The Future of 340B: New Bills Offer Competing Solutions to Modernize the 340B Drug Discount Program

In recent weeks, two competing visions have emerged to legislatively modernize the federal 340B drug discount program (“340B Program”).

On July 6, 2026, Representatives Scott Peters (D-CA) and Dr. John Joyce (R-PA) introduced the bipartisan House bill H.R. 9599, called the SECURE 340B Act (or “the 340B House Bill”), hailed as “the first-ever comprehensive, bipartisan proposal to modernize the 340B Drug Pricing Program since its creation in 1992.” This follows on the heels of the Senate bill “340B Drug Pricing Integrity and Affordability for Patients Act” that was issued as a discussion draft (“340B Senate Discussion Draft”), released by Sen. Bill Cassidy, chairman of the Senate Health, Education, Labor and Pensions Committee, on June 25, 2026. Cassidy’s 340B Senate Discussion Draft was touted as the first statutory update to the 340B Program in fifteen years.

The 340B Program requires manufacturers whose drugs are reimbursed under Medicaid to provide a discount on outpatient drugs to certain 340B covered entity categories of health care providers, including, but not limited to, certain types of hospitals and federal grantee clinics. Over the last several years, the statute has come under renewed scrutiny as stakeholders raise concerns about oversight, transparency, accountability, and statutory ambiguity surrounding the treatment of drugs dispensed through contract pharmacies.

Below, we highlight key provisions (not an exhaustive list) on each bill.

The 340B House Bill

New Definition of Patient

A “patient” eligible to receive 340B drugs would be defined as an individual who received an outpatient service from a prescribing provider at the covered entity within the prior 24 months, received the prescription related to that service, and has a clinical relationship with the covered entity such that the covered entity creates and maintains auditable health care records (with provider responsibility and oversight) with the entity. The 340B House Bill separately defines a “prescribing provider” (a Medicare- or Medicaid-enrolled provider, not excluded from federal health care programs, employed or contracted by the covered entity or its physician organization affiliate, with clinical responsibility for the prescribed care) and a “physician organization affiliate” (an entity organized to employ or contract with licensed clinical professionals under a binding agreement to serve the covered entity’s patients at its locations, with care responsibility remaining with the entity).

Rebate Models

For four years, the 340B House Bill would delay the transition of the 340B Program to a rebate model, during which time manufacturers would be required to continue to give the 340B price as an upfront discount rather than a retrospective rebate or other post-sale payment, while the new “patient” definition and new contract pharmacy, data-sharing, and transparency standards take effect. Also, during this time, the 340B House Bill would require the U.S. Department of Health and Human Services (“HHS”) to contract with an independent, conflict-free, third-party clearinghouse to facilitate the exchange of 340B-related claims-level data between parties in order to improve program integrity. This manufacturer obligation to provide the 340B price as an up-front discount would automatically conclude at the end of the period if HHS has not certified that this clearinghouse has met certain performance benchmarks.

Contract Pharmacies

The 340B House Bill sets standards and HHS oversight for contract pharmacy arrangements—the HHS Secretary reviews the written agreements, with no cap on how many contract pharmacies a covered entity may use or where they are located—and requires HHS to publicly post arrangement details, including each pharmacy's location, dispensing volume, and whether it is mail-order or specialty. The covered entity and the contract pharmacy would be required to utilize the clearinghouse to verify 340B patient eligibility.

Transparency and Accountability

Covered entities would annually report their 340B savings, including patients and prescriptions by insurance type, charity-care levels, patient demographics, and how savings are used. The 340B House Bill would also broaden the HHS Secretary’s authority to audit covered entities, contract pharmacies, child sites, and manufacturers for compliance, and would require audit protocols to be made publicly available.

Patient Affordability

Covered entities would be required to extend their financial assistance policies to patients served at their child sites and contract pharmacies, make those policies transparent at the point of care and publicly available, and provide financial assistance to patients based upon income eligibility levels of up to at least 200 percent or 400 percent of the Federal Poverty Level (depending on the type of covered entity type), along with sliding-fee scales.

