Background on 340B Ceiling Price and MFP Interaction

The 340B Drug Pricing Program was established to help certain safety-net providers, known as covered entities, purchase covered outpatient drugs at substantial discounts (i.e., 340B ceiling price).

Stakeholders considering potential reforms to the 340B program are contending with a new challenge: avoiding duplicate discounts across the 340B program and the new maximum fair prices (MFPs) established via the Medicare Drug Price Negotiation Program.

Earlier this summer, CMS released a draft guidance detailing the negotiation processes for the second year of the program, but also offering new details on how MFPs will be effectuated in 2026 and 2027.  CMS is choosing to add a new data entity to verify that only MFP-eligible individuals get access to the negotiated price, but the agency left open questions related to 340B discount non-duplication. This places the onus on 340B stakeholders (e.g., manufacturers, covered entities, 340B third-party administrators (TPAs)) to verify the 340B eligibility of a drug before issuing an MFP retrospective discount to the pharmacy within 14 days.

Figure 1. Flow of Transactions for Duplicate Discounts Between 340B and MFP

CMS is expected to release final details on MFP effectuation this fall. In parallel, manufacturers have undertaken various efforts to mitigate 340B duplicate discounts, including contract pharmacy restrictions and a newly announced rebate model.

Potential Components of a Rebate Model

Stakeholders have debated the merits of a 340B rebate model since 2020. Supporters assert that it would provide the needed clarity to avoid duplicate discounts, while opponents are concerned the converting upfront discounts in 340B to rebates would have administrative and financial impact on safety-net providers. With the pending operationalization of MFPs in Medicare and CMS’ decision so far not to play a role in deduplicating MFP and 340B discounts, the focus on a rebate model has reemerged.

Given the possibility of manufacturers paying both a 340B discount and MFP refund on the same claim, key components and considerations of a potential rebate model could include the following:

• Covered entities purchase a drug from the wholesaler at wholesale acquisition cost (WAC) (similar to non-340B covered entities) and immediately submit purchase data to the rebate model administrator. (Note: Today, 340B covered entities purchase drugs at or below the 340B ceiling price.)
• After dispensing, covered entities submit claims data within a specified time period to the 340B rebate model platform.
• The 340B rebate model platform validates the claim in terms of eligibility, location, and timeliness of submission.
• If sufficient, the 340B rebate model platform issues a rebate to the covered entity for the difference between WAC and 340B ceiling price.

What’s Next?

There are several outstanding questions that stakeholders must address in the near-term:

Rebate Model Viability: Stakeholders continue to have different perspectives on what actions are permissible under the 340B program. The Health Resources and Services Administration (HRSA) responded, noting that such an approach is inconsistent with the 340B statute. (Note: a rebate model framework has been used for AIDS Drug Assistance Programs historically.) HRSA previously took a similar position when manufacturers began implementing 340B contract pharmacy restrictions in 2020.

• Stakeholder Question: Will additional legal challenges arise in response to these new approaches?

Impact to Covered Entity Revenue: Today, 340B covered entities achieve savings by purchasing drugs at or below the 340B ceiling price, while some covered entities secure sub-ceiling 340B discounts through the Prime Vendor Program (managed by Apexus). Under a rebate model, covered entities would access the savings once a refund is paid.

• Stakeholder Questions: How would the time delay in savings impact the economics of the covered entity? If a 340B rebate model reimburses a 340B covered entity the difference between WAC and the 340B ceiling price, would the covered entities lose access to savings from sub-ceiling 340B discounts?

Intersection with MFP Effectuation: It is unclear how stakeholders will mitigate a 340B and MFP duplicate discount risk under retrospective effectuation of MFPs beginning in 2026. It also remains unclear if different stakeholders prefer to see a role from CMS in verifying both MFP and 340B eligibility or if market and contractual solutions would be more flexible and effective.

• Stakeholder Questions: Could other manufacturers leverage a 340B rebate model to mitigate the duplicate discount risk? Would a 340B rebate model fit within the 14-day window manufacturers have to reimburse pharmacies based on the lesser of the 340B ceiling price or the MFP?

Market Uptake: When the first manufacturer implemented contract pharmacy restrictions several years ago, several other manufacturers announced they were following suit with their own contract pharmacy restrictions.

• Stakeholder Questions: Will other manufacturers pursue a 340B rebate model in the near-term? Which products will be subject to the model and when?

Catalyst for Federal Reform: In the 118th Congress, several bills have been introduced to reform the 340B program. However, without stakeholder consensus, the outlook for bill passage before the end of the year narrows.

• Stakeholder Questions: Could growing 340B contract pharmacy restrictions and potential interest in a 340B rebate model catalyze efforts to reach alignment on 340B program reform sooner?

Conclusion

The intersection of MFP effectuation and the 340B program will be a critical area for stakeholders and policymakers to address in the coming months. Policymakers will have to balance numerous factors across stakeholders and interest groups. To continue exploring these issues connect with us.