On June 1, 2025, the U.S. Department of Health and Human Services (HHS) submitted its proposed 340B rebate guidance to the Office of Management and Budget (OMB) for regulatory review. This step represents a pivotal move in clarifying the use of 340B rebate models and their intersection with IRA rebates, setting the stage for major changes in the 340B landscape.
This action follows a significant ruling on May 15, 2025, when U.S. District Judge Dabney Friedrich affirmed HHS’s authority to require preapproval of rebate models under the 340B Drug Pricing Program—a central issue in ongoing 340B litigation.
The proposed guidance, which HHS initally stated in its legal notice filed on May 2 would be submitted within 30 days, is being closely watched as it addresses how rebate models interact with the Inflation Reduction Act (IRA). The OMB 340B guidance review period could last up to 90 days, before final publication. In the notice, HHS acknowledged that large-scale adoption of rebate models “would be a significant change for the 340B Program and its stakeholders,” adding that the implications “are not straightforward.”[1] This reinforces the agency's stance on balancing program integrity with evolving rebate structures under IRA implementation deadlines.
The court decision came amid lawsuits from manufacturers like Eli Lilly, Novartis, and Bristol Myers Squibb, alongside rebate processor Kalderos, who argued they could implement rebate models without HHS 340B guidance. Their 340B rebate model requires covered entities to pay commercial prices up front and later submit data to qualify for 340B-level rebates. This setup, they argue, offers pricing transparency and access to prescription-level data previously unavailable to manufacturers.
However, critics note that these rebate mechanisms—central to IRA rebate functions for Medicare and Medicaid—may shift operational burdens and undermine the financial benefits 340B covered entities currently rely on.
Judge Friedrich ruled that HHS was within its legal bounds to require preapproval for any rebate-based alternative pricing structure, reinforcing the agency’s oversight. The ruling does, however, suggest HHS consider potential benefits of new rebate frameworks.
Following the court’s decision, Novartis and BMS submitted an emergency motion to the D.C. Circuit Court seeking to fast-track their appeal, further intensifying the 340B litigation battle.
As stakeholders prepare for the full implementation of Medicare drug pricing reforms under the IRA starting in 2026, the forthcoming guidance from HHS will be crucial in determining the future of rebate models within the 340B program. Covered entities and manufacturers alike await the final publication to understand how HHS will approach rebate model approvals moving forward.
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Why This Matters
Rebates Will Impact 340B: These developments are pivotal for 340B-covered entities, as they could likely influence the operational and financial aspects of the program in the near future.
What does this mean for you?
If rebate models move forward, you may need to pay full price for drugs up front and wait for reimbursement — which could strain cash flow for many 340B programs. Also, expect stricter scrutiny of patient eligibility. Manufacturers may delay or deny 340B pricing for prescriptions that aren’t clearly tied to a qualifying patient encounter. Now is a good time to review your documentation and patient definition practices.
What you can do
Entities may want to begin reviewing and planning for potential implications of IRA implementation. By evaluating current patients and prescribing patterns for drugs that will be affected, you can better assess the potential impact of reduced revenue under the Maximum Fair Price (MFP) structure that will apply to IRA-negotiated drugs.