The Health Resources and Services Administration's Office of Pharmacy Affairs (HRSA/OPA) published a Federal Register notice (available at: 340B Rebate Model Pilot Program) on August 3, 2026, announcing a revised 340B Rebate Model Pilot Program (the Rebate Pilot) that will become effective on January 1, 2027. The Rebate Pilot permits manufacturers with active Medicare Drug Price Negotiation Program (MDPNP) agreements to use a rebate mechanism, rather than an upfront point-of-purchase discount, to effectuate 340B ceiling prices for a limited category of drugs. The notice is effective immediately. Manufacturers must submit rebate plans for approval by August 24, 2026. HRSA expects to issue approvals by September 24, 2026.
History
The 340B Drug Pricing Program was established under Section 340B of the Public Health Service Act in 1992. 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. HRSA objected, and 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).
On August 1, 2025, HRSA published its first notice inviting manufacturers with MDPNP agreements for initial price applicability year 2026 to apply for a voluntary rebate pilot, and after more than 1,200 comments, approved nine manufacturers (effective January 1 and April 1, 2026).
The American Hospital Association, the Maine Hospital Association, and four health systems filed suit against HRSA on December 1, 2025, seeking to block the Rebate Program, claiming it violated the Administrative Procedures Act (APA), please see previous alert on this litigation here. On December 29, 2025, Judge Lance E. Walker of the U.S. District Court for the District of Maine blocked HRSA from implementing the initial Rebate Pilot on its scheduled January 1, 2026, effective date. The decision was mostly based on grounds that there was an insufficient administrative record to justify the rebate program. The District Court of Maine and the First Circuit denied HHS' requests for a stay pending appeal, and HHS eventually voluntarily dismissed its 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, and received thousands of comments from covered entities, manufacturers, trade associations, technology vendors, and others. As discussed in our previous alert, linked here, covered entities raised concerns about cash-flow disruption and administrative burdens, while manufacturers and technology vendors generally supported a rebate model to improve transparency and address "duplicate discount" overlaps between 340B pricing and Medicaid rebates or MDPNP maximum fair prices.
The Revised 340B Rebate Model Pilot Program
The August 3, 2026, notice sets forth the following key parameters of the revised Pilot:
Scope: 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: Participation is voluntary for manufacturers, who must submit rebate plans to HRSA (340BPricing@hrsa.gov) by August 24, 2026. Once approved, participation becomes mandatory for all covered entities acquiring that manufacturer's selected drugs.
Mechanics: 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.
Safeguards: HRSA claims that the new Rebate Pilot includes several guardrails designed to protect covered entities from manufacturer overreach, including:
- 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.
- Covered entities receive a 15-calendar-day grace period to request rebates on up to two unreplenished packages.
- Unit-level rebate processing to ease the impact on cash flows.
HRSA cites third-party analyses finding that a rebate approach does not materially increase covered entities' financing costs relative to existing models.
Compliance and Enforcement: HRSA will monitor manufacturer compliance with the ten-day timeline and may remove noncompliant manufacturers from the Pilot. HRSA will evaluate the Pilot on an ongoing basis and issue a full evaluation by April 30, 2028.
What Covered Entities Should Be Doing Now
Covered entities should take the following steps in response to this notice:
- Identify affected drugs – Determine which frequently purchased drugs appear on the CMS Selected Drug List for initial price applicability years 2026 and 2027, as only those drugs are subject to the Pilot.
- Assess operational readiness – Review claims-submission workflows, pharmacy systems, and vendor/third-party administrator (TPA) arrangements to confirm they can submit claims-level data within the 45-day window.
- Monitor manufacturer plan submissions and approvals – Plans are due August 24, 2026, with approvals expected by September 24, 2026. Approved manufacturers must give 90 days' notice, so the earliest effective date remains January 1, 2027.
- Understand the denial and dispute framework – Manufacturers may deny claims only on documented grounds and not for diversion or Medicaid duplicate-discount concerns. Improper denials should be raised with HRSA/OPA or, if necessary, through the 340B Administrative Dispute Resolution (ADR) process.
- Stay aware of the litigation landscape – HRSA's first rebate pilot was vacated after an APA challenge by hospitals and trade groups. Although this notice appears designed to address those procedural deficiencies, renewed legal challenges remain plausible, and covered entities should monitor developments and consider coordinating with trade associations.
For more information about the revised 340B Rebate Model Pilot Program or further analysis regarding the 340B Program, please contact Gregory M. Fliszar, Samuel Cottle, or any other member of Baker Donelson's Health Law Group.