The Evolution of the 340B Rebate Model: Maintaining Patient Access while Minimizing Duplicate Discounts

The 340B program has struggled with implementing effective oversight of the covered entities since the program was established in 1992. Diversion and duplicate discounts are the primary issues that manufacturers face. Diversion typically happens when a 340B drug is dispensed to a non-340B patient and duplicate discounts typically happen when a product receives a 340B discount and a Medicaid discount.  

Limited resources for both HRSA and the covered entities have made it difficult to find a resolution to this problem and Covered Entities have been left to self-monitor. This has resulted in manufacturers continuing to evolve their strategy to prevent revenue leakage and validate 340B claims.  

What Is the 340B Rebate Model? 

Traditionally, covered entities under the 340B program receive upfront discounts on eligible drugs. In 2024, several large manufacturers attempted to flip this structure by introducing a rebate model. Instead of discounted purchases, providers pay the full wholesale acquisition cost (WAC) and then submit a rebate request to manufacturers for reimbursement of the difference between the WAC (i.e. the higher purchase price) and the 340B ceiling price.

These initial rebate models started out of a need for change but ended with a series of lawsuits with mixed results. HRSA raised concerns about the administrative burden and potential financial burden a rebate model can cause the covered entities while manufacturers pointed out the need for stronger methods to prevent diversion and duplicate discounts. The courts determined that it’s important to implement a model that accounts for the potentially fragile financial state of the covered entities, but ultimately a rebate model was allowable under the law. Additionally, the courts determined that rebate models must align with the 340B statute and HRSA has the authority to require pre-approval.  

Introducing the Rebate Model: HRSA’s Version 

On July 31, 2025, HRSA announced the 340B Rebate Program Pilot Model which is intended to be a voluntary program to help HRSA understand the feasibility of transitioning to a rebate model for 340B drugs. This program is only open to the 10 selected drugs for the initial price applicability year of 2026 under the Medicare Drug Price Negotiations Program.  

The pilot applies to pharmacy-dispensed claims and manufacturers must meet several requirements to minimize the administrative burden on covered entities. Notably, manufacturers need to give covered entities 60 days’ notice before implementing a rebate model, rebate submissions need to be allowed up to 45 days after dispensing, rebates must be paid in 10 days, and concerns of duplicate discounts/diversion must be addressed through a dispute resolution process rather than denying the rebate. Additionally, manufacturers are also required to ensure secure data handling, protect any patient health information and cover all administrative and IT costs.  

HRSA accepted public comments on the pilot program through September 2, 2025. Eligible manufacturers who want to participate in the program need to apply by September 15, 2025, and HRSA will have until October 15, 2025, to approve. If approved, these manufacturers can begin offering rebate models starting January 1, 2026. 

The Debate Rages On 

At its core, the debate over the 340B Rebate Model is about access vs accuracy. Critics argue that shifting to rebates could destabilize institutions that serve low-income, rural and underserved patient populations, potentially reducing access to affordable medications for millions. On the other hand, it provides the framework to bring oversight and stronger controls to hopefully allow the 340B program to operate as it was intended. 

As the pilot unfolds, the success of a 340B Rebate Model depends on manufacturers, HRSA, and covered entities all coming together to find a solution that works for all parties without sacrificing patient access.