HRSA Announces Revised 340B Rebate Model Pilot Program Effective January 1, 2027

On July 31, 2026, the Health Resources and Services Administration (HRSA) announced a revised 340B Rebate Model Pilot Program to provide a rebate mechanism through which qualifying manufacturers may effectuate the 340B ceiling price for certain drugs sold to covered entities—as opposed to an upfront discount, which has been the longstanding model. The Federal Register notice, published August 3, 2026, is effective immediately, and the Pilot will become effective on January 1, 2027. Manufacturers must submit rebate plans for approval by August 24, 2026, and HRSA expects to issue approvals by September 24, 2026.

The 2026 Pilot, which is limited to the drugs selected for negotiation under Medicare, is open to qualifying manufacturers that submit plans meeting specific criteria. HRSA's stated purpose for the 2026 Pilot is to strengthen data requirements, dispute processes, privacy safeguards, transparency, and more. According to HRSA, the revised Pilot follows extensive stakeholder engagement, including a Request for Information (RFI) that generated more than 2,400 public comments, and reflects feedback received from hospitals, health centers, manufacturers, pharmacies, patient advocates, and other stakeholders.

The 2026 Pilot adds procedural safeguards (notice, dispute resolution, resubmission rights) and other changes intended to address Administrative Procedure Act (APA) violations cited by a district court decision vacating HRSA's earlier attempt at a rebate model in 2025. The 2026 Pilot aims to:

• improve claims-level transparency (public reporting, data definitions, dispute tools) and accountability through transaction-level verification;
• strengthen verification of eligible 340B transactions before rebates are issued;
• address cash-flow concerns (grace period, unit-level payments, price files);
• clarify data governance (use limitations, de-identification standards, privacy protections);
• prevent duplicate discounts, which are prohibited under the 340B statute;
• generate better data to inform oversight and future policymaking; and
• preserve the long-term sustainability of the 340B Program.

The Pilot applies only to drugs on the Centers for Medicare & Medicaid Services (CMS) Selected Drug List for initial price applicability years 2026 and 2027, representing less than 5.5 percent of total 2025 340B sales volume. Participation is voluntary for manufacturers, who must submit rebate plans to HRSA by August 24, 2026. Once approved, participation becomes mandatory for all covered entities acquiring that manufacturer's selected drugs. Covered entities purchase affected drugs at wholesale acquisition cost (WAC), then submit claims-level data after dispensing to an eligible patient. Manufacturers have ten days from a complete submission to pay a rebate (WAC minus the 340B ceiling price) or deny the claim with documentation (e.g., MDPNP nonduplication or a prior rebate on the same claim). Manufacturers may not deny rebates for diversion or Medicaid duplicate-discount concerns, as those issues go through HRSA/OPA audits or the 340B Alternative Dispute Resolution process. Rebate requests generally must be submitted within 45 days of a drug's dispense.

The revised Pilot includes guardrails designed to protect covered entities from manufacturer overreach: manufacturers must provide at least 90 calendar days' advance notice before implementing an approved plan; manufacturers must bear IT costs associated with IT platform and data submission infrastructure; and covered entities receive a 15-calendar-day grace period to request rebates on up to two unreplenished packages.

The 340B Drug Pricing Program was established under Section 340B of the Public Health Service Act in 1992. Section 340(a)(1) and (2) of the Public Health Service Act mandates that the Secretary of the Department of Health and Human Services (HHS) enter into agreements with manufacturers of covered outpatient drugs purchased by covered entities. The statute has always given the HHS Secretary discretion to effectuate 340B pricing through a discount, a rebate, or another mechanism, but most covered entities have relied on the upfront-discount or replenishment model since inception of the 340B Program more than 30 years ago. In 2024, several manufacturers proposed rebate models, and some indicated they would unilaterally and completely move away from upfront discounts. In Eli Lilly & Co. v. Kennedy (D.D.C. 2025), the court held that HRSA may require Secretarial pre-approval of any rebate model and that manufacturers may not act unilaterally. The D.C. Circuit affirmed a related holding in Novartis Pharmaceuticals Corp. v. Kennedy (July 21, 2026).

The landscape governing 340B pricing obligations has also been shaped by the Inflation Reduction Act of 2022, in which Congress gave the Secretary of HHS authority to negotiate the prices that Medicare pays for certain pharmaceutical products (the Medicare Drug Price Negotiation Program, or MDPNP). If a manufacturer provides a drug to a Medicare beneficiary at the maximum fair price established by the MDPNP and the negotiated price is lower than the 340B ceiling price, the manufacturer need not also provide a 340B discount to the covered entity.

HRSA issued its first call for applications (the 2025 Pilot) on August 1, 2025, inviting manufacturers with MDPNP agreements with CMS for initial price applicability year 2026 to participate in a voluntary rebate model pilot program. The agency received 1,243 public comments and approved nine manufacturers (effective January 1 and April 1, 2026). On December 1, 2025, hospitals and hospital associations sued HRSA, HHS, and their respective officials for violations of the APA, seeking to enjoin the 2025 Pilot. On December 29, 2025, the U.S. District Court for the District of Maine enjoined the government from implementing the 2025 Pilot, three days before it was set to begin. The U.S. Court of Appeals for the First Circuit denied the defendants' request for a stay pending appeal, and the government subsequently dismissed the appeal. On February 10, 2026, the district court vacated and remanded the 2025 pilot approvals.

HRSA then published a Request for Information on February 17, 2026, seeking input from interested parties regarding the potential use of rebates by drug manufacturers, including the standards and procedures HRSA should use in implementing rebates for purchases of certain drugs by 340B hospitals and other providers. The RFI invited comments on administrative, operational, financial, and medication access concerns that rebates may cause; whether and to what extent 340B covered entities have reasonable reliance interests in maintaining an upfront discount structure; cash-flow implications of rebate payment timing; and proposed alternatives and scope-limiting measures that may promote the integrity of the 340B Program and avoid issues with duplicate discounts, particularly in light of the Medicare Drug Price Negotiation Program's launch on January 1, 2026. HRSA accepted comments on the RFI until March 19, 2026.