340B Rebate Pilot Debuts [take two], Aligning Payments with Patient Needs

By: Marcus J. Hopkins, Health Policy Lead Consultant, ADAP Advocacy

On July 31st, 2026, 340B reform denialists opposing efforts to modernize the 340B Drug Pricing Program were served a reality check: reform is coming. Why? The Health Resources and Services Administration (HRSA) announced its revised 340B Rebate Model Pilot Program, providing qualifying pharmaceutical manufacturers with “…a voluntary pathway to provide the 340B ceiling price to covered entities through rebates, rather than upfront discounts” (HRSA, 2026). Proponents of reforming the decades-old program might say, HRSA dropped the proverbial mic.

This pilot model, which represents HRSA’s second attempt, is still significantly limited in scope, covering only the following drugs:

The drugs listed above were selected because they are part of the Medicare Drug Price Negotiation Program (MDPNP), and the rebate pilot requires manufacturers to allow 340B covered entities (CEs) to order the selected drugs under existing distribution mechanisms (e.g., 340B wholesaler accounts with Wholesale Acquisition Cost (WAC) prices loaded).

In the Federal Register notice published about this revised pilot, HRSA took great care to highlight the concerns submitted during the public comment period, of which they received 2,475 comments, including:

• Concerns across covered entity types (e.g., hospitals, Federally Qualified Health Centers, Community Health Centers, et cetera) that a rebate model could increase financial and administrative burdens, with rural providers highlighting cash flow and liquidity concerns, larger hospital systems highlighting operational complexity, and community-based and safety-net providers highlighting patient access concerns;
  
  
• General support for a rebate model among manufacturers, technology vendors, some employer and purchaser coalitions, several patient advocacy groups, and other stakeholders, emphasizing improved transparency, program integrity, and avoidance of duplicative discounts;

Photo Source: ADAP Advocacy

HRSA’s assessments determined that:

• HRSA does not agree that exclusive reliance on an upfront discount model is reasonable or that such reliance forecloses consideration of alternative statutory mechanisms. The 340B statute expressly recognizes the authority to provide the 340B ceiling price via “rebate or discount,” which provides the Secretary, through HRSA, discretion in how best to operationalize the statutory pricing requirement.

• HRSA recognizes the importance of ensuring program integrity and enabling manufacturers to prevent duplicate price concessions across all applicable pricing programs. HRSA believes that a rebate-based approach, authorized by the 340B statute and including the use of standardized claims-level data, will improve the identification and prevention of duplicate discounts.

• HRSA finds that many projections of administrative burden rest on assumptions that do not align with the Pilot's design or accurately reflect the administrative requirements of implementing a rebate approach. The Pilot is structured to enable covered entities, manufacturers, and vendors to operationalize processes and identify implementation challenges on a limited, manageable scale. Given the Pilot’s limited scope and reliance on existing data infrastructure and operational processes, HRSA anticipates that any staffing impacts will generally be modest.

• HRSA recognizes that implementation of a rebate model may require coordination with IT platforms to support the submission and validation of claims data. As an initial matter, the costs of the rebate IT platform must be paid by manufacturers. That is a requirement of participation in this Pilot. HRSA anticipates that these platforms will leverage existing data flows and automation capabilities, thereby minimizing the need for covered entities to develop new systems.

• With respect to other anticipated costs, including vendor fees and training, HRSA notes that participation in the 340B Program has always entailed some level of compliance and operational cost. Covered entities derive significant financial benefit from participation in the Program. Covered entities are expected to maintain compliance as program requirements evolve. As part of its ongoing oversight, HRSA conducts audits and compliance reviews, and provides education and guidance to covered entities based on those efforts. Covered entities routinely update policies, procedures, IT systems, and operational practices to align with program requirements and guidance, and there may be operational costs associated with program participation and ensuring compliance. Overall, HRSA concludes that while a rebate model may introduce incremental or transitional administrative and operational changes, HRSA believes the magnitude of the associated costs is likely to remain low.

