LUGPA Policy Brief: Withdrawal of the 340B Rebate Model Pilot Program

March 2026

At-a-Glance Essentials

What’s Changing
In February 2026, HHS formally withdrew the proposed 340B Rebate Model Pilot Program following federal court rulings, including the February 10 action in American Hospital Association et al. v. Kennedy. The decision preserves the traditional upfront discount structure of the 340B program.

Why It Matters
The withdrawal maintains the status quo amid continued rapid growth of the 340B program, limited oversight, and structural inequities that favor hospital-owned practices over independent physician groups.

LUGPA’s View
While the withdrawal avoids a problematic shift to post-sale rebates, it does not address the underlying transparency, accountability, and consolidation concerns that distort competition and disadvantage independent urology practices.

What’s Next
HHS is committed to using formal notice-and-comment rulemaking—and providing at least 90 days’ notice—before implementing any future rebate model. On February 17, 2026, HRSA issued a Request for Information (RFI) seeking stakeholder input on the feasibility of the rebate model, its operational design, and its impact.

HRSA also signaled that any future pilot could be limited to drugs subject to Medicare negotiation under the Inflation Reduction Act for 2026–2027, with implementation no earlier than January 1, 2027.

Executive Summary

On February 5, 2026, HHS filed court documents formally withdrawing the 340B Rebate Model Pilot Program announced by HRSA in 2025. The pilot would have permitted manufacturers to provide post-sale rebates instead of upfront discounts under the 340B program. A federal injunction issued in December 2025 prevented the model from taking effect, and it was never implemented.

Following litigation, HHS agreed to vacate prior approvals and return the matter to the agency for further consideration through formal rulemaking procedures. This preserves the existing upfront discount framework while addressing procedural deficiencies identified by the court.

In mid-February 2026, HRSA published an RFI in the Federal Register to gather stakeholder feedback on the feasibility and design of the rebate model. At the request of stakeholders, the agency extended the comment deadline to April 20, 2026. HRSA also indicated that any future pilot could be narrowly tailored to drugs selected for Medicare negotiation under the Inflation Reduction Act, potentially beginning in 2027.

LUGPA supports the core mission of the 340B program to assist underserved and vulnerable patients. However, the program’s growth has occurred with limited guardrails, creating financial incentives that accelerate hospital acquisition of independent practices and widen disparities between hospital-owned and physician-owned settings.

LUGPA’s Position on 340B Reform

LUGPA urges policymakers to pursue targeted, bipartisan reforms that improve transparency, accountability, and competitive neutrality, including:

• Restricting 340B eligibility for acquired off-campus provider-based departments.
• Aligning Medicare Part B reimbursement more closely with actual drug acquisition costs.
• Establishing meaningful charity care or community benefit standards.
• Improving transparency regarding the use of 340B savings.
• Preventing duplicate discounts and ensuring benefits are directed to low-income and uninsured patients.

Conclusion

The withdrawal of the rebate pilot maintains the status quo but does not resolve structural issues within the 340B program that contribute to consolidation and market distortion.

LUGPA calls on Congress and the Administration to advance balanced reforms that protect vulnerable patients, ensure program integrity, and preserve the viability of independent physician practices.