ACI Monthly (July 2025)
- ACI 340B Management
- Jul 23
- 9 min read
July 2025
Volume 2, Issue 1
Inside this issue
HHS Guidance Under Review as Stakeholders Make Final Push
CMS Drug Price Negotiation
340B Compliance Trends
Sagebrush Sites
Cassidy’s 340B Reform Proposals
Supreme Court on HHS
State Bill Updates
Drugmakers Announce 340B Contract Pharmacy Exemptions
Rebate Reform Update: HHS Guidance Under Review as Stakeholders Make Final Push
The debate over 340B rebate models is entering a critical phase as stakeholders race to influence the Department of Health and Human Services’ (HHS) forthcoming guidance.
Stakeholder Lobbying and What’s Next
On June 1, HHS submitted its draft rebate guidance to the Office of Management and Budget (OMB) for final review. Since then, at least 15 groups, including drug manufacturers, provider associations, tech vendors, and a health insurer group, have met with federal officials to lobby for changes ahead of publication.
Drugmakers like Johnson & Johnson (J&J), Eli Lilly, Bristol Myers Squibb (BMS), and Novartis continue to push for rebate models, arguing they help prevent duplicate discounts and improve tracking. J&J emphasized alignment with the Trump administration’s cost-cutting goals, while AbbVie, not currently implementing a rebate model, urged HHS to permit rebates for all 340B drugs and covered entities.
Technology vendors are also pressing for inclusion. Kalderos called on OMB to endorse a standardized claims-based rebate model with federal guardrails, while 340B ESP’s parent company promoted its platform, Beacon, as a compliance solution.
Meanwhile, provider organizations remain strongly opposed. In recent meetings with OMB, 340B Health, the National Association of Community Health Centers (NACHC), America’s Essential Hospitals, and the American Hospital Association (AHA) warned that rebate models would increase administrative burdens, delay savings, and jeopardize patient care. Multiple groups submitted letters urging HHS to formally reject manufacturer-led rebate alternatives.
Survey data shared by 340B Health showed that most hospitals expect significant operational challenges under a rebate model, even if rebates are fully paid. The Hall Render 340B Collaborative and others argued that shifting to rebates could drive smaller covered entities out of the program entirely.
While OMB typically has 90 days to review proposed guidance, no formal deadline exists. The final version could emerge as soon as late August — but delays are possible. Several additional stakeholder meetings are still scheduled this month.
What’s Next?
In parallel with OMB review, oral arguments in multiple manufacturer appeals are expected in early September. The outcome may determine whether HHS can require pre-approval of rebate models, and influence how far the agency goes in its upcoming guidance. No changes have taken effect yet.
CMS Drug Price Negotiation Raises Questions for 340B Providers
CMS has released new guidance for implementing the Inflation Reduction Act’s (IRA) Medicare Drug Price Negotiation Program, but it leaves major questions unanswered, especially as the first negotiated prices take effect in January 2026.
On June 9, CMS issued a user guide and FAQs for the Medicare Transaction Facilitator (MTF), a third-party system that will handle data sharing and payments between manufacturers, insurers, and pharmacies. The MTF is intended to help operationalize the Maximum Fair Price (MFP) required under the IRA. While the guidance outlines technical details about MTF enrollment and functionality, it leaves gaps around how the system will apply to 340B claims.
One key concern is that if a claim is flagged as340B-eligible and the 340B ceiling price is lower than the MFP, no refund will be issued through the MTF. Instead, those claims enter a vague “340B process” not described in the guidance. Providers may also have to reconcile two separate payments for a single claim, one through MTF, and another through existing 340B workflows, posing added administrative and financial burden. Additionally, legal experts have pointed out that CMS’s language may exclude contract pharmacy claims from receiving MFP pricing, depending on how “at the covered entity” is interpreted. This has implications for rural and small hospitals that rely on contract pharmacy arrangements.
CMS says it will investigate complaints about inaccurate MFP reimbursements, but only through a formal process and only for issues within the program’s scope. Stakeholders have expressed concern that this limited oversight could leave providers without a timely resolution if errors occur.
What to Expect Next:
CMS’s draft guidance is open for public comment through June26. Hospitals should monitor updates to the Medicare Transaction Facilitator(MTF) process and watch for the release of the pending 340B rebate guidance currently under federal review.