Antidiscrimination Provisions

Group health plans, insurers, and pharmacy benefit managers (“PBMs”) would be barred from discriminating against 340B covered entities or contract pharmacies—by, for example, reimbursing them less than similarly situated non-340B pharmacies or imposing different terms, fees, or conditions based on 340B status.

Child Sites

Covered entities that own and operate child sites would have to annually certify to the HHS Secretary that each child site is wholly owned by the entity, clinically and financially integrated with it, and provides care consistent with the entity’s policies—including registering each site, applying the entity’s financial-assistance and patient-assistance policies, and meeting Medicare provider-based rules.

Referral Requirements

The 340B House Bill would restrict the 340B eligibility of “referral” prescriptions only to certain covered entity types. Specifically, drugs prescribed by providers referred by certain Federally Qualified Health Centers (“FQHCs”), critical access hospitals, and sole community hospital covered entities may count as 340B eligible. The 340B House Bill also outlines Health Resources and Services Administration (“HRSA”) auditing requirements for covered entities with certain volumes of referral prescriptions.

Program Funding / User Fees

Beginning in fiscal year 2027, the HHS Secretary would assess an annual user fee on participating covered entities—generally 0.1 percent of what the entity paid for 340B covered outpatient drugs the prior year—to fund program administration and enhanced integrity and oversight activities.

Nonhospital Entities / Subgrantees

As a condition of participation, grant-based (nonhospital) covered entities must be nonprofit or public, may purchase 340B drugs only for patients receiving care within the scope and time period of the qualifying federal grant or program, and must oversee—and remain directly liable for—any subgrantee under an enforceable written agreement.

Studies and Reports

The 340B House Bill directs the HHS Secretary to study the dispensing fees and reimbursements that health plans and PBMs pay pharmacies—broken out by payer (Medicare, Medicaid, commercial) and by 340B versus non-340B—repeating at least every two years and reporting to Congress whether the fees are reasonable, with any recommendations.

The 340B Senate Discussion Draft

New Definition of Patient

Under the 340B Senate Discussion Draft, a “patient” eligible to receive 340B drugs would be required to receive an outpatient health care service at the covered entity within the previous two years, obtain the prescription from one of the covered entity’s practitioners (or via referral), and have an auditable-record relationship with the entity (records kept at least three years); or be enrolled in a state-operated AIDS drug assistance program under title XXVI.

Additional Definitions

The 340B Senate Discussion Draft proposes the following additional definitions:

• “Specified nonhospital covered entities”: any nonhospital covered entity that:
  • Averages over $1 billion in annual operating revenue across three years; or
  • Is a hospital affiliate (controls, is controlled by, or shares a parent with a hospital).

The definition excludes hemophilia treatment centers, unaffiliated FQHCs, or FQHCs that had hospital ties before December 1, 2025.

Specified nonhospital covered entities would not be allowed to use mail order pharmacies to dispense 340B drugs to patients.  

• “Outpatient health care service”: a service paid by a third-party payor as outpatient items or services (or, absent third-party reimbursement, one where under 24 hours elapsed between hospital registration and discharge), or, for nonhospital covered entities, a service within the scope of their grant or designation.
• “Practitioner”: a non-excluded provider who is an employee or contractor of a covered entity that both bills for and is responsible for the care, or that at least retains clinical responsibility where state law limits its ability to bill for contracted services.

Rebate Models

The 340B Senate Discussion Draft would allow manufacturers to elect one of three price reduction models for 340B drugs: a retroactive rebate; a discount after submission of standardized claims data to a claim’s repository operated by the HHS Secretary; or a discount at the time of sale (the current model).

Contract Pharmacies

The 340B Senate Discussion Draft would preserve covered entities’ ability to contract with pharmacies but would limit hospital covered entities to a maximum of five contract pharmacies (mail order pharmacies are not considered contract pharmacies for purposes of this limit). Contract pharmacy locations would be limited by their Public Use Microdata Area (“PUMA”), a geographic unit defined by the U.S. Census Bureau based on census data. A covered entity may only use a contract pharmacy within the PUMA where the covered entity is located, as well as all contiguous PUMAs. Also excluded from the definition of a contract pharmacy is an “entity pharmacy,” which is defined as an individual pharmacy that is (1) the same legal entity as a nonhospital covered entity (excluding specified nonhospital covered entities) located within the covered entity’s service area, or (2) the same legal entity as either a hospital covered entity or a specified nonhospital covered entity, located within the covered entity’s four walls.

