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As the healthcare landscape evolves under the weight of federal reforms, two major developments, the HRSA 340B Rebate Pilot and the One Big Beautiful Bill (OBBB), are poised to reshape how hospitals, health centers and pharmacies manage drug pricing, eligibility, patient access and cash flow.
HRSA’s 340B Rebate Pilot: A New Era of Retrospective Rebates
What Is the 340B Rebate Model?
The 340B Rebate Model Pilot, announced by HRSA on July 31, 2025, introduces a retrospective rebate system for select high-cost drugs negotiated under the Inflation Reduction Act’s (IRA) Medicare Drug Price Negotiation Program (MDPNP). Unlike traditional 340B pricing, which offers upfront discounts, this model allows manufacturers to issue rebates after drug dispensing, based on submitted claims.
Key features:
- Applies to 10 drugs starting January 1, 2026.
- Rebates are issued within 10 calendar days of claim submission.
- Covered Entities (CEs) must submit 11 required data fields. Although these fields tend to indicate the applicable drugs are retail/specialty pharmacy- dispensed products, HRSA has confirmed approved plans would be applicable to all dispenses/administrations.
- Date of Service
- Date Prescribed
- RX number
- Fill Number
- 11 Digit National Drug Code (NDC)
- Quantity Dispensed
- Prescriber ID
- Service Provider ID
- 340B ID
- Rx Bank Identification Number (BIN)
- Rx Processor Control Number (PCN)
- Rebates are payer-agnostic – covering Medicare, commercial, and uninsured patients.
Who Benefits? Who Loses?
Winners:
- Pharma manufacturers: Gain flexibility and compliance with lowest-price mandates.
- HRSA (Health Resources and Services Administration): Gains oversight and data, using small subset, to evaluate rebate feasibility and impacts.
Losers:
- Drug wholesalers: Marginalized from the rebate process because the entity will pay WAC (Wholesaler Acquisition Cost) up front to the wholesaler, then the entity submits request directly to manufacturer for rebate.
- Pharmacies: Face working capital strain and reduced access to sub-340B pricing.
- Covered Entities (CEs): Must manage administrative burdens, delayed savings, and potential rebate denials [1]. CEs will now have a 45-day timeline to determine eligibility.
- Contract Pharmacies: Will need to adjust to a new financial structure in which rebates are issued directly to the covered entity rather than reflected in the purchase price.
How Can You Prepare?
We recommend a three-phase approach: Assess, Prepare, Execute, supported by technological upgrades, contract amendments, and real-time rebate tracking.
- Assess: Forecast CY26 drug prices, volumes, and rebate denial risks.
- Prepare: Adapt workflows, update contracts, and coordinate with legal/accounting teams.
- Execute: Submit and reconcile 340B rebates, track Maximum Fair Price (MFP) impacts, and manage accumulators.
OBBB’s (One Big Beautiful Bill) Potential Effects on Pharmacy and 340B
How Could Changes to Medicaid Affect 340B Eligibility?
OBBB introduces sweeping Medicaid reforms:
- Work requirements for adults under 65.
- Certain adults must meet new community engagement mandates to maintain coverage (80 hours/month).
- Reduced state funding via provider tax restrictions.
- New restrictions reduce states’ ability to use provider taxes to generate additional Medicaid funds.
- More frequent eligibility checks (every 6 months vs annually).
- States must conduct eligibility verifications more often, increasing the risk of coverage loss (every 6 months vs annually).
- Immigration-related coverage limitations.
- Narrows eligibility for lawful immigrants to receive Medicaid or the Children’s Health Insurance Program (CHIP) coverage.
These changes could significantly reduce Medicaid enrollment, directly impacting Disproportionate Share Hospital (DSH) adjustment percentages, a critical metric for 340B eligibility.
Is Your Hospital or Health System at Risk?
Yes, particularly if:
- Your DSH adjustment % is near the 340B threshold (11.75% or 8% depending on classification).
- You serve high Medicaid populations.
- You’re in a state with aggressive OBBB implementation or near state borders.
Key Strategic Questions That CEs Need to Consider
CEs will benefit from early comprehension of the potential effects of the OBBB, allowing them to start scenario planning and identify the possible next steps they can take.
Because DSH% impacts extend well beyond 340B, these questions should be reviewed by stakeholders across multiple departments to account for complexity and broad implications.
- Who should I consult within my organization to assess risks related to my 340B program?
- What are the specific implications of OBBB for my state’s Medicaid and hospital programs?
- What is my current DSH percentage, and what are the historical trends?
- What key factors drive our DSH percentage—high Medicaid patient days, a large SSI ratio, or both?
- Are there strategic opportunities to expand inpatient services for high Medicaid populations?
- Could we qualify for 340B under an alternative CE classification?
- Is our organization prepared to help patients maintain Medicaid coverage under new requirements?
Conclusion: A Call to Action
The rebate pilot and the OBBB law represent a pivotal moment for safety-net providers. While the challenges are real including financial strain, administrative complexity, and eligibility risks, proactive strategies can help hospitals and health systems protect their 340B status, help all CEs optimize pharmacy margins, and continue serving vulnerable populations.
At VytlOne, we emphasize the importance of collaboration across pharmacy, finance, legal, and compliance teams to ensure readiness. The time to act is now.
[1] Manufacturers are required to provide a clear rationale and supporting documentation for any claim denials (e.g., due to deduplication for MFP or when a 340B rebate has already been provided to another covered entity for the same claim). 340B rebate should not be denied due to compliance concerns related to diversion or Medicaid duplicate discounts.
Logan Bailey is 340B Services Manager at VytlOne. He can be reached at logan.bailey@vytlone.com.
