On the heels of multiple lawsuits disrupting drug manufacturers’ efforts to convert the 340B Program into a rebate-based model, the Health Resources and Services Administration (HRSA) released a Notice[1] announcing the launch of a one-year 340B Rebate Model Pilot Program (the Pilot Program). At its core, the Pilot Program allows drug manufacturers to voluntarily propose (and implement subject to HRSA’s approval) 340B rebate models for select drugs.[2] Manufacturers must submit proposals by September 15, 2025.  HRSA will evaluate submissions by October 15, 2025, with approved models rolling out on January 1, 2026.  

The 340B Program has traditionally operated as an upfront discount program through which eligible entities (“Covered Entities”) purchase 340B Program-discounted drugs (“340B Drugs”) at the 340B Program discount price.  However, under a rebate model, Covered Entities will instead pay a higher price up front for a 340B drug and later receive a rebate equal to the difference between the higher price and the 340B Program-discounted price.  Rebate models have never been utilized during the 340B Program’s more than 30-year history, and their implementation has the potential to create substantial cash-flow, data privacy and claims processing issues for Covered Entities to address.

Under the Pilot Program, a drug manufacturer’s proposed rebate model must meet various minimum criteria. For example, a Pilot Program-approved model cannot pass administrative costs (ex. claims submission fees) on to Covered Entities, cannot be launched without 60 days’ notice and cannot require Covered Entities to purchase drugs outside of existing supply chain infrastructure.  Similarly, drug manufacturers and their information technology vendors are limited to reviewing distinct types of pharmacy claims data and must also secure and protect claims data in accordance with applicable law.  Further, each rebate model must allow Covered Entities up to 45 days from the date the drug is dispensed to submit rebate data, must provide real-time rebate reconciliation reporting and must result in all rebates being paid within 10 calendar days of data submission.

Importantly, the Pilot Program also prohibits drug manufacturers from denying rebate payments based on compliance concerns with 340B Program diversion or duplicate discounts.  However, drug manufacturers may deny rebates as long as denial rationale and specific documentation are provided (e.g., deduplication for Medicare Maximum Fair Price or 340B rebate provided to another covered entity on the same claim). Manufacturers are instructed to instead report concerns with duplicate discounts or diversion to HRSA or otherwise utilize the 340B statutory dispute resolution mechanisms.  Similarly, Covered Entities are instructed to raise concerns they may experience with rebate payment delays and denials, as well as logistical issues that may emerge through implementation of a rebate model.

HRSA’s launch of the Pilot Program is intended so HRSA can gather information to “better understand” the merits and shortcomings of utilizing rebate models to administer the 340B Program.  However, should HRSA approve any proposed rebate model under the Pilot Program, it will undoubtedly create substantial cash-flow, data privacy and administrative issues that Covered Entities must address. Further, the Pilot Program’s lack of detail concerning data privacy, claims processing requirements and dispute resolution could result in a multitude of risks (and headaches) for 340B Program stakeholders

If your organization would like more information about the Pilot Program or how it could affect your organization, please contact one of Dinsmore’s health care attorneys.