Why It Matters
A dispute over how drug manufacturers should price medications for hospitals and clinics has escalated into a legal and policy showdown. A Congressional Research Service (CRS) report, published September 10, lays out competing interpretations of the 340B Drug Discount Program that Congress created three decades ago.
The program requires drug manufacturers to offer covered entities discounted prices as a condition of participation in Medicaid and Medicare, and has grown substantially: registered sites expanded from fewer than 30,000 in 2014 to over 60,000 by February 2025, with covered entities making approximately $100 billion in covered outpatient drug purchases through the program in 2025. At stake is whether manufacturers can unilaterally shift from offering straight discounts to rebates, whether covered entities must share patient data with drugmakers, and whether hospitals can use subsidiary clinics to access deeper discounts, all of which the 119th Congress is actively considering.
The Big Picture
The Health Resources and Services Administration (HRSA), which administers the program, has sought to prevent what it calls duplicate discounting, where covered entities receive both a 340B discount and a separate Medicare payment adjustment on the same drug.
In 2024, several drug manufacturers announced plans to implement rebate models for certain drugs, prompting HRSA to warn of civil penalties unless manufacturers sought the agency's approval first. The manufacturers sued HRSA, and a federal district court ruled in 2025 in HRSA's favor, holding that manufacturers cannot unilaterally create a rebate model.
HRSA then launched a rebate pilot in 2025 to address duplicate discounting, but the American Hospital Association sued, arguing the program was arbitrary and capricious. A federal court enjoined the pilot in December 2025, and in February 2026 the parties agreed to vacate and remand it to HRSA.
After collecting over 2,400 comments from stakeholders, HRSA relaunched the pilot on August 3, with a revised version scheduled to begin January 1, 2027. Separately, contract pharmacy restrictions imposed by manufacturers remain a flashpoint, with federal appellate courts ruling that manufacturers may impose conditions on their offers to sell 340B drugs, while some states have enacted laws to prohibit such restrictions, and litigation over those state laws continues.
The Bottom Line
The 119th Congress has contemplated changes to the 340B program regarding whether the 340B price should be effectuated as a rebate or discount, whether contract pharmacy use should be permitted, whether covered entities must turn over claims data to drug manufacturers as a condition of purchasing 340B drugs, and increased transparency on the scale and use of 340B revenues.
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