340B Compliance Trends Offer a Win
A recent report from the American Hospital Association (AHA), analyzing HRSA audit data from FY2018 to FY2022, shows a marked contrast: findings requiring covered entities to return funds due to diversion or duplicate discounts declined from 71% to 28%. In comparison, 60% of drug companies audited had adverse findings, with 93% of those required to repay covered entities.
This suggests that hospitals are doing the work to maintain strong internal oversight, including regular self-audits, external auditing, and formal compliance structures, while drug manufacturers increasingly face audit failures. The AHA urges policymakers to shift more oversight focus onto manufacturers to preserve program integrity.
“Covered entities are getting it right. The data shows that hospitals are leading on 340B compliance, even as manufacturers fall short.” — American Hospital Association, June 2025
Sagebrush Sites Reinstated, Legal Dispute Continues
Eight Sagebrush sites, Nevada-based STD clinics, were officially reinstated into the 340B Drug Pricing Program by the Health Resources and Services Administration (HRSA) effective July 1, 2025. The reinstatement came just one day before a federal court upheld HRSA’s original decision to terminate the sites earlier this year. While the timing raised eyebrows, HRSA’s move signals a limited but significant victory for Sagebrush after months of legal and administrative battles.
The agency had removed 20 Sagebrush locations from the program in January 2025, citing insufficient evidence that the clinics received Section 318 funding— a key requirement for STD clinic eligibility under 340B. Although Sagebrush later submitted additional documentation, the court ultimately ruled that HRSA had acted within its authority based on the information it had at the time of removal.
The reinstatement marks a turning point in what has become one of the most closely watched 340B eligibility disputes of the year. Following the terminations, several pharmaceutical manufacturers, including Amgen, Eli Lilly, and UCB, filed a suit against HRSA, claiming the agency had improperly allowed Sagebrush sites to participate in 340B. Sagebrush sued to block the termination. After withdrawing that case in February to enter negotiations, the organization filed a second lawsuit just days later, on February 26, after HRSA initiated termination of the last two remaining eligible sites.
Sagebrush CEO Guru Charan called the reinstatement “a vindication of Sagebrush’s work on behalf of thousands of patients,” emphasizing the organization’s commitment to maintaining access to affordable STD care for underserved populations. However, the reinstatement does not include retroactive eligibility. Covered entities will not be reimbursed for the period in which they were excluded from the program.
Despite the favorable outcome, many questions remain unanswered. The federal court's ruling did not resolve whether Section 318 documentation standards should be clarified or reinterpreted, nor did it address broader concerns over how HRSA verifies eligibility for STD grantees and subrecipients. These gaps leave the door open for continued litigation and potential policy changes in the months ahead.
What to Expect Next:
While the reinstatement is a clear win for Sagebrush and potentially for other STD clinics, the legal and regulatory landscape remains in flux. HRSA has not issued new guidance clarifying Section 318 documentation requirements, leaving some uncertainty for similarly structured providers. Meanwhile, lawsuits involving Sagebrush and major pharmaceutical companies are still active and could result in rulings that shape 340B eligibility standards moving forward. STD clinics and other grantees relying on federal funding should continue to maintain meticulous documentation of their funding sources and program qualifications. Stakeholders are encouraged to monitor upcoming court decisions and any future guidance from HRSA that could impact program participation and compliance requirements.
Cassidy’s 340B Reform Proposals
Senator Bill Cassidy (R-LA), ranking member of the Senate HELP Committee, is continuing to push for major reforms to the 340B Drug Pricing Program, releasing a detailed report earlier this year that outlines what he sees as critical flaws in the program’s current operation. The report has sparked renewed debate across Capitol Hill and among covered entities, including STD and HIV clinics that rely on 340B to expand access to care.
Cassidy’s investigation reviewed data from hospitals, federally qualified health centers, contract pharmacies, and pharmaceutical manufacturers. It concluded that, while the program has grown dramatically in scope — reaching nearly $66 billion in discounted drug purchases by 2023 — there remains a lack of transparency and oversight. Cassidy’s report claims that some large hospital systems are not clearly passing savings along to patients, and that fees collected by contract pharmacies and third-party administrators may be diverting resources from direct care.
In response, Cassidy is advocating for legislation that would define patient eligibility more narrowly, increase reporting requirements for how 340B savings are used, and give HRSA more enforcement authority. The proposals also take aim at the growing influence of contract pharmacy arrangements, particularly those involving large national chains.
While no bill has been formally introduced as of July 2025, Cassidy’s office has signaled that a reform package could be finalized by the end of the year. Stakeholders across the 340B landscape are watching closely, as any legislative action could significantly reshape how the program operates — especially for STD clinics and other grantees relying on Section 318 funding.