Transparency and Accountability

The 340B Senate Discussion Draft would create annual reporting obligations for hospital covered entities and their child sites, including data such as the total number and types of individuals who received 340B drugs, total costs incurred, charity care, and margin generated from covered outpatient drugs. The HHS Secretary would be given the power to expand reporting obligations to other covered entities.

Patient Affordability

The 340B Senate Discussion Draft would establish affordability requirements for covered entities. Hospital covered entities would be required to adopt the following sliding fee scale capping out-of-pocket costs for low-income and uninsured patients by family income: below the Federal Poverty guidelines, $0; below 200 percent, 20 percent of cost-sharing (max $35 per drug); and above 200 percent, 30 percent of cost-sharing (max $50 per drug). Non-hospital covered entities would be required to establish a policy that provides drug discounts to an amount sufficient to ensure the patient is not denied access to the drug based on the patient’s ability to pay. Covered entities would need to require their contract pharmacies to provide discounts on behalf of the covered entity pursuant to these respective requirements.

Contracting Reforms

The 340B Senate Discussion Draft would require third-party administrator (“TPA”) and contract pharmacy compensation to be based on flat fees. A TPA would be permitted to receive payment from the covered entity only if the fee was a set amount per unit of service at fair market value (and consistent with state and federal law). A contract pharmacy would be permitted to receive payment from the covered entity only if the fee was a flat amount for each dispense of a drug and did not exceed 125 percent of its average per-prescription dispensing fee from all third-party payors in the prior full year. TPA and contract pharmacy violators would face new enforcement, including civil monetary penalties equal to ten times the amount received for the services.

Child Sites

The 340B Senate Discussion Draft would add requirements for the child sites (off-campus outpatient facilities) of hospital covered entities. In order for a child site to register in the 340B Program it would have to meet the following criteria:

• be listed on the entity’s Medicare cost report reimbursable line for hospital outpatient department services;
• have cost reports demonstrating that services provided have associated costs and charges for hospital outpatient department services;
• be wholly owned by the entity;
• meet Medicare provider-based standards;
• provide outpatient services beyond drug dispensing or administration;
• follow the entity’s charity-care and sliding-fee policies; and
• be located in a personal health services shortage area (as designated by HHS pursuant to Section 330(b)(3) of the Public Health Service Act). The inclusion of this new restriction to child sites based on shortage area is a notable change and could lead to a sizeable reduction in 340B activity from hospital covered entity child sites.

The 340B Senate Discussion Draft would require registered child sites that fail these requirements to deregister and self-disclose any improper purchases.

Nonhospital Grantees and Subgrantees

Covered entities that qualify for 340B as subgrantees must certify that 340B revenues are used within the scope of their qualifying federal grant and that their patients are primarily low-income or uninsured. An entity cannot be a covered entity, if that entity only receives in-kind contributions (bought with Title XXVI or Section 318 grant funds) from the primary grantee.

Prime Vendor Program

The 340B Senate Discussion Draft would require the HHS Secretary to establish a prime vendor program offering covered entities a choice of at least two conflict-free prime vendors, which may not charge covered entities for educational services under the contract and must give HHS unlimited rights to data created or managed under it.

These bills present contrasting views on the future of 340B Program. While the 340B House Bill seeks clear parameters and transparency, including a measured timeline to transition to a rebate model, to allow the program to work as intended, the 340B Senate Discussion Draft imposes direct patient affordability and severe operational restrictions (e.g., restrictions on TPA and contract pharmacy compensation). If either proposal is enacted, it would force current 340B stakeholders, including covered entities, contract pharmacies, and child sites to reevaluate whether their contracts and established procedures comply with new restrictions, and reforming those systems could impose greater costs or a decrease in 340B savings.

For additional information about the issues discussed above, or if you have any other questions or concerns about the 340B House Bill or 340B Senate Discussion Draft, please contact the authors or the Epstein Becker Green attorney who regularly handles your legal matters.

Epstein Becker Green Staff Attorney Ann W. Parks contributed to the preparation of this post.