As Prescribed
The 340B Drug Pricing Program (the Program) has long been a cornerstone for healthcare providers seeking to deliver affordable care to underserved communities. However, as the regulatory and compliance landscape evolves, stakeholders—including covered entities, pharmaceutical manufacturers, and pharmacies—must navigate an increasingly complex array of legal requirements and enforcement trends.
This blog post provides a comprehensive update on legislative developments, legal disputes, and emerging compliance issues within the Program.
Legislative Updates
The Program’s legal framework continues to evolve as states address pressing concerns surrounding contract pharmacy access, transparency, and distribution practices through legislation. Recent updates include efforts to protect contract pharmacy arrangements, impose revenue disclosure requirements, and restrict manufacturer use of limited distribution networks.
These legislative initiatives highlight the tension between pharmaceutical manufacturers, covered entities, and pharmacies, each seeking to balance program integrity with equitable access to drugs.
State Pharmacy Access Laws
In recent years, participating manufacturers have attempted to limit contract pharmacies’ access to 340B drugs in response to the operational challenges posed by the Program’s rapid expansion and concerns about equitable access to 340B drugs. Such restrictions have included limiting the number of contract pharmacies per 340B-covered entity or restricting access to only those contract pharmacies within a certain geographic radius of the covered entity. However, such restrictions were met with litigation from 340B providers contesting that the restrictions were violative of the manufacturers’ statutory duty to offer 340B-covered drugs without restriction.
Simultaneously, states have enacted legislation to prohibit manufacturers from restricting access to 340B drugs when dispensed through contract pharmacies. For example, Arkansas’ statute states that a pharmaceutical manufacturer cannot (1) prohibit a pharmacy from contracting or participating with an entity authorized to participate in 340B drug pricing by denying access to drugs that are manufactured by the pharmaceutical manufacturer or (2) deny or prohibit 340B drug pricing for an Arkansas-based community pharmacy that receives drugs purchased under a 340B drug pricing contract pharmacy arrangement with an entity authorized to participate in 340B drug pricing.
Similar statutes have been enacted in Louisiana, Maryland, Minnesota, Mississippi, Missouri, South Dakota, and West Virginia, with more than a dozen related bills currently pending in additional state legislatures.
These legislative efforts highlight a growing trend among states to safeguard the operational viability of covered entities while challenging practices perceived as limiting access to the Program’s benefits.
Covered Entity Revenue Disclosure Requirements
Another area of significant legislative focus has been transparency around a covered entity’s use of 340B savings. Some states have proposed or enacted laws requiring hospitals and other covered entities to disclose revenue generated through the Program and how those funds are utilized to further support patient care.
For instance, Colorado recently enacted legislation that requires hospitals participating in the Program to report detailed revenue figures and demonstrate how Program savings benefit underserved patients. While manufacturers have argued that such transparency measures are necessary to curb what they perceive as abuses of the Program, critics, including participating hospitals, counter that these requirements add administrative burdens.
Limited Distribution Networks
The emergence of limited contract pharmacy distribution networks has become another significant point of contention within the Program. These networks restrict which contract pharmacies are authorized to dispense 340B-priced medications on behalf of covered entities, effectively narrowing patient access to discounted drugs.
A recently enacted law in Arkansas—which specifically prohibits pharmaceutical manufacturers from implementing limited contract pharmacy distribution networks for 340B drugs—has prompted ongoing litigation challenging its constitutionality. While manufacturers argue that these laws unlawfully restrict their ability to manage distribution channels and that federal law preempts such state interference, covered entities and state regulators maintain that these laws are necessary to protect patient access, prevent discriminatory practices by manufacturers, and preserve the integrity of the Program by ensuring contract pharmacies can fully participate.
Pursuant to a 2024 opinion issued by the US Court of Appeals for the District of Columbia Circuit, use of limited contract pharmacy distribution networks is considered permissible under the Health Resources and Services Administration (HRSA)’s Program guidance. Specifically, the DC Circuit pushed back against HRSA’s interpretation, finding that the Program does not categorically prohibit manufacturers from limiting the distribution of discounted drugs by contract.
Instead, the Circuit Court construed HRSA’s guidance to permit manufacturers to insist on at least some reasonable conditions, which in this case included allowing only limited distribution to specialty pharmacies because the covered drugs required an “unusual degree of instruction and support.”
