Proposed Changes to 340B

Over the years, the 340B Drug Pricing Program has grown across multiple metrics, including the number of drug purchases, participating covered entities (CEs), child sites, and contract pharmacy arrangements. Recently, the Health Resources and Services Administration (HRSA) reported that 340B drug purchases reached $100 billion in 2025, a 23% increase from 2024. The substantial growth in the 340B program has intensified debate over program oversight and transparency.

Recently, policymakers released the following proposals and discussion draft legislation:

• 340B Drug Pricing Integrity and Affordability for Patients Act: Authored by Senate Health, Education, Labor and Pensions (HELP) Committee Chair Bill Cassidy (R-LA) on June 29, 2026 as a discussion draft, not introduced legislation, for stakeholder comment.
• SECURE 340B Act(Strengthening the Exercise of Controls and Upgrading Requirements for Efficiency in 340B Act): Introduced in the House on July 6, 2026 by Reps. Scott Peters (D-CA-50) and John Joyce (R-PA-13).
• SUSTAIN 340B Act(Supporting Underserved and Strengthening Transparency, Accountability, and Integrity Now and for the Future of 340B Act): Introduced in the Senate on August 5, 2026 by a Senate 340B Bipartisan Working Group.

The proposals take different approaches to several issues that Congress has not comprehensively addressed in 340B statute. Key areas addressed in proposed legislation include:

1. Refining the “patient definition”

Under current guidance, an individual is a 340B-eligible patient of a CE if they:

• Have an established relationship with the entity; and
• Receive care from a provider employed by the CE or under contract with the CE that maintain records for their patients

Stakeholders have challenged the definition from both directions, arguing that it is either too broad or too narrow.

Each of the three proposals would refine the 340B patient definition to require a documented care relationship that includes outpatient care from the CE during the last two years, an eligible prescription, and auditable record. They also clarify that an individual would not qualify as a patient of a CE if the service that they receive only consists of administration, dispensing, or infusing of a drug.

2. Tightening child site eligibility requirements

Current 340B guidance does not establish detailed standards for ownership, clinical, or financial integration between CEs and their registered child sites. All three proposals would establish stricter child site eligibility requirements, requiring CEs to be the sole or majority owners of child sites and be clinically and financially integrated with their child sites.

The proposals vary in their approaches; Sen. Cassidy’s draft is the most detailed, including criteria related to location in a healthcare professional shortage area, charity care costs, and outpatient revenue from patients enrolled in Medicaid or Children’s Health Insurance Program (CHIP). The SECURE Act would require most child sites to be located in areas with a sufficiently high social vulnerability index score.

3. Establishing contract pharmacy registration requirements and restrictions

The 340B statute does not expressly address contract pharmacies, and stakeholders have long disagreed about their scope and oversight of them. All three proposals would require contract pharmacies to register and have written arrangements with CEs. However, only Sen. Cassidy’s discussion draft would directly limit the number of contract pharmacies that certain CEs may use. The SUSTAIN and SECURE 340B Acts would also prohibit manufacturers from imposing terms or conditions to purchase and dispense 340B drugs. Sen. Cassidy’s draft would require manufacturers to ship 340B drugs to qualifying contract pharmacies, but only when the CE site and contract pharmacy meet specified registration and compliance requirements.

4. Setting patient affordability requirements and reporting on the use of 340B savings

The 340B statute generally does not require CEs to pass savings from discounted drugs directly to patients or to maintain specific patient affordability policies, although certain grantees must offer sliding fee discounts under the requirements of their respective grant programs.

All three proposals would require CEs to adopt patient affordability policies that also apply to their child sites and contract pharmacies. Sen. Cassidy’s draft includes the most prescriptive affordability provisions, including income-based patient out-of-pocket cost caps and sliding fee requirements for certain CEs. Meanwhile, the SECURE 340B Act would require CEs to maintain financial assistance policies for patients up to specified income levels and report how they use 340B savings, but it would not set the same uniform copay limits. The SUSTAIN 340B Act would focus instead on transparency around CE financial assistance policies, without setting income-based eligibility thresholds.

5. Clarifying requirements related to offering access to the 340B ceiling price

Currently, manufacturers generally provide covered outpatient drugs to CEs at or below the 340B ceiling price through an upfront discount at the time of purchase. Because this pricing is provided before the drug is ultimately dispensed, CEs, pharmacies, manufacturers, and payers must be able to track each transaction to ensure compliance with program requirements. Federal law prohibits (1) duplicate discounts, which occur when a manufacturer provides both a 340B discount and another government-required discount (e.g., a Medicaid rebate) for the same drug and (2) diversion, which occurs when 340B drugs are dispensed to ineligible patients or at ineligible locations.

The proposals take different approaches to preserving or modifying the upfront discount model. The SUSTAIN 340B Act and would maintain the upfront discount model under which manufacturers provide drugs at the 340B ceiling price at the time of purchase, while the SECURE 340B Act would temporarily maintain it by disallowing retrospective rebates for four years. Meanwhile, the Senate HELP discussion draft would give manufacturers more flexibility to use upfront discounts, retrospective rebates, or a claims-based approach.

6. Establishing systems to prevent duplicate discount and diversion

The risk of duplicate discounts or diversion may be more complex if 340B savings are provided through retrospective rebates rather than upfront discounts. Under HRSA’s planned 340B Rebate Model Pilot Program, certain drugs selected for Medicare price negotiation would be purchased at a higher initial price, with CEs later receiving a rebate to the 340B ceiling price. This approach would require transaction-level data to confirm that rebates are paid only for eligible 340B claims and that the same transaction is not also subject to another manufacturer discount or Medicare’s Maximum Fair Price.

The proposals also take different approaches to identifying potential duplicate discounts and diversion. The SUSTAIN and SECURE 340B Acts would create a centralized clearinghouse to verify transactions, while the discussion draft would establish a claims repository administered by HHS. Notably, the SUSTAIN 340B Act would explicitly end the 340B Rebate Model Pilot Program and transition to its proposed clearinghouse, while the SECURE 340B Act would delay the pilot by at least four years by requiring manufacturers to provide 340B pricing as an upfront discount rather than through retrospective rebates.

Looking Ahead

As 340B remains a key policy focus in 2026, these proposals could affect HRSA’s planned 340B Rebate Model Pilot Program, scheduled to begin on January 1, 2027, for certain drugs selected for Medicare drug price negotiation. Stakeholders should closely monitor legislative and administrative developments that could reshape 340B requirements and operations. To learn more about how Avalere Health can support you on 340B policy and strategy, connect with us.

Background

The 340B Drug Pricing Program is a federal program that requires drug manufacturers participating in Medicaid to sell covered outpatient drugs at substantial discounts (i.e., 340B ceiling price) to safety-net providers, known as CEs.  Statute defines CEs to include specific hospital types, health centers, specialized clinicals, and other federal grantees. In the years since the program was established, HRSA has allowed CEs to register and provide 340B drugs at off-campus outpatient locations (“child sites”) and through pharmacies they contract with (“contract pharmacies”).