HRSA sets 2027 launch for the 340B rebate model, announces requirements

The Health Resources and Services Administration (HRSA) followed through with plans to pilot a rebate model for the 340B Drug Pricing Program beginning Jan. 1, 2027.

As described in a notice published July 31, HRSA previously scrapped plans for a 2026 pilot following litigation. In response to that legal challenge, the agency provided additional information on the prospective impact of the rebate model and, before finalizing the 2027 version, accepted public comments on the projections.

Basics of the 340B rebate model

The National Drug Codes initially covered in the rebate pilot apply to the roughly 25 drugs that were selected for the Medicare Drug Price Negotiation Program for 2026 and 2027. A goal of the rebate model is to help manufacturers avoid paying duplicate discounts on drugs covered under both 340B and Medicare negotiations.

The drugs initially covered in the pilot amount to roughly 5.5% of 340B sales, according to HRSA, with the rest continuing under the longstanding system of upfront discounts.

All 340B covered entities (i.e., providers) will purchase the selected drugs at wholesale acquisition cost (WAC) through existing distribution channels. After dispensing the drug, the covered entity can submit standardized claims data and receive a rebate that will bring the net price down to the 340B ceiling price.

Obligations for manufacturers include ensuring covered entities have at least 45 days to submit claims following the date of dispense, with more time as needed for extenuating circumstances and claim-status adjustments.

In addition, manufacturers must pay or formally deny a completed rebate request within 10 calendar days. Rebates are to be calculated and paid at the drug-unit level.

Next steps for implementing the rebate model

Manufacturers can decide whether to apply to participate in the rebate model. Applications are due Aug. 24, with HRSA intending to issue approvals within a month.

Participating manufacturers must pay all costs associated with setting up rebate-submission platforms. The platforms will be required to support real-time status reporting, security of protected health information, and interoperability with existing systems.

“The record shows that rebate processing platforms have already been developed or are in the process of being operationalized and are designed to integrate with existing billing, pharmacy and [third-party administrator] systems,” the notice states. “HRSA anticipates that these platforms will leverage existing data flows and automation capabilities, thereby minimizing the need for covered entities to develop new systems.”

During the transition to the rebate model, manufacturers must offer a 15-day grace period in which providers can submit rebate requests for up to two unreplenished packages of a given drug prior to Jan. 1 (still within 45 days of dispense). The idea is to help covered entities avoid losing the 340B benefit on inventory that has been dispensed but not yet replenished under the system of upfront discounts.

How the rebate model will operate

The claims data required for submission is restricted to 11 specified fields for pharmacy claims and 12 for medical claims. Manufacturer-imposed requirements for broader purchasing, encounter-level or clinical information will be subject to review by HRSA.

Rebate denials will not be permitted based on suspected instances of diversion, duplicate discounts between 340B and Medicaid, eligibility issues with the provider, or insufficient purchases of a drug at full price, according to HRSA. Such issues remain subject to agency review, manufacturer audits and administrative dispute resolution.

Authorized denials under the rebate model must be documented, and HRSA says there will be a process for covered entities to challenge denied claims.

Providers dispute the impact

In comment letters over the past few months, 340B covered entities said paying full price upfront would strain cash flow and impose administrative costs, staffing demands and vendor expenses. Ultimately, patient services could be at risk, commenters said.

Some comments missed the mark, HRSA wrote in the new notice, because they “generally assumed limited automation, manufacturer-specific reporting requirements, or ongoing parallel workflows that are not contemplated under the Pilot.”

“While many covered entities would need to place an order at the higher WAC price for the drugs included in the Pilot, payment to wholesalers for those orders, in most cases, would occur after the rebate from the manufacturer is received,” HRSA wrote.

In prior comments, providers said constraints on cash flow would be substantial. The pharmacy solutions vendor VytlOne calculated that a rebate model featuring only the 10 drugs selected for Medicare price negotiations in 2026 would affect the average 340B hospital’s cash flow by between $2.34 million and $4.67 million per year.

“[HRSA’s] analysis dramatically understates the true costs of this program, ignoring the hundreds of millions of dollars in compliance expenses, cash-flow disruptions and operational burdens that will inevitably divert scarce resources away from patient care,” Rick Pollack, president and CEO of the American Hospital Association (AHA), said in written comments July 31.

In addition to the upfront “float” costs, a source of contention is the prospective administrative burden on providers. HRSA projects that the administrative costs of reporting claims data will average $34,320 per covered entity per year. But the AHA recently reiterated that the annual cost burden stands to be more than $1 billion collectively for 340B hospitals.

Rebate model litigation may not be over

HRSA’s efforts to incorporate a rebate model in 340B followed attempts by manufacturers to apply such a system unilaterally. Under both the Biden and Trump administrations, the agency went to court to protect its authority to block or allow a rebate model. On July 21, the U.S. Court of Appeals for the District of Columbia Circuit affirmed that manufacturers need formal permission.

Under the Trump administration, HRSA has been open to allowing a rebate model with guardrails in place. Anticipated benefits of the pilot, according to the agency, include:

• Improving claims-level transparency and accountability through transaction-level verification
• Strengthening verification of eligible 340B transactions before rebates are issued
• Preventing duplicate discounts, which are prohibited under 340B statute
• Generating better data to inform oversight and future policymaking
• Preserving the long-term sustainability of 340B

HRSA said the rebate model is “expressly authorized” under the 340B statute. That view could be challenged in litigation.

“HRSA’s initial attempt [at a rebate model] was blocked by federal courts that found the program likely violated federal administrative law, and it may be again,” Maureen Testoni, president and CEO of the provider advocacy group 340B Health, said in written comments.

Likewise, the AHA said it is considering “all available options to prevent this flawed program from going into effect.”