HRSA Relaunches the 340B Rebate Pilot After a Court Vacated the First One

On August 3, 2026, HRSA published a notice relaunching the 340B Rebate Model Pilot Program — eight months after a federal court in Maine enjoined the first version of it, and six months after HHS withdrew that version and had it formally vacated. Manufacturer plans were due to HRSA’s Office of Pharmacy Affairs by August 24, 2026, with approvals to be issued by September 24, 2026 and an effective date of January 1, 2027 (91 FR 48883).

The mechanism at issue is narrow but consequential. Under a rebate model, a 340B covered entity buys a drug at commercial price and is reimbursed the difference between that price and the 340B ceiling price afterwards, rather than receiving the discount up front at purchase. Hospitals and health centres have operated on up-front discounts and replenishment for most of the programme’s history. Manufacturers want the retrospective model, and courts have now twice held that they may not simply impose it.

How this got here

The sequence matters, because the current pilot is a second attempt with the litigation record of the first attached to it.

2024. Following the Medicare Drug Price Negotiation Program’s creation under the Inflation Reduction Act, several manufacturers approached HRSA with rebate proposals. HRSA responded that shifting to a rebate model “would disrupt how the 340B Program has operated for over thirty years” and put detailed questions to each manufacturer about claim adjudication, data privacy and statutory compliance. In the autumn of 2024, several manufacturers informed HRSA they intended to roll out rebate models regardless of approval.

May 15, 2025. In Eli Lilly & Co. v. Kennedy, No. 24-cv-03220, 2025 WL 1423630 (D.D.C.), the district court agreed with HRSA that the agency has authority to require pre-approval of rebate models and that manufacturers may not implement them unilaterally.

August 1, 2025. HRSA published a notice inviting manufacturers with Medicare Drug Price Negotiation Program agreements for initial price applicability year 2026 into a voluntary pilot (90 FR 36163). It drew 1,243 public comments. HRSA approved eight manufacturer applications on October 30, 2025, effective January 1, 2026, and a ninth later, effective April 1, 2026.

December 1, 2025. Covered entity stakeholders sued under the Administrative Procedure Act in the District of Maine. In American Hospital Association v. Kennedy, 820 F. Supp. 3d 30 (D. Me. 2025), the court granted a preliminary injunction on December 29, 2025, pausing the pilot nationwide — while also confirming that HRSA was not required to respond to public comments in establishing it.

2026. The First Circuit denied a stay (Am. Hosp. Ass’n v. Kennedy, 164 F.4th 28 (1st Cir. 2026)). HHS voluntarily dismissed its appeal, granted January 20, 2026, and withdrew the pilot. On February 10, 2026, the district court vacated and remanded the August 2025 notice, the corrected notice at 90 FR 38165, and all the manufacturer approvals issued between October 30 and November 14, 2025.

July 21, 2026. The D.C. Circuit affirmed the district court in Novartis Pharmaceuticals Corp. v. Kennedy, No. 25-5177, upholding HHS’s position that section 340B permits rebate models and that manufacturers may not implement them without Secretarial approval.

So the appellate law now says two things at once: HHS can authorise rebate models, and manufacturers cannot act without that authorisation. The 2026 pilot is HHS exercising the first half.

The scale HRSA is describing

HRSA’s own figures in the notice: as of April 1, 2026 the programme includes 15,249 covered entities and 49,214 associated sites, and reached $100 billion in purchases at discounted 340B pricing in 2025. Covered entities purchased $53.7 billion in 2022, $66.3 billion in 2023 and $81.4 billion in 2024 — roughly 50% growth in two years. GAO found a 174% increase in the number of covered entities between 2013 and 2023 (GAO-26-108784).

What is actually in the pilot

The scope is deliberately tight. The pilot covers only the 11-digit NDCs of drugs on the CMS Medicare Drug Price Negotiation Selected Drug List for initial price applicability years 2026 and 2027, regardless of payer or indication, and only during each drug’s price applicability period. Only manufacturers with active selected drugs in that programme were eligible to apply. Participation is for a minimum one-year period, and manufacturers may not implement without HHS approval.

HRSA attached conditions that read as direct responses to the covered entities’ objections in the first round. A manufacturer’s plan must:

Bear the IT cost. The plan must identify the platform for covered entity data submission and include assurances that all costs of that platform are borne by the manufacturer.

Give 90 calendar days’ notice to covered entities before implementation, with registration instructions.

Preserve existing purchasing rails. Covered entities must still be able to order the selected drugs through existing distribution mechanisms — 340B wholesaler accounts with WAC prices loaded.

Pay within 10 calendar days of completed data submission, or deny with supporting documentation. If a submission is returned as incomplete, the clock restarts on resubmission.

Allow at least 45 calendar days from date of dispense for covered entities to submit data, with allowances for extenuating circumstances and for 340B status changes on a claim.

Calculate the rebate as WAC less the 340B ceiling price on the day of dispense, paid at unit level.

Publish a quarterly 340B price file for each of the manufacturer’s 11-digit NDCs, so entities can account for post-rebate actual acquisition cost in Medicaid billing, sliding fee scales and patient cost sharing.

Provide real-time reconciliation reports on rebate status of submitted claims.

The most significant condition is on denials. A plan must ensure that rebates are not denied based on eligibility or compliance concerns with diversion or Medicaid duplicate discounts, and rebates may not be denied for perceived lack of WAC purchases. Where a manufacturer has such concerns, it must raise them with HRSA directly or use the statutory mechanisms — audits and administrative dispute resolution. In other words, HRSA has told manufacturers they may not use the rebate adjudication process as a de facto compliance-enforcement tool against covered entities.