Increased Administrative Burden
• New reporting requirements on how 340B savings are used
• More detailed eligibility documentation for patients and sites
Narrowed Patient Eligibility
• Tighter definitions could exclude some patients who currently qualify
• Greater scrutiny of referrals, prescriptions, and provider ties
Contract Pharmacy Limits
• Reforms may restrict the use of national chains or limit the number of pharmacy partners
• Smaller clinics could lose access to low-cost dispensing options
Expanded HRSA Authority
• HRSA could gain more power to audit, enforce, or penalize based on noncompliance
• Possible introduction of new site registration rules
What to Expect Next:
Congressional debate on 340B reform is expected to intensify in the second half of 2025, especially as Cassidy continues to build bipartisan support for legislative changes. HRSA may also issue additional guidance in the meantime, particularly around eligibility documentation and contract pharmacy oversight. Clinics should stay prepared to respond to new reporting requirements or eligibility clarifications and continue documenting how 340B savings support underserved patient populations.
Supreme Court Allows HHS Reorganization to Proceed
The U.S. Supreme Court has cleared the way for the Trump administration to move forward with its planned reorganization of the Department of Health and Human Services (HHS), including significant workforce reductions and agency restructuring. Among the proposed changes is the transfer of 340B program oversight from the Health Resources and Services Administration (HRSA) to the Centers for Medicare and Medicaid Services (CMS), outlined in the administration’s FY 2026 budget proposal.
While the Court’s decision lifts a previous injunction, the immediate impact on the 340B program remains unclear. HRSA has managed 340B since its inception, and any transition in oversight would likely require additional funding measures and Congressional approval.
What to Expect Next:
Covered entities should monitor updates related to HHS’s restructuring timeline and any Congressional action on the budget, as these developments may signal formal changes to 340B program administration.
Current Status on State Bills and Laws that Prohibit Drugmaker 340B Contract Pharmacy Restrictions
*States in Bold are the newest updates since last month
Drugmakers Announce 340B Contract Pharmacy Exemptions Following New State Laws
In early July, five major drug manufacturers — AbbVie, Biogen, Bristol Myers Squibb (BMS), Sobi, and Sanofi — announced new exemptions to their 340B contract pharmacy restrictions for covered entities in South Dakota and several other states. These updates follow the implementation of new state laws aimed at protecting covered entities’ ability to use contract pharmacies for 340B medications.
Most of the new exemptions took effect on July 1, the same day South Dakota’s contract pharmacy access law became active. AbbVie also announced upcoming exemptions for North Dakota and Colorado, which are scheduled to take effect in August when those states’ laws begin. These states join a growing list of previously exempted locations, including Arkansas, Maryland, Mississippi, Missouri, and Nebraska. Despite these new exemptions, AbbVie continues to challenge several state laws in court. Federal judges in Louisiana, Missouri, Maryland, and Mississippi have ruled against the company, while one judge in West Virginia ruled in its favor. All cases remain under appeal.
Biogen also exempted covered entities in South Dakota and Hawaii as of July 1. In Hawaii, Biogen is requiring covered entities to submit 340B claims data within 45 days of dispensing to confirm program compliance. The company has previously exempted states such as Arkansas, West Virginia, Louisiana, Kansas, Maryland, Minnesota, Mississippi, Missouri, Nebraska, Utah, and Vermont.
Bristol Myers Squibb issued its exemption for South Dakota on July 1. The company had already exempted covered entities in Mississippi, Maryland, and Arkansas. In a prior update, BMS also allowed a fourth contract pharmacy location for its lung cancer medication Krazati under limited conditions.
Sobi, which focuses on rare disease therapies, announced new exemptions for Hawaii, South Dakota, and Vermont. Vermont’s law took effect in June. Sobi had already granted exemptions in states such as Kansas, Louisiana, Minnesota, Nebraska, and West Virginia. Sanofi added South Dakota and Vermont to its exempt list beginning July 1, joining Arkansas, Maryland, Mississippi, and Missouri. The company had previously reinstated restrictions in Kansas and West Virginia following court rulings.
What to Expect Next:
Covered entities in exempted states can continue using contract pharmacy arrangements without being subject to the listed manufacturers’ restrictions, though conditions like data submission may still apply. Legal action is ongoing, and court decisions could impact how exemptions are enforced in the future.