New Manufacture Restrictions Emerge - Lilly’s New 340B In-House Claims Data Requirement

With the HRSA 340B Rebate Pilot temporarily on hold pending litigation, Eli Lilly and Company is expanding its efforts for 340B claims oversight. Effective February 1, 2026, Lilly will require claims-level data (CLD) submission for all 340B dispenses, including those from in-house pharmacies, as a condition of continued access to Lilly drugs at the 340B ceiling price.  Data must be submitted through 340B ESP within 45 days of dispensing, with noncompliance potentially resulting in temporary suspension of 340B pricing access until the data is provided.  A few drugs will allow for 60 days submission timeline.

In the notice, Lilly states that the submitted data will be used “to evaluate for duplicate discounts and other 340B Program abuses,” making clear that this requirement is intended to support manufacturer oversight and compliance monitoring—not simply administrative reporting.

This policy reinforces a broader industry direction: manufacturers increasingly view claims-level transparency as a prerequisite for 340B access, even for in-house dispensing. If other drug makers follow Lilly’s lead, covered entities should anticipate expanded reporting requirements, greater reliance on third-party platforms like ESP, and increased operational complexity to maintain 340B pricing.

Note, this requirement does not apply to covered entities located in Colorado, Maine, Nebraska, North Dakota, Oregon, Rhode Island, South Dakota, Tennessee, Vermont, or West Virginia, nor to Community Health Centers (CHCs) in New Mexico.

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Read the full policy

https://340besp.com/resources/eli_lilly/in_house_policy.pdf

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Why This Matters:

For covered entities, this development means the 340B rebate pilot is effectively paused, reducing near-term operational and cash-flow risk, but leaving ongoing uncertainty as HHS reconsiders whether, and how, the program could move forward in a revised form.

 

340B Rebate Pilot Update – Legal Action Paused, Future Uncertain

On January 12, 2026, the parties in the rebate pilot case, American Hospital Association v. Kennedy, informed the U.S. Court of Appeals for the First Circuit that they plan to dismiss the government’s appeal and “return the approvals challenged by the litigation to [HHS] for reconsideration”1. This signals that both sides agree the issues are better resolved through administrative processes than through an immediate ruling on the case.

What This Means for the 340B Rebate Pilot Going Forward

At this point, the 340B rebate pilot is not being implemented as initially scheduled and approved; HRSA has publicly stated it is pausing implementation pending these legal developments. Rather than face a binding appellate decision, the agency appears likely to review and potentially revise the underlying approvals that supported the pilot.

This shift could result in:

  • Delays to any future implementation timeline.

  • Revisions to the pilot’s design, including clearer rationale and stronger administrative support.

  • Continued legal challenges if stakeholders believe statutory or procedural norms aren’t met.

While the pilot hasn’t been permanently blocked, its rollout is on hold.  Any future iteration of the rebate program will likely need a much more robust explanation and process to withstand both legal and stakeholder scrutiny.

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[1] American Hospital Association v. Kennedy, No. 25-2236 (1st Cir. Jan. 12, 2026).

The HRSA 340B Model Pilot Program page

U.S. Court of Appeals for the First Circuit Jan 7th decision

History of litigation

American Hospital Association, the Maine Hospital Association, and several health systems filed their lawsuit on December 1, 2025 alleging that HRSA violated the Administrative Procedure Act in approving the pilot, alleging it was arbitrary and capricious.

A federal district court in Maine temporarily enjoined HRSA’s implementation of the rebate pilot just before its slated January 1, 2026 start, finding procedural and substantive flaws in the agency’s rollout.

On January 7, 2026, the First Circuit denied the government’s request for a stay of that injunction, effectively keeping the pilot on hold pending further litigation.

Ready for expert guidance and support for optimizing your 340B program based on the latest industry events? Contact us today to learn how we can support your entity's success.

 

Why This Matters:

For covered entities, this development means the 340B rebate pilot is effectively paused, reducing near-term operational and cash-flow risk, but leaving ongoing uncertainty as HHS reconsiders whether, and how, the program could move forward in a revised form.

 

First Circuit Court Blocks HHS Request to Restart 340B Rebate Pilot

Yesterday, the U.S. Court of Appeals for the First Circuit declined to stay a lower court’s injunction blocking the 340B Rebate Model Pilot Program, meaning the pilot remains on hold while the legal appeals proceed. The court’s decision leaves in place the December 29 order in which the federal district judge prevented HHS from launching the pilot on January 1, finding that the agency likely failed to adequately consider the longstanding reliance interests and operational realities of 340B covered entities. The government had asked the appeals court for an emergency pause of that injunction, but the court declined, signaling skepticism about the government’s likelihood of success on appeal. 

In practical terms, this means entities participating in 340B can continue receiving discounted drug prices up front, instead of purchasing at WAC and waiting for rebates to receive the statutory discount. The courts have been concerned that the rebate pilot would shift financial risk and administrative burden onto safety-net providers, straining cash flow and resources needed to serve patients, without sufficient justification or planning by the government. By keeping the pilot on hold, the appeals court preserved the status quo while it considers the case on the merits, a development widely viewed as significant for covered entities that have depended on upfront 340B savings throughout the program’s decades of operations.

Find Out More:

U.S. Court of Appeals for the First Circuit Jan 7th decision

“Federal Appeals Court Rejects HHS’ Bid to Revive 340B Rebate Pilot,” 340B Report, January 8,
2026.

