A new bipartisan 340B reform bill limits the HHS rebate program

Introduction of the SUSTAIN 340B Act

A new legislative proposal to further cordon off the controversial 340B drug discount program from restrictive language that calls on the administration not to expand a rebate pilot it is considering at the end of this year.

The SUSTAIN 340B Act (Supporting Underserved and Strengthening Transparency, Accountability and Integrity Now and for the Future of 340B Act) was introduced Wednesday with stakeholder input designed to “provide comprehensive reforms to the program while maintaining the critical benefit of the program.”

Like a counterpart bill introduced last month in the House, but unlike a discussion draft circulated by the Louisiana Republican outbound Senate health policy committee chair Bill Cassidy, it takes a stance that promotes the creation of a third-party data clearinghouse to help resolve pharma industry worries about improper diversion and duplicate discounts. Such a model adds an extra layer of information sharing and coordination between parties and would be funded by fees levied on program participants, with the goal of uncovering any problems in 340B transactions.

The bill says the 340B Rebate Model Pilot Program will end “or a substantially similar program” within a year of the bill’s passage, as it is intended to replace safety-net providers’ statutory upfront discounts with rebates from manufacturers.

The administration said in a notice last week made public in response to public comments on the pilot program that an approach “that preserves upfront discounts or relies on a clearinghouse mechanism would depend on covered entities accurately and fully reporting 340B transaction data to the intermediary and on the intermediary to timely and standardize report 340B transaction data to manufacturers and payers. As manufacturer commenters have noted, a rebate model as it is would incentivize covered entity compliance as a condition to receiving 340B discounts.”

The public notice included the administration’s belief that such an intermediary-based model is not specifically authorized by existing law.

Other provisions of the new legislation clarify the role of contract pharmacies, define the requirements and guardrails of child sites and define the term “patient” eligible for the program, all of which have been hotbeds of controversy in recent years that have given rise to litigation.

It clearly prohibits discriminating against a participating provider, 340B pharmacy or patient “by imposing requirements, exclusions, reimbursement terms, or other conditions” that are different from those of non-participants. That means that the reimbursement rates for covered entities are lower than those for others, or that there are multiple fees imposed.

For providers, the bill also establishes new policies for financial assistance for patients participating in the program, new annual obligations to share information with participants on how they are using the program, and new authority for HHS to audit and enforce the policies in the program, among other changes.

“As we continue working together in a bipartisan manner, we are dedicated to making sure the 340B program is strengthened and can continue to meet patients’ and communities’ needs for years to come,” said the bill’s cosponsors, Sens. In a statement, Jerry Moran, R-Kansas; Tammy Baldwin, D-Wisconsin; Shelley Moore Capito, R-West Virginia; John Boozman, R-Arkansas; and John Hickenlooper, D-Colorado said. All are members of the Senate’s 340B Bipartisan Working Group.

Mixed Stakeholder Reactions

Provider organizations that claim the 340B program is a lifesaver for the care delivery system have pushed potential changes such as a clearinghouse and the retention of upfront discounts or discrimination protections.

The American Hospital Association “appreciates the leadership” of the senators on the matter, said Aimee Kuhlman, group vice president for advocacy and grassroots for the hospital lobbying group.

“In the future, we are looking forward to examining their legislation in depth, conversing with our 340B hospitals, and collaborating along with other policymakers to make sure the 340B program continues to be robust for patients, communities and providers throughout the country.

This doesn’t mean all momentum is with providers on the controversial program, however. However, large nonprofit health systems have attracted criticism especially for increasing their reliance on the discount to increase margins, and critics – particularly the pharmaceutical industry – argue that this has driven up health spending in the nation, which is at a record high of $100 billion as of 2025.

In addition to the pilot program, providers who join the program are facing a proposal by the Centers for Medicare and Medicaid Services to further reduce reimbursements, and data submission policies by individual manufacturers that would be required to qualify for the discounts.

The proposed 340B Act reform bill is drawing attention across the healthcare and pharmaceutical industries as lawmakers consider changes to the federal 340B drug pricing program. The bipartisan proposal aims to place new limits on how the U.S. Department of Health and Human Services (HHS) could structure rebate-related requirements.

The 340B Act discussion comes amid broader debates over prescription drug affordability, manufacturer obligations, and how safety-net healthcare providers benefit from discounted medicines.

What the 340B Act Could Change

The proposed 340B Act would seek to limit aspects of the HHS rebate approach while providing greater clarity around the administration of the 340B program. Supporters argue that clearer rules could reduce uncertainty for pharmaceutical manufacturers and healthcare organizations.

The 340B Act could also influence how discounts and rebates are managed within the program, potentially affecting the financial relationships between drug manufacturers, covered entities, and other stakeholders.