Proposed Federal Legislation Would Eliminate Arbitration for Many Surprise-Billing Disputes

Drugmakers and hospitals continue to clash over the 340B program following the federal government's proposal of a new pilot model, which is scheduled to move forward in 2027 after undergoing revisions earlier this year. As outlined, the program would replace upfront drug discounts for hospitals with a post-sale rebate. Hospitals have fought vehemently against the model for more than a year, citing heavier administrative burdens and costs, and most recently filed another lawsuit requesting the program be blocked. Where the Program Stands After a long battle in the courts, the Health Resources and Services Administration revised its rebate program in mid-2026. The reworked model would require drug manufacturers to validate claims before paying out rebates, which would give HRSA more transparency into individual transactions. However, hospitals asserted that the agency's project cost analyses did not fully account for increased compliance costs and disruptions to cash flow. Opponents of the rebate model also stated that, ultimately, the program would undermine patient care if implemented. Despite negative feedback from stakeholders, the agency moved forward with plans for implementation. Drugmakers were given a deadline to submit their rebate plans, with approved plans being scheduled to take effect on January 1, 2027. Approved Participants & Covered Drugs After reviewing proposals submitted by drug manufacturers, HRSA authorized 10 to be part of the updated pilot program, including AbbVie, Pfizer, Merck, AstraZeneca, and Teva. A total of 21 pharmaceutical drugs are impacted, including Eliquis, Jardiance, Enbrel, Xtandi, Farxiga, Januvia, and Ibrance. How the Model Works According to Becker's Hospital Review , "covered entities will keep buying through their 340B wholesaler accounts at wholesale acquisition cost, then submit limited claims data within 45 days of dispense through a manufacturer-funded platform." The manufacturers then have ten days after receiving a complete rebate request to either pay or deny it. Denials related to eligibility, diversion, or concerns about duplicate discounts are not allowed. These concerns must be routed through a different audit channel. Hospitals, Others Respond The American Hospital Association and a coalition of safety-net hospitals filed another lawsuit in early October 2026 to block the revised pilot. The opponents estimate that the pilot will incur more than $1 billion in administrative costs for hospitals. The lawsuit was filed in the U.S. District Court for the District of Maine, which, notably, is the same court that ruled in favor of critics and blocked the first iteration of the rebate pilot program. Appellate courts previously settled the question of whether drugmakers can switch to a rebate program autonomously, ruling that they cannot do so without approval from the U.S. Department of Health and Human Services. Now, with 10 drugmakers approved for the rebate program by HHS, the question is whether the court will intervene once again. While the legal battle plays out, upfront 340B discounts remain intact. Source: Becker's Hospital Review, American Hospital Association