340B drug rebates coming as HRSA launches pilot program

Modern Healthcare – Thursday, July 31, 2025
By Bridget Early

The federal government has cracked open the door to what could be a transformation of the 340B Drug Pricing Program.

The Health Resources and Services Administration is launching a voluntary program to test drugmakers paying rebates after purchase to safety-net providers that participate in 340B rather than discounting prices upfront, the agency announced Thursday.

The initiative, which will begin Jan. 1 and run at least a year, involves a narrow selection of pharmaceuticals subject to the Medicare Drug Price Negotiation Program, including medicines that treat diabetes, rheumatoid arthritis and heart failure. Drugmakers must apply by Sept. 15 and participants will be announced Oct. 1.

Although this is merely a pilot and doesn’t apply to all prescription drugs providers buy through 340B, even partially converting the program from discounts to rebates is a major shift from more than 30 years of standard practice. Under 340B, qualifying safety-net providers get 25%-50% discounts on prescription medications.

“Today’s announcement of the availability of a rebate model 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,” HRSA Administrator Tom Engels said in a news release.

Drugmakers such as Eli Lilly, Bristol Myers Squibb, Sanofi, Novartis, and Johnson & Johnson last year sought to switch from discounts to rebates, but HRSA determined the companies needed permission before altering arrangements with providers and later prevailed in legal challenges pharmaceutical companies made.

340B providers and trade groups such as the American Hospital Association and America’s Essential Hospitals strongly oppose a rebate model.

HRSA must take care not to hamstring 340B providers as it tests this new approach, Aimee Kuhlman, vice president of advocacy and grassroots at the American Hospital Association, wrote in an email.

“We are concerned that this 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,” Kuhlman wrote. “It will be essential that HRSA makes certain that drug companies bear all the costs of implementing these rebate models and that those companies provide discounts expeditiously. Anything else will pose serious financial risks to patients, communities and the hospitals that care for them.”

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