340B at an Inflection Point: Senate Hearing Continues Spotlight on the Program

Late last week, the U.S. Senate Committee on Health, Education, Labor & Pensions (HELP) held a hearing titled “The 340B Program: Examining Its Growth and Impact on Patients.” The hearing revealed bipartisan interest in targeted reforms to the 340B program, with a particular focus on transparency, increased Health Resources and Services Administration (HRSA) audit authority, and new program definitions. In addition to the hearing, a series of recent actions are shaping the 340B landscape, all of which may impact congressional actions in the short- and long-term.

Recent 340B Developments Shaping the Policy Landscape

In terms of recent legislative and regulatory developments:

• The Senate’s Bipartisan 340B Working Group, established in 2023 by Sens. Thune (R-SD), Baldwin (D-WI), Capito (R-WV), Cardin (D-MD), Moran (R-Kan), and Stabenow (D-MI) issued a request for information in early 2024 and released the SUSTAIN 340B discussion draft later that year.

• In March 2025, Sens. Kaine (D-VA), Mullins (R-OK), and Hickenlooper (D-CO) joined the working group (following retirements and Sen. Thune’s promotion to Majority Leader), and stated they will continue their efforts to strengthen the 340B program to ensure its long-term viability. The group has not yet released a compromise bill this year, but an imminent release was hinted at during the hearing.

• In April, HELP Committee Chairman Bill Cassidy (R-LA) released a majority staff report assessing how 340B revenue is generated and used across hospitals, contract pharmacies, and PBMs. The report noted limited visibility into patient-level outcomes and called for stronger transparency and HRSA oversight.

• In an August 1, 2025 Federal Register notice, HRSA announced an application process for a 340B Rebate Model Pilot Program. Under HRSA’s voluntary 340B Rebate Model Pilot Program, covered entities would forgo point‑of‑sale discounts and instead receive post-sale rebates from manufacturers for drugs subject to the Medicare Drug Price Negotiation Program. The model is purportedly designed to improve claims-level transparency and reduce duplicate discounts. After the notice, 163 bipartisan House members sent a letter to HHS expressing concerns about the potential impacts of a rebate model on community health centers, safety net hospitals, and other providers.

• Finally, in September, CBO published “Growth in the 340B Drug Pricing Program,” which found that 340B drug purchases rose from $6.6 billion in 2010 to $43.9 billion in 2021—an average growth of about 19 percent per year.

Courts also continue to reshape 340B on multiple fronts. In American Hospital Association v. Becerra, the Supreme Court invalidated CMS’s reduced Hospital Outpatient Prospective Payment System (OPPS) payment rates for 340B drugs absent acquisition-cost survey data, anchoring reimbursement at average sale price (ASP) plus six percent and prompting a remedial rule for past underpayments. CMS later complied with the lower court’s January 10, 2023 remand order by issuing the Final Remedy Rule on November 8, 2023, and made one-time lump sum payments to affected 340B covered entities.

There also has been a slew of litigation brought by drug manufacturers against covered entities’ use of contract pharmacies to distribute 340B drugs to their patients. HHS issued violation letters to several drug manufacturers, including Sanofi-Aventis, AstraZeneca, Novo Nordisk, Novartis, and United Therapeutics, asserting that the 340B program requires drug manufacturers to honor 340B ceiling prices for covered entities regardless of where or to whom the drugs are delivered for dispensing, including through an unlimited number of contract pharmacies. In the Sanofi-Aventis case, the District Court for the District of New Jersey upheld HHS’s letter, finding that the drug manufacturer’s policy was unlawful. Sanofi-Aventis appealed and HHS cross-appealed. The Third Circuit ruled in favor of the manufacturers and rejected HHS’s position that the statute requires manufacturers to deliver 340B-priced drugs to an unlimited number of contract pharmacies, emphasizing that 340B is silent on delivery and location and that HHS could not enforce a contrary interpretation. States are also getting into the action—as of August 2025, approximately eighteen states had enacted some level of protection for 340B contract arrangements.

