aamc.org does not support this web browser.

    Rebate Models

    For over 30 years, pharmaceutical manufacturers have offered 340B pricing to covered entities in the form of an upfront discount, allowing these organizations to achieve savings, which are further reinvested into critical programs and services. However, in 2024, five manufacturers — Johnson & Johnson, Eli Lilly, Sanofi, Bristol-Myers Squibb, and Novartis — threatened to upend this precedent when they proposed to unilaterally restructure their 340B programs from an upfront discount to a retrospective rebate. Under this proposed system, covered entities would be required to purchase drugs at significantly higher list prices and then submit a rebate request to the manufacturer after dispensing that drug to a 340B-eligible patient.

    Under the Biden administration, the Health Resources and Services Administration (HRSA), which administers and oversees the 340B program, responded by sending enforcement letters to these manufacturers, threatening punitive action if they were to move forward with these plans without securing prior approval from the agency. The manufacturers subsequently sued HRSA, arguing that the 340B statute allows them to provide 340B pricing either as an upfront discount or a retrospective rebate. They also argued that a rebate model system would help to promote program integrity and expedite implementation of the Inflation Reduction Act’s Medicare Drug Price Negotiation Program. The AAMC joined several other hospital groups in an amicus brief supporting HRSA’s enforcement actions against the manufacturers. In May 2025, the U.S. District Court for the District of Columbia ruled that manufacturers could not unilaterally pursue rebate models without HRSA’s prior approval, placing the onus on the federal government whether to allow rebate models in the program.

    Following the District Court’s opinion, under the Trump administration, HRSA announced a voluntary 340B Model Pilot Program, initially applicable to ten drugs subject to the Medicare Drug Price Negotiation Program in 2026. Although the pilot was originally scheduled to take effect Jan. 1, 2026, due to litigation led by the American Hospital Association — in which the AAMC joined as an amicus — the pilot was delayed and then later withdrawn. In February 2026, the agency released a request for information (RFI) on the impact of implementing rebate models in the 340B program. This RFI reflects the agency’s continued interest in this topic and persistent intention to implement a 340B rebate model.

    Related Links