Ready for expert guidance on your 340B program based on the latest industry events? Contact us today to learn how we can support your entity's success.

Want to streamline all your 340B pharmacy data in one location? Learn about 340B Performance 360, our independent data dashboard.

 

Why This Matters:

The court’s decision keeps 340B upfront drug discounts in place for now, protecting entities from cash-flow strain and administrative burdens while the legal challenge to the 340B pilot continues.

 

HRSA Posts Announcement that the 340B Rebate Pilot Implementation is Paused

340B Rebate Model Pilot Program

HRSA has updated its Office of Pharmacy Affairs website to confirm that it is pausing implementation of the 340B Rebate Model Pilot Program while litigation continues, following a January 29th federal court order blocking the pilot from moving forward. The pause stems from a preliminary injunction issued by the U.S. District Court for the District of Maine, which concluded that the rebate pilot raised significant procedural concerns and therefore could not proceed as planned for the January 1st start date. The update comes after the Department of Health and Human Services appealed that decision and sought an emergency stay and on January 31st  the U.S. Court of Appeals for the First Circuit declined to lift the injunction. The court stated that it intends to resolve the appeal on an expedited timeline. For now, HRSA emphasized that it will maintain the existing 340B pricing structure and will provide further updates as the litigation progresses.

Ready for expert guidance on your 340B program based on the latest industry events? Contact us today to learn how we can support your entity's success.

 

Why This Matters:

The pause on the 340B rebate pilot preserves the existing drug pricing structure for covered entities and manufacturers while the courts determine whether HHS has the authority to fundamentally change how the 340B program operates.

 

Federal Judge Temporarily Blocks 340B Rebate Pilot Implementation

A federal judge in the U.S. District Court for the District of Maine granted a temporary restraining order (TRO) blocking the Department of Health and Human Services from moving forward with its 340B Rebate Model Pilot Program, which was scheduled to begin on January 1, 2026. The order preserves the current purchasing structure and process of the 340B program while the court considers a legal challenge brought by hospital and healthcare association plaintiffs, who argue that the program represents an unlawful restructuring of the long-standing 340B Drug Pricing Program.

In granting the TRO, the court found that the plaintiffs raised serious questions about whether HHS exceeded its statutory authority and violated the Administrative Procedure Act by mandating a rebate-based system in place of upfront discounts. The court also credited arguments that implementation of the pilot would impose immediate and significant administrative and financial burdens on 340B covered entities, constituting irreparable harm absent judicial relief. The TRO prevents HHS from implementing or enforcing the pilot program pending further proceedings in the case.

Ready for expert guidance on your 340B program based on the latest industry events? Contact us today to learn how we can support your entity's success.

 

Why This Matters:

A federal court has temporarily stopped the launch of the 340B Rebate Model Pilot Program: The court’s order prevents an immediate shift to a rebate-based system that could have increased cash-flow strain, administrative complexity, and compliance risk while the legality of the program is unresolved.

 

HRSA Launches 340B Rebate Model Pilot Program to Test Alternative Pricing Approach

The U.S. Department of Health and Human Services (HHS), through the Health Resources and Services Administration (HRSA), has announced the 340B Rebate Model Pilot Program, a new voluntary initiative for drug manufacturers to offer 340B ceiling prices via post-purchase rebates rather than traditional upfront discounts. Under the model, “a covered entity would pay for the drug at a higher price upfront and then, within 10 days receive a post-purchase rebate that reflects the difference between the higher initial price and the 340B price.”

The pilot is scheduled to begin on January 1, 2026, and will initially apply only to drugs listed on the CMS Medicare Drug Price Negotiation Selected Drug List for the 2026. Drug manufacturers interested in participating must submit detailed implementation plans to HRSA by September 15, 2025.

This rebate pilot program is designed, “primarily to address 340B and Maximum Fair Price (MFP) deduplication, but also to facilitate other aims such as the prevention of 340B Medicaid duplicate discounts and diversion.“ The pilot will rely on a secure IT platform to allow covered entities to submit pharmacy claims data up to 45 calendar days after the date of dispense for real-time rebate processing. Rebates may not be denied based on concerns related to diversion or Medicaid duplicate discounts. Any compliance issues must be addressed directly with HRSA.

Manufacturers participating in the pilot will be required to meet strict criteria. They must cover all administrative and technical costs, ensure data protection, and provide technical support to covered entities. HRSA emphasizes that no additional administrative costs should be passed on to the covered entities themselves.

Manufacturers must also submit periodic reports to HRSA detailing rebate processing outcomes, claim delays, denials, and other program-specific metrics.

HRSA will collect public comments on the pilot program’s design and application process. For complete program details and to access the full Federal Register notice, visit: Federal Register Notice: HRSA 340B Rebate Model Pilot Program (PDF)

Ready for expert guidance on your 340B program based on the latest industry events? Contact us today to learn how we can support your entity's success.

 
 

What does this mean for you?

It’s time to start reviewing the 2026 MFP drug list to see how it might affect your organization.

 

What you can do

Plan for the fact that you may need to pay more upfront for some drugs, and then get a rebate later—within about 10 days.

HHS Advances 340B Rebate Guidance Amid Legal Developments

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.

Ready for expert guidance on your 340B program based on the latest industry events? Contact us today to learn how we can support your entity's success.

 
 

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.