• HRSA believes the Pilot is unlikely to result in unstable cash flow for covered entities, contrary to certain commenters’ predictions. HRSA has incorporated several design elements intended to mitigate potential cash-flow impacts on covered entities. First, the Pilot requires prompt rebate payments, within 10 calendar days of submission of a complete claim. This accelerated payment timeline is intended to precede the payment deadlines associated with standard wholesaler payment terms, thereby reducing or eliminating the need for covered entities to “float” the WAC price or finance drug purchases for extended periods.

• In response to commenter concerns regarding rebate denials and dispute resolution, HRSA includes design features within the Pilot to promote transparency, consistency, and accountability in rebate determinations. Specifically, the Pilot requires manufacturers to document and report denied claims, including the basis for each denial and the status of any associated dispute. HRSA intends to use this information to monitor denial patterns and assess whether rebate determinations are applied consistently and appropriately across participating manufacturers and will remove manufacturers from the Pilot where appropriate. In addition, the Pilot will provide a defined pathway for covered entities to challenge denied claims, including specified timeframes for review and response, to facilitate timely resolution of disputes.

• HRSA intends to limit the data collection that manufacturers may impose on covered entities under the Pilot to the minimum necessary to effectuate rebate payments and to support 340B program integrity and nonduplication under the MDPNP. HRSA believes that limiting the required data collection to a narrowly defined set of standardized pharmacy and medical claims data elements substantially reduces the potential burden compared with broader reporting models considered during the development of the Pilot. In response to stakeholder feedback, HRSA declined at this juncture to require additional data elements proposed by manufacturers, including purchasing data, encounter data, invoice-level information, and patient-level clinical information, because HRSA determined that collecting and reconciling such information could create additional operational complexity and systems burden for covered entities acclimating to a new rebate environment.

• As an initial matter, HRSA notes that the data elements required under the Pilot, as set forth in Section VIII.D of this Notice, are limited to standardized pharmacy and medical claims fields such as date of service, NDC-11, quantity dispensed, prescriber ID, service provider ID, 340B ID, RX BIN, RX PCN, and health plan identification information. These data elements do not include direct patient identifiers such as patient names, addresses, dates of birth, Social Security numbers, medical record numbers, or other information that would directly identify individual patients.

• HRSA will require participating manufacturers to submit purchase data reports to the agency. HRSA will continue to assess reporting burden and implementation experience and may refine requirements as appropriate to balance program integrity objectives with administrative feasibility. HRSA agrees that collecting Pilot data is important for evaluating adherence to the rebate framework and the impact of the Pilot. HRSA also agrees that providing aggregate data, which will not contain confidential or proprietary information, to the public is important to provide further transparency into the 340B Program.

• Congress created the 340B Program so covered entities could “stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” H.R. Rep. No. 102-384(II), at 12 (1992). The Pilot does not deviate from that statutory purpose. Nor does implementation of a rebate-based model modify the statutory 340B ceiling price, covered entity eligibility requirements, or the legal framework governing patient eligibility under the 340B Program. Rather, the Pilot changes the mechanism and timing by which the 340B price is effectuated, shifting from an upfront discount to a post-dispense rebate that is expressly authorized by the 340B statute. HRSA further notes that the Pilot is structured to mitigate any potential operational or financial disruption to covered entities. HRSA anticipates the Pilot will provide program integrity benefits that ultimately support patient care and stewardship of federal resources (Notice Regarding 340B, 2026).

Ryan White Clinics for 340B Access (RWC-340B), a lobbying organization representing clinics and other HIV/AIDS service providers represented by an inside-the-beltway special interest firm with deep ties to the American Hospital Association, alleges that support for the rebate pilot is overstated, highlighting that 1,170 of the 2,351 publicly posted comments “…were substantially identical submissions tied to an astroturfing campaign intended to mimic genuine grassroots engagement” (Muolo, 2026). HRSA, in its receipt and analysis of the public comments, specifically mentioned that 1,170 comments were “…identical comments as part of a letter campaign” (Notice Regarding 340B, 2026), and took that into account before releasing the revised pilot program.

