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Last week, the Trump administration announced a series of new healthcare policies and introduced a pilot program that will bring about major changes in favor of the pharma industry.
After being recently blocked from implementing its own rebate model due to the controversial 340B drug pricing program, offering discounted drugs to medical centers serving low-income or uninsured patients, drugmakers have the opportunity to immediately voluntarily participate in pilots that bring about this dynamic change. The pilot allows drugmakers to replace current prepaid discounts on certain 340B drugs with rebates instead.
Several major pharma companies and the industry's largest lobbying group, PHRMA, are pushing for a rebate model that replaces the 340B discount structure.
Drugmakers and PhRMA claim that the rebate system will improve surveillance, reduce duplicate discounts and modernize the program.
Conversely, a group in the healthcare industry says the rebate model will harm hospitals by forcing hospitals to cover higher drug prices while waiting for hospitals to recover some of their costs.
HHS has so far not allowed drugmakers to implement their own rebate models, even after drugmakers sued their agents last year. In its own model, HHS is implementing guardrails by limiting pilots to only 10 drugs selected for the 2026 CMS Medicare Drug Price Negotiation Program. This model helps HRSA understand the “benefits and drawbacks of the rebate model.” And limited runs could expand in the future.
Rebates and Discounts
Since its establishment in the 1990s, the 340B program has grown to include almost 60% of all hospitals. The expansion has attracted attention from the pharmaceutical industry, which has voiced concerns about program abuse and criticised HRSA for not maintaining the pace of surveillance.
Drugmakers in particular are worried about duplicate discounts. The hospital is said to have purchased the medicine at a discounted rate, but has also received a Medicaid rebate. They argue that rebates will erase the issue instead of discounts.
“Under the rebate model, eligible entities will pay for the drug at a higher price and then receive a post-purchase rebate reflecting the difference between the higher initial price and the 340B price,” the Federal Register announcement reads.
That high cost could translate into millions of dollars that hospitals will be forced to temporarily cover. According to 340B Health, a nonprofit organization representing 340B hospitals and health systems, the average “float” for Pharma Companies by hospitals is estimated to exceed $72 million. The economic impact of waiting for a rebate can make some providers operational. 27% of hospitals said waiting for a rebate for a month could hinder payroll and force layoffs.
Not only will hospitals need to cover more costs, they will also face new management burdens with the rebate model.
“The impact of the pilot model on hospitals and health systems introduces several operational, financial and strategic risks,” said Joel Wright, president of pharmacy services at Vytlone, a pharmacy solution provider. “Managing rebate claims and adjusting payments adds the complexity and risk of a rejected rebate due to a technical or eligibility dispute.”
In particular, the pilot will require that all rebates be paid within 10 calendar days of submission, and the hospital will submit and report the rebates data for 45 days from the date of distribution.
Also, the pilot covers only 10 drugs in its Medicare Drug Price Negotiation Program, so rebate lobbyists say it won't go well enough.
“The administration's rebate pilot is a positive first step towards addressing hospital abuse in the 340B program, but we believe it needs to cover all drugs and address concerns about the integrity of the broader program,” Alex Shriver, senior vice president at PhRMA, told Pharmavoice via email.
340b Health disagrees, but I am worried about the program expanding further.
“We recognize the institution's intention to test the limited rebate model associated with IRA implementation, but we are deeply concerned about the financial and management burdens that the rebate approach places on 340B hospitals,” said Maureen Teston, president and CEO of 340B Health. “HRSA says that after evaluation of the pilot program, they can choose to expand their list of drugs next year.”
With the announcement of the HRSA, qualified pharmaceutical companies will apply to participate in voluntary pilots until September 15th, with approval being effective by October 15th by January 1st, 2026. The pharmacy office will consider and accept pilot applications from drug manufacturers involved in the 2026 Medicare Drug Price Negotiation Program.
The Federal Register also holds a 30-day public comment period.
Pharma's legal battle
Last year, a few drugmakers tried to launch their own rebate model, but HRSA blocked it. Eli Lily, Bristol Myers Squibb, Novartis, Sanofi, Calderos, Johnson & Johnson sued HHS to promote the rebate model, but the district judge declared that he had the authority to approve or reject the rebate model before it became effective.
According to Wright, HRSA had some concerns about drugmaker rebate models, including lack of approval, the possibility of undermining program protection measures, obscure pricing and eligibility data, and complex enforcement.
The judges stood with the HHS, but did not say that such a model was not banned. The pilot doesn't entirely suggest that drugmakers can implement their own rebate models in the future, but it gives institutions the opportunity to test changes to discount structures.
“Restricting pilots to IRA negotiation drugs represents a strategic trade-off. We narrow down the scope from the drug manufacturer's first 340B rebate model, allowing the industry to assess the effectiveness of the model,” Wright said in an email.