As of June 2025, no other federal appellate court has opined on the permissibility of limited distribution models, nor have HRSA or the US Department of Health and Human Services (HHS) issued updated guidance on this matter. Accordingly, the DC Circuit Court’s favorable opinion on limited distribution models remains the most current interpretation of these models. Stakeholders involved in the Program should closely follow these developments, given the possibility that subsequent litigation could lead to a circuit split over the permissibility of this model.
Manufacturer Proposed Rebate/Credit Rebate Models and Ongoing HRSA Litigation
To guard against duplicate discounts (which occur when both a 340B discount and a Medicaid rebate are applied to the same drug), 340B-covered entities are required to determine whether a drug is eligible for 340B pricing at the time of sale. However, participating manufacturers have contested that this process is too opaque to satisfy statutory obligations for deduplication, namely due to a lack of claims-level data sharing from covered entities back to the manufacturer.
Without this data sharing, manufacturers assert that they face challenges determining whether a Medicaid rebate is being paid on drugs dispensed at the 340B price or whether 340B-priced drugs are being dispensed to eligible patients of the covered entity. To address manufacturer concerns over the limitations on data sharing, among other compliance concerns, manufacturers proposed implementation of rebate/credit rebate models as opposed to the current upfront discount model.
Under the rebate model, manufacturers proposed to provide covered entities with rebates as opposed to upfront discounts. Specifically, the rebate model would function such that covered entities would purchase a 340B drug at full price and subsequently receive rebates equal to the value of the 340B discount following the submission of documentation and/or data as required by the manufacturer to validate the 340B claim as eligible for the 340B discount. According to the manufacturers proposing these models, this approach would enhance the transparency and integrity of the Program, ensure that the 340B discounts benefit the intended patient populations, and prevent duplicate discounts.
However, to quell adoption of this rebate model, HRSA began issuing warning letters to manufacturers, calling for immediate cessation of the model’s implementation and, in some instances, threatening sanctions. Specifically, HRSA asserted that the rebate models violate the 340B statute, which HRSA interprets as requiring the manufacturer to provide discounts at the time of purchase, not as post-purchase rebates contingent upon the submission of additional information and documentation.
In response to HRSA’s opposition and threats of sanctions, several manufacturers have filed suit against HRSA in the US District Court for the District of Columbia. These lawsuits question HRSA’s inherent authority within the Program and present a combination of arguments, including that (1) the 340B statute permits rebate models (as opposed to an upfront discount), (2) HRSA’s rejection of the rebate models is an APA violation, (3) the rebate model increases program integrity and prevents abuse, (4) the rebate models help to ensure compliance with statutory requirements, (5) the rebate models prevent duplicate discounts, and (6) the rebate models are similar to other models allowed by HRSA.
Ultimately siding with HHS, the DC District Court recently granted, in part, the government's cross-motions for summary judgment concerning the plaintiffs' claims (except in the case of Sanofi-Aventis). Notably, the court’s treatment of Sanofi’s rebate model differed from the others due to nuances in how Sanofi structured its model, and how HRSA addressed it. The court found that unlike the other manufacturers, HRSA’s rejection of Sanofi’s rebate model did not thoroughly address several critical statutory questions raised by Sanofi. The court therefore found that HRSA’s analysis was incomplete and remanded the matter for further review.
This recent decision confirmed the need for HRSA to review and approve a manufacturer’s rebate model, emphasizing that the lack of upfront discounts could conflict with the Program’s statutory requirements. For covered entities, this decision underscores the importance of closely monitoring developments, as future rulings may directly impact their ability to secure 340B-priced drugs. And for manufacturers, the ruling presents a challenge to their efforts to restructure pricing mechanisms, potentially setting the stage for broader regulatory scrutiny and legal disputes by and against HRSA.
Conclusion
The Program remains a vital tool for expanding access to affordable drugs, but its regulatory landscape is becoming increasingly more complex. By staying abreast of legislative developments, enforcement trends, and emerging disputes, stakeholders can better navigate these challenges and maximize the Program’s benefits.
How We Can Help
Drawing on our experience in navigating the complexities of the Program, our team is prepared to provide strategic advice and solutions to help stakeholders achieve compliance and optimize their Program participation.