Data collection is capped to a specified list of claim fields — date of service, Rx number, NDC-11, quantity, prescriber and service provider IDs, 340B ID, RX BIN/PCN for pharmacy claims, and an equivalent list for medical claims. HRSA states that purchasing data and encounter data “should not be requested as part of the pilot at this time,” and that data received by manufacturers or technology platforms must not be used, aggregated, shared or licensed for any other purpose.

Who is affected and what to do

If your hospital or health centre dispenses any drug on the CMS selected drug list for 2026 or 2027, and one of your manufacturers is approved, the change lands on January 1, 2027 — but you should see 90 days’ notice first, meaning roughly the start of October 2026.

Model the cash-flow gap. The pilot moves you from a discount realised at purchase to a reimbursement received up to ten days after a data submission made up to 45 days after dispense. For high-cost specialty products this is a working capital question, not an accounting one.

Confirm who submits the data. Most covered entities will be relying on a third-party administrator or contract pharmacy to produce the claim-level fields. HRSA’s conditions require manufacturers to describe any exception that would not apply broadly — explicitly naming entities without third-party administrator access, rural hospitals and health centres.

Plan for the quarterly price file. Post-rebate actual acquisition cost is what drives Medicaid billing accuracy and sliding fee scale calculations. Getting that file into your charge capture and reconciliation workflow is a real integration task.

Preserve your denial documentation. HRSA requires manufacturers to give rationale and specific documentation for denials, and gives covered entities a reporting route to OPA. That route only works if you are capturing denials systematically.

Note the implementation grace period. Covered entities have a 15-calendar-day grace window in which they may request rebates for up to two unreplenished accumulated packages dispensed from neutral inventory before the effective date — still subject to the 45-day-from-dispense submission rule.

What remains uncertain

Whether the 2026 pilot will itself be challenged. The 2025 pilot was enjoined within a month of the suit being filed. Nothing in the August 3 notice resolves the underlying dispute about reliance interests, and HRSA’s notice records covered entity commenters arguing exactly that. We are not aware of a ruling on the 2026 notice, and readers should not assume one either way.

Whether any manufacturer plans were approved. The notice sets a submission deadline of August 24, 2026 and an approval date of September 24, 2026, and says approvals will be made “if any.” As of publication, HRSA has not announced how many plans it received or approved. HRSA also reserves the right to revoke an approval at any time for non-compliance.

Whether the pilot expands. The notice confines the model to MDPNP selected drugs for 2026 and 2027. HRSA describes this as introducing the approach “in a methodical and thoughtful manner.” It has not said what would trigger extension to other drugs or other covered entity classes, and its own history here cuts both ways — when HRSA recognised a rebate option for AIDS Drug Assistance Programs in 1998, it agreed with commenters that the model should not extend beyond ADAPs “at this time” (63 FR 35241). Twenty-eight years later it is extending it.

The evaluation is years away. HRSA says it will publish interim summaries on its website and a full evaluation of the first year of pilot operations by April 30, 2028.

The notice is effective immediately and revisable. HRSA states the notice “is effective immediately as published, unless revised by a future notice” and reserves the right to issue revisions or addenda at a later date.

Frequently asked questions

Does the pilot change the 340B ceiling price?

No. It changes the mechanism by which the ceiling price is effectuated, not the price itself. The rebate is calculated as wholesale acquisition cost less the 340B ceiling price on the day of dispense, paid at the unit level. The statute at 42 U.S.C. 256b(a)(1) directs that the ceiling price be determined “taking into account any rebate or discount, as provided by the Secretary,” which is the flexibility HRSA relies on.

Can a manufacturer deny a rebate because it suspects diversion or a duplicate discount?

Not under the pilot’s terms. HRSA’s conditions require that rebates not be denied based on eligibility or compliance concerns with diversion or Medicaid duplicate discounts. A manufacturer with those concerns must raise them with HRSA’s Office of Pharmacy Affairs directly, or use the statutory audit and administrative dispute resolution mechanisms. Rebates also may not be denied for perceived lack of WAC purchases.

Which drugs are in scope?

Only the 11-digit NDCs of drugs on the CMS Medicare Drug Price Negotiation Selected Drug List for initial price applicability years 2026 and 2027, and only while each drug is within its price applicability period. Payer and indication are irrelevant — if the NDC is on the list and in period, it is in scope.

Is participation mandatory for covered entities?

Manufacturer participation is voluntary and requires HHS approval. For a covered entity buying an in-scope drug from an approved manufacturer, the mechanism changes regardless — the entity’s route to the 340B price for that product becomes the rebate rather than the up-front discount. That is the reliance-interest objection covered entities have pressed throughout the litigation.

Primary source: Health Resources and Services Administration, “Notice Regarding 340B Rebate Model Pilot Program,” 91 FR 48883 (August 3, 2026), signed by Administrator Thomas J. Engels. Litigation and prior notices cited therein: Eli Lilly & Co. v. Kennedy, No. 24-cv-03220, 2025 WL 1423630 (D.D.C. May 15, 2025); Am. Hosp. Ass’n v. Kennedy, 820 F. Supp. 3d 30 (D. Me. 2025); Am. Hosp. Ass’n v. Kennedy, 164 F.4th 28 (1st Cir. 2026); Novartis Pharms. Corp. v. Kennedy, No. 25-5177 (D.C. Cir. July 21, 2026); 90 FR 36163 (August 1, 2025); 91 FR 7287 (February 17, 2026); 63 FR 35241 (June 29, 1998); GAO-26-108784 (2025).