Photo Source: Realty Leadership

It is worth noting, RWC-340B’s executive committee is composed of representatives from some of the largest recipients of 340B revenues in the HIV/AIDS space, ironically enough, including some organizations whose executives are making $1,268,349…or $744,510…or $633,624…or $466,081, which represents compensation levels considered higher than most patients living with HIV believe are appropriate for an HIV service provider. For the sake of comparison, a majority of clients enrolled in the Ryan White HIV/AIDS Program (RWHAP) are low-income, with roughly 59% living at or below 100% of the Federal Poverty Level (FPL), according to a report by the Kaiser Family Foundation. For the layman reading this blog, it amounts to basically less than $16,000 annually.

Notably absent from this lobbying group's executive committee is any actual patient representation. ADAP Advocacy proudly boasts that over half of its board of directors are patients living with HIV, including 3:4 executive committee members. 

For its part, ADAP Advocacy fully supports the 340B Rebate Model Pilot because it promotes a robust 340B Program modeled after the gold standard among CE's: State AIDS Drug Assistance Programs. Many of these very programs have been actively and successfully implementing a rebate model since the practice was first authorized in 1998. And, by the way, they have been serving more clients since 2000. Arguments supporting this assertion have been clearly articulated in the first policy paper released earlier this year with Legacy Health Endowment, as well as the stand-alone policy paper subsequently released over the summer.

While the rebate model is an excellent first step, ADAP Advocacy contends that it is just that—a good first step. More reforms are desperately needed, including full transparency from every CE type regarding the total dollar amounts of 340B rebate revenues received, how those revenues are spent, and what percentage of annual revenues consists of 340B rebates. Carve-outs equate to transparency opt-outs.

Lately, Congress is awash in 340B-related legislation. Any attempt to stall implementation of holding healthcare organizations accountable for how 340B-related revenues are spent to help low-income patients under a new 340B rebate model, such as the SUSTAIN Act, should be met with caution by patients. At what point did accountability become a luxury? 

Photo Source: ADAP Advocacy

If the purpose of the 340B Program is to extend and expand access to affordable healthcare services for underserved and lower-income populations, then CEs need to be required to “show their work,” as many math teachers have demanded. Those who are opposed to such transparency rarely have patients' best interests in mind and are more than willing to threaten to limit or cease services altogether to avoid transparency requirements being imposed on them.

It’s time for that power to be broken and returned to the patients the 340B Program was intended to serve. ADAP Advocacy gladly can offer referrals! 

Disclaimer: All funders of the ADAP Advocacy Association are publicly listed on our website. 

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association; rather, they provide a neutral platform for the author to promote open, honest discussion of public health-related issues and updates.

References:

[1] Notice Regarding 340B Rebate Model Pilot Program, 91 F.R. 48883 (published August 03, 2026). https://www.federalregister.gov/documents/2026/08/03/2026-15633/notice-regarding-340b-rebate-model-pilot-program

[2] Health Resources and Services Administration. (2026, July 31). HRSA Announces Revised 340B Rebate Model Pilot Program to Strengthen Care in Rural and Medically Underserved Communities. Rockville, MD: United States Department of Health and Human Services: Health Resources and Services Administration: About HRSA: News & Events: Press Releases. https://www.hrsa.gov/about/news/press-releases/revised-340b-program-2026

[3] Muolo, D. (2026, July 31). Revised 340B Rebate Model Pilot Program moves forward, despite provider pushback. New York, NY: Fierce Healthcare: Providers. https://www.fiercehealthcare.com/providers/revised-340b-rebate-model-pilot-program-moves-forward-despite-provider-pushback

When Hospital 'Community Benefits' Benefit Relatively Few

By: Marcus J. Hopkins, Health Policy Lead Consultant, ADAP Advocacy

The proverbial dead horse highlights how drug purchases under the 340B Drug Pricing Program exceeded $100 billion for the first time in 2025—an increase from 2024 of 22.8%—according to the Health Resources and Services Administration (HRSA), with hospitals accounting for a combined $83,936,162,423 (83.9%) across all hospital types (HRSA, 2026). Today’s fast-paced news cycle dictates a look at the primary vehicle used by 340B hospitals to claim they are using 340B Program revenues to serve patients: “Community Benefits”.