Johnson & Johnson sued HHS in the U.S. District Court for the District of Columbia, challenging HRSA’s position that Johnson & Johnson is prohibited from using a rebate model to provide 340B pricing to disproportionate share hospitals (DSHs).¹ Johnson & Johnson argued that the 340B statute allows them to provide 340B discounts either as up-front discounts or as back-end rebates. Ultimately, the court upheld HRSA’s interpretation of the statute, finding that the statute deferred to the Secretary to “tak[e] into account any rebate or discount” in determining the 340B price.²

Takeaways From Senate HELP Committee Hearing

The hearing focused on 340B revenue transparency, HRSA oversight and audit capacity, duplicate drug discounts across 340B and Medicaid, the definition of certain terms in the 340B statute—including, of course, “patient”—and limits on the use of contract pharmacies and child sites that do not operate in underserved areas.

Chairman Cassidy framed the discussion around whether the benefits of 340B reach low‑income patients or are instead captured by hospitals and intermediaries. He also highlighted the growth of contract pharmacies, the proliferation of off‑site child sites, and limited visibility into 340B revenue flows. Democratic members emphasized 340B as a lifeline for safety‑net providers, particularly amid broader coverage pressures and looming Medicaid and ACA eligibility changes and cuts. The witnesses underscored several key facts: the program has grown substantially since 2010; HRSA has implemented some GAO recommendations but still lacks authority and audit capacity to ensure consistent compliance and investigate potential noncompliance; and the 340B statute does not address (or direct) how covered entities use program‑derived revenue.

The witnesses and Senators coalesced around recurring pain points. Several members pressed on whether and how savings are passed through to patients at the point of sale, and whether reforms should differentiate among provider types (e.g., FQHCs versus hospitals).  There also was pointed discussion of a potential shift to a rebate model—widely criticized by stakeholders as increasing costs and ceding leverage to manufacturers—alongside interest in a neutral third‑party clearinghouse model to resolve disputes without restructuring the program entirely. 

Congress appears to be signaling a near‑term push to modernize 340B’s guardrails without dismantling its core purpose. Organizations should prepare for enhanced transparency requirements and program integrity measures—and position now to document patient‑facing value and compliance readiness. Specifically, Senators seems poised to introduce a bill that implements new 340B revenue reporting requirements and strengthens HRSA’s audit capacity.

The bill also could include a new definition of “patient,” which could change how widely covered entities can use 340B drugs to generate 340B revenue. HRSA guidance defining a “patient” of a covered entity was first established in 1996 and generally required the covered entity to have a bona fide relationship with the patient, which had to have received appropriate health services at the facility. The agency proposed a new, more specific definition in 2015 guidance, and attempted to enforce that narrower definition through audits. One such audit was at issue in Genesis Healthcare, Inc. v. Becerra, in which a federal district court voided the agency’s definition of “patient” and enjoined the agency from enforcing it against Genesis, holding that “[t]he plain language of the 340B statute does not require a link between a 340B prescription sold by a ‘covered entity’ to a ‘patient’ and the origination of that prescription,” while at the same time noting that the statute “require[s] an ongoing patient relationship between the individual and the ‘covered entity.'”³ The district court’s holding was not appealed by the agency and generally aligns with the 1996 guidance, which remains active on the agency’s website.    

Finally, the bill could also establish new restrictions on the use of contract pharmacies and child-site practices and could include reforms calibrated to protect rural hospitals and safety‑net providers amid broader coverage pressures.

1. Johnson & Johnson Health Care Sys. Inc. v. Kennedy, No. CV 24-3188 (RC), 2025 WL 1783901 (D.D.C. June 27, 2025). ↩︎
2. Id. at 7. ↩︎
3. Genesis Health Care, Inc. v. Becerra, 701 F. Supp. 3d 312, 326-27 (D.S.C. Nov. 3, 2023). ↩︎