The 340B Drug Pricing Program, created in 1992 to help safety-net providers serve vulnerable populations, has grown into a $66 billion market in 2023—up from just $5.3 billion in 2010. With rapid expansion has come mounting concerns for pharmaceutical manufacturers around compliance, duplicate discounts, and program integrity.
To address these challenges, industry stakeholders are exploring a rebate model that replaces upfront discounts with backend reimbursements. This marks a potential turning point in how 340B is structured, managed, and enforced.
The Problem: Duplicate Discounts & Complexity
Under the traditional model, covered entities purchase drugs at reduced prices upfront called as 340B price or negotiated sub-ceiling price. But as the program has expanded, several issues have emerged:
- Duplicate Discounts: Manufacturers risk paying both 340B discounts and Medicaid or commercial rebates on the same drug.
- Financial Pressure: Average discounts of ~46%, combined with penny-priced drugs, create significant revenue strain.
- Data Gaps: Limited visibility into prescription-level utilization makes oversight and dispute resolution difficult.
- Administrative Burden: Managing compliance, chargebacks, and audits requires extensive resources.
The Rebate Model: How It Works
Instead of receiving discounts at the point of sale, covered entities would:
- Purchase drugs at WAC or list price.
- Submit utilization data to manufacturers after dispensing.
- Receive rebates that net them down to the 340B price.
This shift mirrors existing healthcare rebate systems and offers:
- Better oversight: Script-level visibility prevents duplicate discounts.
- Revenue predictability: Improves gross-to-net calculations for manufacturers.
- Program integrity: Real-time validation reduces diversion and compliance disputes.
For covered entities, the model provides clearer savings and standardized processes but raises concerns about cash flow (fronting higher upfront costs, can be solved through cash payment terms) and data-sharing requirements.
HRSA’s Rebate Pilot Program
On August 1st, 2025, HRSA announced the first-ever 340B rebate model pilot program, launching January 1, 2026. Key details include:
- Eligibility: Manufacturers with drugs on the IPAY 2026 Maximum Fair Price list.
- Scope: Applies only to products subject to Medicare negotiations.
- Timelines: Covered entities must submit rebate claims within 45 days; manufacturers must pay within 10 days.
The pilot aims to enhance transparency, prevent duplicate discounts, and test the rebate model’s viability at scale.
Preparing for the Future
The rebate model could fundamentally reshape 340B by improving transparency and alignment with other federal pricing programs. But success will require:
- Robust technology infrastructure for secure, high-volume data exchange.
- Careful cash flow planning and adjusting payment terms by covered entities.
- Updated compliance frameworks for real-time validation.
- Efficient dispute resolution processes to manage transaction-level challenges.
Outlook
The move to rebates signals more than a tactical shift—it’s a structural evolution in how the pharmaceutical industry balances safety-net access with financial sustainability. As HRSA’s pilot unfolds, manufacturers and covered entities should proactively evaluate systems, strengthen compliance, and prepare for broader adoption.
Want to dive deeper? Watch our on-demand webinar, [An Ongoing Debate: Managing 340B as a Rebate], for expert perspectives and practical insights.
Disclaimer: This content is for informational purposes only and not legal advice. Organizations should consult qualified counsel before making program decisions.
