, and manufacturers pay rebates equal to WAC minus the 340B ceiling price on the date of dispense.7
The pilot applies only to drugs selected for the
- Submission window: Covered entities submit claims data to the manufacturer's IT platform within 45 calendar days of dispense.
- Payment timeline: Manufacturers must pay rebates within 10 calendar days of submission of a complete claim.
- Data limits: HRSA limits covered entity submissions to a specified set of pharmacy and medical claims fields.
- Denial limits: Rebates may not be denied over covered entity eligibility, diversion, Medicaid duplicate-discount concerns or a perceived lack of WAC purchases.
- Platform costs: Manufacturers pay the costs of the rebate IT platforms.
- Transition period: Plans must accommodate up to two unreplenished accumulated packages during implementation, with a 15-calendar-day grace period before the effective date.
What Is the Case for Rebates?
HHS and HRSA have framed the pilot as a program integrity measure. HRSA said a claims-based rebate approach would provide greater visibility into 340B transactions, strengthen verification of eligible claims before rebates are issued and generate better data to inform oversight and future policymaking.3
Duplicate discounts are central to that case. HRSA said the pilot would help prevent 340B duplicate discounts, which the statute prohibits, and support nonduplication under the Medicare Drug Price Negotiation Program.3 In its notice, HRSA said Medicare negotiated prices and 340B prices "are not cumulative," so a manufacturer does not have to provide a 340B discount on a unit when the Medicare negotiated price is lower.8
"As the program has grown in both size and complexity, strengthening transparency, accountability, and program integrity has become increasingly important," HRSA Administrator Tom Engels said in a release.3 "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."
HRSA also said in the notice that rebate processing platforms "have already been developed."8
Manufacturers have made a program integrity case of their own. In the D.C. Circuit litigation, drugmakers argued that rebates would address what they described as "programmatic noncompliance that is rampant among covered entities."6
Manufacturers are also seeking a role in the current litigation. Several drug companies and the Pharmaceutical Research and Manufacturers of America (PhRMA) have moved to intervene in the case. In an Oct. 21 filing, AHA and its co-plaintiffs asked the court to deny those motions, noting the court rejected similar requests in the earlier case after finding the federal government could adequately defend its own policy.9
What Are Health Systems Arguing?
The plaintiffs argue HRSA did not adequately weigh public comments on the pilot's costs, writing that the agency "dismissed those comments in a few conclusory sentences." They contend the pilot's full operational costs will exceed $1 billion a year for 340B hospitals alone.1
HRSA's notice estimates that reporting claims data will cost about $34,320 per covered entity, or roughly $523 million across the 15,249 covered entities expected to report claims. HRSA said many comments on costs "generally assumed limited automation."8
On cash flow, HRSA wrote that while many covered entities "would need to place an order at the higher WAC price for the drugs included in the Pilot, payment to wholesalers for those orders, in most cases, would occur after the rebate from the manufacturer is received."8 The plaintiffs dispute that, writing in their restraining order motion that "many wholesalers require payment in 5 to 7 days, not 10."2
What Does Implementation Require From Both Sides?
In an interview with Pharmaceutical Commerce published in September, before the lawsuit was filed, Valerie Bandy, PharmD, vice president of pharmacy solutions at Tecsys,
Visibility into where drugs are purchased and dispensed is "even more important to the manufacturers and the health systems that navigate those changes to the 340B environment, because both sides need a system that creates transparency and accountability," Bandy said. Without connected operational processes, she said, both manufacturers and health systems could face unintended consequences.10
On the health system side, Bandy said that when a rebate arrives after a drug has been purchased and dispensed, medication costs can appear inflated on a pharmacy's books until the rebate is credited. "A lot of these critical access hospitals and safety net organizations, they don't have that financial flexibility that some larger health systems may have," she noted.10
Bandy said manufacturers need to communicate their requirements "completely and clearly so that they can work very collaboratively with those health systems." Health systems, in turn, should have clear ownership and governance of their 340B programs rather than responsibility fragmented across departments.11
What Is Congress Doing?
On Oct. 9, Reps. Rob Bresnahan Jr. (R-Pa.), Debbie Dingell (D-Mich.), Tracey Mann (R-Kan.) and Lois Frankel (D-Fla.) introduced the 340B Rebate Model Delay Act, which would stop the rebate model through 2028. "Congress needs more time to evaluate the potential financial and administrative consequences of the rebate model," Bresnahan said in a press release.12
Why Does It All Matter?
If it launches, the pilot would be the first time 340B pricing is delivered through claims-verified rebates with HRSA's approval, a mechanism manufacturers proposed in 2024 and the D.C. Circuit has now said requires the secretary's sign-off. For hospitals and other covered entities, it would mean paying WAC upfront and taking on new claims reporting for the selected drugs. The pilot covers less than 5.5% of 340B sales, but HRSA has said it will generate data to inform future policymaking, which gives its outcome weight across a program that now tops $100 billion a year.
The near-term path runs through a Maine court that, as of Oct. 22, had not ruled on the restraining order request or the intervention motions, and through a House bill that would stop the model through 2028, with the Jan. 1 start roughly 10 weeks away. If the pilot proceeds, HRSA's evaluation of its first year, due by April 30, 2028, will be the government's first assessment of how a 340B rebate model works in practice.
References
1. American Hospital Association et al. v. Kennedy et al. "Complaint for Declaratory and Injunctive Relief." No. 1:26-cv-00515. U.S. District Court for the District of Maine. Oct. 9, 2026.
2. American Hospital Association et al. "Plaintiffs' Motion for Temporary Restraining Order With Incorporated Memorandum of Law." U.S. District Court for the District of Maine. Oct. 9, 2026.
3. Health Resources and Services Administration. "HRSA Announces Revised 340B Rebate Model Pilot Program to Strengthen Care in Rural and Medically Underserved Communities." HRSA.gov. July 31, 2026.
4. Health Resources and Services Administration. "2024 340B Covered Entity Purchases." HRSA.gov. Accessed Oct. 22, 2026.
5. Health Resources and Services Administration. "2025 340B Covered Entity Purchases." HRSA.gov. Accessed Oct. 22, 2026.
6. Novartis Pharmaceuticals Corp. v. Kennedy. No. 25-5177. U.S. Court of Appeals for the District of Columbia Circuit. July 21, 2026.
7. Health Resources and Services Administration. "340B Rebate Model Pilot Program." HRSA.gov. Accessed Oct. 22, 2026.
8. Health Resources and Services Administration. "Notice Regarding 340B Rebate Model Pilot Program." Federal Register. Vol. 91, No. 147. Aug. 3, 2026.
9. American Hospital Association. "AHA Urges Court to Reject Drug Industry Intervention in 340B Rebate Program Case." AHA News. Oct. 21, 2026.
10. Bandy, Valerie, and Stephen Appezzato. "How Rebate Timing Distorts a Pharmacy's 340B Books." Pharmaceutical Commerce. Sept. 18, 2026.
11. Bandy, Valerie, and Stephen Appezzato. "How Stakeholders Can Avert 340B Rebate Disruption." Pharmaceutical Commerce. Sept. 22, 2026.
12. Office of Rep. Rob Bresnahan Jr. "Bresnahan, Dingell, Mann and Frankel Introduce Legislation to Delay 340B Rebate Model, Protect Access to Affordable Medicine." Oct. 9, 2026.
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