Photo Source: Debt.com

According to a 2025 report released by the American Hospital Association (AHA), a special interest group that bankrolls inside-the-beltway lobbying firms pretending to care about patient access to care, the 1,166 340B hospitals examined by Research Triangle Institute (RTI) International spent $99,473,767,285 on “Total Benefits to the Community” (AHA, 2025).

What’s key here is how RTI and the AHA have defined “Community Benefit.” It truly amounts to nothing more than profit-driven shenanigans.

By their definition, “Community Benefits” include the following:

• Type of Benefit Provided (1,166 individual hospitals)
• Financial assistance, unreimbursed Medicaid, and unreimbursed costs from means-tested government programs
• Other benefits, including health professions education, medical research, cash and in-kind contributions to community groups
• Community-building activities
• Medicare Shortfall
• Bad debt expense

In fairness, now, this definition didn’t arise out of nowhere. It is a direct response to definitions set by the Internal Revenue Service (IRS) for reporting in Schedule H of the federal Form 990. Schedule H is broken into six parts, each of which is reported to the IRS for data collection purposes. Below are brief descriptions of each Part, but only Parts I, II, III, and VI specifically apply to what the IRS considers to be a “community benefit”:

Part I: Quantifying "Community Benefit"

Part I of Schedule H attempts to quantify the community benefit provided by hospitals annually. Expenses that are reportable in Part I include free care, unreimbursed Medicaid, unreimbursed costs from other means-tested government programs, community health improvement services, health professions education, subsidized health services, research, and contributions to other community groups.

ADAP Advocacy's take: The IRS has not suggested a minimum level of expenditures required to justify tax-exempt status.

Part II: Community Building Activities

Part II quantifies the hospital's community building activities. Although the definition of "community building" may not be obvious at first glance, it is generally understood to refer to programs that are intended to have a beneficial impact upon the health of a community but that do not provide medical care. Examples of community building are housing improvements, economic development, community support, environmental improvements, leadership development, coalition building, community health improvement advocacy, and workforce development.

ADAP Advocacy's take: Despite the inclusion of community building metrics on the Schedule H, these numbers are still separate from the reporting of charity care and community benefit expenditures in Part I. The IRS commentary on the Schedule's final draft reflected the view that the link between community building and health remained tenuous and that the reporting tools in Schedule H are intended, in part, to serve as data collection methods for the IRS to discern what links exist.

Part III: Medicare Shortfalls and Bad Debt

Hospitals incur costs when treating all patients, including patients who are covered by Medicare. Medicare, however, may not reimburse a provider for the total cost of services received by a patient. The difference between the Medicare reimbursement rates and the costs incurred by a hospital are called shortfalls. Schedule H includes a dedicated area in which to report Medicare shortfalls.

ADAP Advocacy's take: Despite the addition of Part III, the IRS does not appear to automatically treat Medicare shortfalls as a direct measure of community benefit. Instead, hospitals are asked to "[d]escribe ... the extent to which any shortfall reported [in Part III] should be treated as community benefit." 

Photo Source: Grammarist

Hospitals regularly engage in billing and collection practices to recoup co-pays, deductibles, and other expenses from patients.

ADAP Advocacy's take: Schedule H allows hospitals to report bad debt in Part III alongside Medicare shortfalls, but bad debt expense may not be reported on the charity care and community benefit table in Part I. As with Medicare shortfalls, filing hospitals must explain what portion of bad debt should be considered community benefit. The IRS comments accompanying the Schedule's final draft indicated that it does not intend to treat any portion of bad debt as a de facto community benefit, citing a lack of consensus on bad debt policies among hospitals.

 Part IV: Management Companies and Joint Ventures

Part IV requires disclosure of any joint ventures in which a hospital participates. 

Part V: Facility Information

Part V requests information about the entity's health care facilities, including questions about compliance with the ACA's requirements.

