Rx|X Next Level Community

Background

On May 15, 2025, the U.S. District Court for the District of Columbia issued a significant ruling in a consolidated case involving Eli Lilly, Bristol Myers Squibb, Sanofi, Novartis, and technology vendor Kalderos. The plaintiffs challenged HHS and HRSA for rejecting their proposals to implement rebate-based alternatives to the traditional 340B up-front discount model.

As we are all familiar, HRSA did not approve the rebate proposals, citing both statutory authority and programmatic concerns. In sum, the court largely upheld HRSA’s position. Four of the five suits are dismissed, as the judge ruled that HHS had not adequately explained its rejection of Sanofi’s rebate proposal.

Key Findings from the Court Decision

- HRSA has legal authority to require preapproval for any alternative 340B pricing models, including rebate-based models.

- The court ruled that HRSA did not act arbitrarily in treating these new rebate proposals differently from the long-standing product replenishment model, which continues to be the accepted mechanism.

- HRSA's concern that rebate models would financially burden hospitals, particularly those in rural or underserved areas, was upheld as a valid reason for requiring oversight.

- However, in Sanofi’s case, the court found that HRSA had not adequately justified its rejection of Sanofi’s model and ordered the agency to reconsider its decision in light of claims data and compliance concerns.

- The court confirmed that rebate models are not inherently prohibited, but their use must be consistent with 340B program goals and must undergo regulatory scrutiny.

Implications for Rx|X Clients

- The traditional replenishment model remains the approved standard for 340B purchasing and inventory management.

- Entities are not currently required to participate in or adopt any rebate-based mechanisms.

- The ruling provides stability but also signals that manufacturers may continue pushing alternative models—especially through technology vendors like Kalderos.

- HRSA is expected to release new guidance in mid-2025, which could influence future program requirements or expand permissible models.

- The upcoming Medicare inflation rebate provisions (effective January 2026) heighten the risk of duplicate discounts and may prompt further compliance adjustments.

Recommended Action Items

1. Monitor HRSA guidance expected later this year regarding rebate models and 340B compliance expectations.

2. Engage with 340B Health or other advocacy groups and Congress to ensure hospital concerns are represented.

3. Reinforce internal audit readiness, particularly around Medicaid managed care claims and data sharing.

4. Stay cautious of manufacturer efforts to pressure adoption of rebate platforms without HRSA approval.

5. Prepare talking points for leadership in case questions arise around financial impact or compliance exposure from this ruling.

Please reach out if you have questions or would like a deeper briefing on the court’s decision or related developments!

 As a “heads up”, we have heard from entities that BRG is working on developing their “Entity” side of 340B Consulting. Yes, you heard that right. The same firm that brought you ESP and Beacon is trying to get in at entities. While larger consulting firms often work for both drug manufacturers and CEs, the firewalls have been questionable at best (Deloitte has the same auditors working for both sides, for example).  

You may be contacted by Ryan DiGiovanni, Associate Director at BRG and former 340B manager at Rush Medical Center, who is purportedly building a peer group to discuss evolving strategies such as:

• 340B Alternate Distribution Models

• Centralized 340B Qualification via MTM Clinics

• Building or restructuring pharmacies for greater 340B capture
  

It goes without saying, none of these are topics I would recommend speaking to BRG about. If you have any questions, please let me know. 

Article: https://insidemedicine.substack.com/p/scoop-leaked-pdf-outlines-major-hhs

Woof this is ugly! I thought about posting a blog to LinkedIn and then decided against calling further attention to it. However, I have been monitoring whether any of the advocacy groups respond or whether any of you have fielded questions on it? Here is the snippet that is super concerning to me: “340B providers and for-profit companies now get 18 times more of the drug dollar than they did a decade ago while patients, taxpayers and employers are saddled with a hidden tax that inflates their costs. The largest share of 340B costs is driven by hospital markups—where big tax-exempt hospitals markup drugs up to 7x or more.” The message is flipped and convoluted—no payer pays more than what they would…the 340B acquisition cost is lower to the entity. Just keep your eyes open, friends! Government relations needs to know that this is what BRG does with 340B data…who knows what would happen if the rebate model went through and large files of data loaded through Beacon are shared with them? Link to 1/7/2025 report: https://phrma.org/blog/new-study-entities-that-dont-make-medicines-get-half-of-what-is-spent-on-those-medicines

CMS is scheduling the publication of its final rule, “Medicaid Program; Misclassification of Drugs, Program Administration and Program Integrity Updates Under the Medicaid Drug Rebate Program,” on September 26, 2024, but is available online as of last Friday, the 20th. These regulations are effective on November 19, 2024.

Click Here to see the summary per CMS