Beginning in January 2026, through the Department of Health and Human Services, the 340B Drug Pricing Program will initiate a voluntary pilot rebate model for a select group of drugs and manufacturers.
The voluntary qualification application period for manufacturers concluded on September 15, 2025, with approvals expected from the Office of Pharmacy Affairs (OPA) by October 15, 2025. This model replaces traditional upfront drug discounts with reimbursements issued after the sale has been made. Although designed to enhance transparency, this change introduces significant financial and operational challenges for healthcare organizations, including tighter cash flow management, increased administrative demands and more complex accounting procedures. As covered entities prepare for this shift, understanding its financial implications is essential for maintaining compliance and fiscal health.
Overview and Origins of the 340B Drug Pricing Program
Launched in 1992, the 340B Drug Pricing Program requires pharmaceutical manufacturers to provide discounted outpatient medications to eligible healthcare organizations, including federally qualified health centers and hospitals serving a disproportionate share of low-income patients. These organizations — referred to as covered entities — can acquire medications at reduced rates and bill insurers at standard prices, using the margin to fund care for underserved populations. The program was developed to counteract the unintended effects of the Medicaid Drug Rebate Program, which had discouraged manufacturers from offering voluntary discounts. By requiring discounted pricing, Congress aimed to restore access to affordable medications for safety-net providers.
Recent Developments
In response to ongoing concerns about duplicate discounts and drug diversion — particularly involving Medicaid and Maximum Fair Price (MFP) — manufacturers have proposed various rebate models to the OPA. To evaluate these proposals, the Health Resources and Services Administration (HRSA) is launching a pilot program to assess the effectiveness and fairness of the rebate model. The initiative aims to gather feedback from stakeholders and inform future policy decisions that align with the 340B statute and broader healthcare goals.
New Legislation Impacting the 340B Drug Pricing Program
On September 10, 2025, Representatives Buddy Carter (R-GA) and Diana Harshbarger (R-TN) introduced H.R. 5256, the 340B Affording Care for Communities and Ensuring a Strong Safety Net Act (340B ACCESS Act). The act aims to enhance the oversight of the program, clarify eligibility criteria for patients and entities and regulate contract pharmacies. The bill comes amidst mounting evidence of the program’s need for reform, including one day after the non-partisan Congressional Budget Office (CBO) released a report effectively suggesting that the 340B program is costing taxpayers andthat there is no evidence to support the claim that patients are benefiting.
Some of the key initiatives under the bill include:
- Codifying the definition of a "Patient" within the 340b statute.
- Enhanced compliance requirements for 340B contract pharmacies.
- Introduction of a sliding fee scale requirement under the 340B program.
- Enhanced reporting and compliance requirements for covered entities.
- Charity care requirements for covered entities.
- Increased scrutiny, through audit, of the 340B program profits and usage of those profits for covered entities.
- Limitations on administrator service fees and contract pharmacy fees.
- Enhanced audit and enforcement provisions for noncompliance.
Since its inception, the 340B program has faced its share of controversy and challenges. While the original intent of the program was to provide access to affordable prescription drugs for a population that needed such access, some regulators and intended users of the program have suggested that it has deviated from this direction. As a long-standing way to address these issues, the new rebate program and legislation aim to realign the program’s intent with reality.
Considerations for Covered Entities
As the rebate model evolves, healthcare organizations must prepare for potential delays in reimbursement, which can cause entities to temporarily hold cash until reimbursement is received, thereby drastically impacting operational liquidity. Implementing robust tracking systems to automate rebate submissions and reconcile payments will be critical for maintaining accuracy and efficiency. Strengthening internal controls will help ensure compliance with HRSA audits, while staying informed about legislative developments will support strategic financial planning and decision-making. Close collaboration between finance and pharmacy departments will also be key to maximizing 340B benefits and minimizing financial risk. HRSA’s pilot rebate model and new legislation represent a significant shift in how drug discounts are administered under the 340B program. While the initiatives seek to improve transparency and stakeholder engagement, they also introduce new financial and operational complexities for covered entities. As the program continues to evolve, ongoing collaboration among government agencies, healthcare providers and manufacturers will be essential to preserving the program’s core mission: expanding access to affordable care for vulnerable populations.
Author: Carol Arroyo | [email protected]
Contact Us
For more information on this topic, reach out to Withum’s Healthcare Services Team.