Part VI: Supplemental Information

Part VI of Schedule H provides an area in which to provide narrative information regarding the amount of community benefit provided. The IRS stated that this area could be used to justify why some portion of Medicare shortfall or bad debt reported in other areas of the Schedule should be considered community benefit. In addition, hospitals may provide details about other community benefits they provide that are not easily quantifiable (Liu, 2024).

As far as ADAP Advocacy can see from the Congressional Research Service (CRS), hospitals are defining “Community Benefit” in a way that does not comply with IRS standards. In fact, of the $99,473,767,285 RTI International reported, 9.5% of those expenditures—including community-building activities, Medicare shortfall, and bad debt expenses—would not be considered a “community benefit” by the IRS.

But observers really need to look further into what “Community Benefits” mean for each category.

When ADAP Advocacy examines Form 990s to review “Charity Care” expenditures, specifically Line 7, Section a is of interest (Figure 1):

Figure 1 – An Example of the Financial Assistance at Cost Line Item in Schedule H on the federal Form 990 Tax Return

Photo Source: ProPublica, 2026

This line specifically asks hospitals to report their provision of “Financial Assistance at cost,” or “charity care.”

The IRS specifically defines “charity care” as, “…free or discounted health services provided to persons who meet the organization's eligibility criteria for financial assistance and are unable to pay for all or a portion of the services.” In fact, the IRS further specifies that charity care DOES NOT INCLUDE, “…bad debt or uncollectible charges that the organization recorded as revenue but wrote off due to a patient's failure to pay, or the cost of providing such care to such patients; the difference between the cost of care provided under Medicaid or other means-tested government programs or under Medicare and the revenue derived therefrom; self-pay or prompt pay discounts; or contractual adjustments with any third-party payors” (Levinson et al., 2022).

This is why, when looking at the very friendly report published by the AHA, the entirety of their “Community Benefits” reporting should be questioned.

Why?

Because on virtually every Form 990 we examined that included full Schedule H reporting, Line 7, Section b (Medicaid), was significantly higher than Section a.

This means that the provision of “Financial Assistance at cost” makes up a vanishingly small percentage of the entirety of Schedule H reporting.

This prompts a vital question: Should the other sections in Line 7 still be considered a “community benefit”?

Absolutely.

But patients need clear information on how those hospitals are using 340B revenues to DIRECTLY benefit patients. Absent that, GoFundMe pages most likely will continue to serve as the "community benefit" standard for most patients straddled with hospital medical debt.

Disclaimer: All funders of the ADAP Advocacy Association are publicly listed on our website. 

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association; rather, they provide a neutral platform for the author to promote open, honest discussion of public health-related issues and updates.

References:

[1] American Hospital Association. (2025, September). 340B Hospital Community Benefit Analysis. Chicago, IL: American Hospital Association: Data & Insights: Guides & Reports. https://www.aha.org/system/files/media/file/2025/10/340b-hospital-community-benefit-analysis.pdf

[2] Health Resources and Services Administration. (2026, July). 2025 340B Covered Entity Purchases. Rockville, MD: United States Department of Health and Human Services: Health Resources and Services Administration: Office of Pharmacy Affairs: 340B Drug Pricing Program: Program Updates. https://www.hrsa.gov/opa/updates/2025-340b-covered-entity-purchases

[3]Levinson, Z., Hulver, S., & Neuman, T. (2022, November 03). Hospital Charity Care: How It Works and Why It Matters. San Francisco, CA: KFF: Topics: Health Costs. https://www.kff.org/health-costs/hospital-charity-care-how-it-works-and-why-it-matters/

[4] Liu, E. C. (2024, April 15). Legal Requirements for Section 501(c)(3) Hospitals. Washington, DC: Congressional Research Service. https://www.congress.gov/crs-product/R48027

[5] ProPublica. (2026). Full text of "Full Filing" for fiscal year ending Nov. 2023. New York, NY: ProPublica: Nonprofit Explorer: California: Oroville Hospital. https://projects.propublica.org/nonprofits/organizations/941634554/202402859349301695/full