The 340B Drug Pricing Program is under pressure from multiple directions: pharmacy benefit manager litigation, drugmaker contract pharmacy restrictions, and a federal rebate pilot that courts have effectively killed. For health systems, the program represents one of the most significant levers for offsetting drug costs and cross-subsidizing care for vulnerable patients — and each of these fronts carries direct financial and operational exposure.
Here are four things to know:
1. Eli Lilly’s five-day ultimatum
In a June 1 letter to HHS’ Health Resources and Services Administration, Lilly gave an initial group of 340B hospitals five business days to begin submitting claims-level data for in-house pharmacy dispensing or face suspension of 340B pricing on its products. Lilly said wholesalers will be instructed to stop offering 340B pricing to noncompliant hospitals until the required data is submitted. The drugmaker has indicated it will extend enforcement to additional covered entities in the weeks ahead, making this a near-term operational and financial risk for any system that has not yet complied.
The company expanded its claims-data requirement in February to include in-house pharmacy dispensing, citing duplicate discount concerns under the IRA, and says covered entities received a two-month implementation window, multiple reminders, and individual outreach before enforcement began. The response from hospital groups has been swift:
- About 70% of covered entities purchasing Lilly drugs — roughly 2,350 organizations — have already submitted data, generating nearly 800,000 claims records since Jan. 1; two-thirds of critical access hospitals are among those compliant.
- The American Hospital Association called the policy unlawful and warned it will increase costs and administrative burdens for hospitals serving vulnerable populations. AHA CEO Rick Pollack said HHS “can no longer sit on the sidelines.”
- The AHA had proposed a neutral, government-administered clearinghouse for data collection on May 13; Lilly did not respond.
- 340B Health, an organization representing more than 1,600 participating hospitals, called the move “a huge kick in the face to the nation’s safety-net hospitals” and urged HRSA to warn Lilly it faces enforcement action.
For health systems: Any hospital purchasing Lilly drugs through its in-house pharmacy that has not yet submitted claims data faces imminent loss of 340B pricing. At least five other drugmakers have announced similar in-house claims data policies, according to the AHA — meaning compliance pressure is likely to spread beyond Lilly in the weeks ahead.
2. The CVS lawsuit
New York City-based Mount Sinai Health System, Ann Arbor-based Michigan Medicine and Kansas City-based University of Kansas Health System filed separate federal lawsuits against CVS Health on May 21, alleging the company ran a secret scheme to divert approximately $250 million in 340B savings between 2020 and 2025.
The complaints allege CVS artificially deflated reimbursement for 340B specialty drug claims and pocketed the spread between what insurers paid and what was passed through to hospitals. The alleged mechanics of the scheme:
- Because 340B eligibility often cannot be determined at the point of sale, specialty drug claims were initially processed at standard network reimbursement rates. Weeks later, when WellPartner identified a claim as 340B-eligible, CaremarkPCS allegedly paid CVS Specialty an artificially reduced rate — and presented that lower amount to hospitals as the full reimbursement.
- The lawsuits name CVS Health, CaremarkPCS Health, Caremark, CVS Specialty and WellPartner as defendants.
- The University of Kansas complaint additionally alleges CVS refused a contractually required audit and terminated the health system’s pharmacy agreement after it raised concerns.
For health systems: Any system with a CVS contract pharmacy arrangement should review its 340B specialty drug reimbursement flows. The University of Kansas allegation — that CVS terminated the agreement after concerns were raised — is a signal that systems which have experienced similar friction may have legal standing. The cases raise broader questions about transparency in vertically integrated PBM arrangements where the same corporate family controls the PBM, specialty pharmacy, and claims adjudication platform.
3. The HRSA rebate pilot: effectively dead for now
HRSA’s 340B Rebate Model Pilot Program, which would have shifted hospitals from up-front discounts to post-dispense rebates for certain drugs, was blocked by a Maine federal court days before its planned Jan. 1 launch after the AHA and Maine Hospital Association sued, arguing HRSA violated the Administrative Procedure Act in developing the program. The legal resolution moved quickly:
- The 1st Circuit Court of Appeals upheld the injunction; HHS subsequently agreed to drop its appeal and on Feb. 10 the Maine court vacated the pilot and remanded it to HRSA to reassess the program’s framework.
- Up-front 340B discounts remain in place for affected drugs; covered entities should continue receiving them without shifting to a rebate workflow.
- HRSA issued a request for information on Feb. 13 seeking stakeholder input on whether and how to pursue a rebate-based model; the comment period was extended to April 20.
- The AHA used the comment period to urge HRSA to abandon the rebate model entirely, arguing it would cost hospitals more than $1 billion annually; HRSA has not responded publicly.
For health systems: The immediate cash flow threat is off the table, as hospitals are not being required to front drug costs and wait for rebates. But HRSA will eventually return with a revised framework. The IRA duplicate discount problem that drove the pilot in the first place remains unresolved, and the administration’s posture toward the 340B program overall has not become more favorable to hospitals.
4. The contract pharmacy battle
Drugmakers have been restricting 340B contract pharmacy access since 2020, and states have been pushing back with legislation ever since — triggering a wave of litigation that shows no sign of slowing. At least 13 states enacted 340B contract pharmacy access laws in 2025; Washington, Minnesota and Connecticut have advanced bills in 2026. Here is where the legal landscape stands:
- PhRMA has filed three separate lawsuits challenging Washington state’s new contract pharmacy access law alone.
- The Justice Department filed amicus briefs in February backing drugmakers in state contract pharmacy cases, arguing state laws are preempted by federal statute — a significant shift in federal posture.
- The 4th Circuit Court of Appeals sided with drugmakers in a Maryland case; a federal judge permanently blocked North Dakota’s 340B law; a federal judge blocked Oklahoma’s law one day before it took effect.
- Courts in Tennessee and Hawaii denied preliminary injunctions sought by drugmakers, allowing those state laws to remain in force; Colorado’s law survived an AbbVie challenge.
For health systems: Contract pharmacy access is now state dependent and legally unstable. Systems operating across multiple states face a fragmented landscape where the same arrangement may be protected in one state and unenforceable in another. The Justice Department’s posture shift is the most consequential long-term development; federal backing for drugmaker restrictions weakens the legal foundation that state access laws were built on.
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