What Happened?

Hospitals and clinics that serve low-income patients could see their access to cheaper drugs disrupted as a long-running legal fight over a three-decade-old federal discount program heats up. The 340B Drug Discount Program requires drug manufacturers to sell medications at reduced prices to qualifying hospitals and clinics as a condition of participating in Medicaid and Medicare.

The program has grown from fewer than 30,000 registered sites in 2014 to more than 60,000 by February 2025. Covered entities, meaning the hospitals, clinics, and health centers that qualify, made roughly $100 billion in drug purchases through the program in 2025 alone.

A report published by Congress' research branch on Sept. 10 lays out the competing legal and policy disputes now before Congress and the courts.

Why Does it Matter to Me?

The hospitals and clinics in this program typically serve patients on Medicaid, Medicare, or with no insurance at all. The discounts allow those providers to stretch their budgets and keep care affordable.

The current legal fights center on three practical questions:

  • Can drug manufacturers switch from upfront discounts to after-the-fact rebates, which would require providers to pay full price first and wait for money back?
  • Can manufacturers limit or cut off sales through contract pharmacies, which many rural and underserved communities rely on?
  • Must hospitals hand over patient claims data to drug companies as a condition of buying discounted drugs?

Both Sides, Now

Drug manufacturers have argued they need tools like rebate models and data-sharing requirements to prevent "duplicate discounting," a situation where a provider receives both a 340B discount and a separate Medicare payment adjustment on the same drug. Several manufacturers announced rebate plans in 2024, but the Health Resources and Services Administration (HRSA), the federal agency that runs the program, warned them that those changes required agency approval first. A federal district court sided with HRSA in 2025, ruling manufacturers cannot make that switch on their own.

HRSA then launched its own rebate pilot to address duplicate discounting, but the American Hospital Association sued, calling it arbitrary. A federal court blocked the pilot in December 2025. After collecting more than 2,400 public comments, HRSA relaunched a revised version on Aug. 3, with a new start date of Jan. 1, 2027.

On contract pharmacies, federal appeals courts have ruled manufacturers may impose conditions on 340B drug sales. Some states have passed laws banning those restrictions, and litigation over those state laws is ongoing.

Congress holds the power to resolve these disputes by rewriting the program's rules, but has not yet acted. The current Congress is weighing whether to mandate discounts or allow rebates, set rules on contract pharmacy use, require data-sharing with manufacturers, and increase transparency around how 340B savings are spent.

What Happens Next?

The revised HRSA rebate pilot is set to begin Jan. 1, 2027, though it could face further legal challenges. Court cases over contract pharmacy restrictions and state laws continue to work through the federal system with no set resolution date.

In Congress, no specific bill has been scheduled for a vote. Lawmakers would need to pass legislation to change the program's rules in a lasting way, and any such bill would require approval from both the House and Senate before reaching the president.

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