This blog is part of IQVIA’s A Brave New World: State of the Industry series.

In January 2026, two of the most consequential federal drug pricing policies in U.S. history will go live. Maximum Fair Price (MFP) will begin for the first 10 drugs selected for Medicare Part D price negotiation, and the 340B Drug Pricing Program will commence a pilot to test the use of rebates to deliver 340B discounts. Together, these programs represent over $200 billion in annual drug spend, and their interaction could reshape U.S. healthcare, impacting hospitals and clinics, patients, wholesalers, pharmacy benefit managers (PBMs), manufacturers, and contract pharmacies.

Maximum Fair Price

Maximum fair price is one of a series of changes being implemented by the Inflation Reduction Act, which include price negotiation, price caps for insulin, and the redesign of Medicare Part D. Price negotiation has targeted high expenditure, branded drugs without generic or biosimilar competition, and is being phased in as annual cycles, beginning with 10 Part D drugs in 2026, 15 additional Part D drugs in 2027, a further 15 Part D or Part B drugs in 2028, and up to 20 additional drugs each year thereafter. According to the Centers for Medicare & Medicaid Services (CMS), the initial 10 MFP drugs represented $56.2B in Part D gross spending (before accounting for rebates) in 2023, or about 20% of total Part D gross spend.

340B Rebate Pilot

The 340B Drug Pricing Program (340B program) is a federal drug discount program in which manufacturers provide heavily discounted drugs to qualifying hospitals and clinics. The program grew 16.7% year-over-year in 2024, reaching $147.8B measured at list price, as shown in Figure 1, and within a couple of years may overtake Medicare Part D as the largest federal drug discount program.

Figure 1. Sales in the 340B program based on list price, 2018 to 2024

Until now, 340B hospitals and clinics have generated 340B spread revenue via arbitrage—buying low and being reimbursed at non-340B-discounted prices. Because of challenges determining which drugs were purchased at 340B discount pricing, drug manufacturers routinely pay both 340B discounts to providers as well as rebates to commercial payers on the same drugs, a scenario termed "duplicate discounts" which generates losses thought to be in the billions of dollars. Because drug research and development investment is based on net revenue, this diminishes drug innovation.

The initial 10 drugs subject to Part D price negotiation present a new threat for duplicate MFP/340B discounts, and on July 31, 2025 the Department of Health and Human Services (HHS) and the Health Resources and Services Administration (HRSA) announced a pilot program for 340B rebates. The 340B rebate model was the only mechanism thought to be able to prevent such duplicate discounts.

Dueling narratives have emerged about 340B rebates, with critics such as hospital groups claiming it will be a severe financial burden on safety-net hospitals, while advocates such as manufacturers have argued it will address duplicate discounts and improve transparency.

Why their interaction matters

MFP and 340B rebates are not just concurrent reforms—they intersect on the same high-spend drugs, creating overlapping incentives and risks. The potential for duplicate discounts, revenue erosion, and shifting utilization patterns means their combined effect could be greater than expected.

Unintended consequences

We believe the implementation of MFP and 340B rebates at the same time on the same products may have unintended consequences, as illustrated in Figure 2.

Figure 2. The impact on healthcare stakeholders from the interaction between MFP and 340B

340B hospitals and clinics

Drugs subject to price negotiation will be reimbursed at MFP plus a dispensing fee. For the initial 10 Part D drugs for which MFP begins in January 2026, the negotiated discounts relative to list price range from 38% to 79%, with an average discount of 56.5%. This will significantly erode 340B spread revenue—the difference between reimbursement and acquisition cost—for 340B hospitals and clinics. Before MFP goes into effect, 340B spread for drugs is approximately wholesale acquisition cost (WAC) minus the 340B discount price, while after MFP begins it will be MFP minus the 340B discount price for Part D patients. For example, for a drug with a WAC of $1,000 and a 340B price of $400, a 56.5% MFP discount would reduce 340B spread revenue from $600 to $35, as illustrated in Figure 3.

Figure 3. Impact of MFP reimbursement on 340B spread revenue

Patients

Declining 340B revenue from MFP drugs may incentivize 340B hospitals and clinics to favor alternative therapies. Revenue erosion is expected for MFP drugs purchased at 340B pricing and dispensed to Part D beneficiaries. In addition, if manufacturers reduce the list price of these drugs, the 340B ceiling price might rise due to reduced inflation rebates, while reimbursement rates would fall. This dual impact would compress 340B spread revenue on commercially insured patients, creating stronger financial incentives for covered entities to shift prescribing away from MFP drugs.

While this remains a hypothesis, such shifts would decrease utilization of the affected MFP drugs, undermining CMS's stated goal of improving patient affordability and access: "Finally, CMS believes the Negotiation Program will help improve drug affordability for people with Medicare, improving access to innovative, life-saving treatments for people who need them."

Wholesalers

Wholesalers measure sales using invoice price, net of returns and customer incentives. Supplier incentives such as manufacturer chargebacks are accounted for as reductions to the cost of goods sold, not as a reduction in reported revenue. If the 340B discount is applied upfront, the invoice price will reflect the 340B discount, while if it's applied as a rebate, the invoice price will be closer to WAC.

A switch to 340B rebates will increase top line revenue and increase cost of goods due to the discontinuation of manufacturer chargebacks. Gross profit, which is revenue minus cost of goods, will be unchanged, but the gross margin percentage, which is gross profit divided by revenue, will decrease due to the increase in the denominator. Wholesalers may face challenges reporting financials, which could incentivize wholesalers to renegotiate fee structures.

In addition, wholesalers are able to generate revenue from cash flow benefits using 340B chargebacks, but this will cease once a drug switches to 340B rebates.

PBMs

When PBMs submit rebate claims to manufacturers involving drugs purchased using the 340B program, two outcomes are possible. If the 340B status of the drugs is apparent to the manufacturer, the rebate claim will be rejected, while if the 340B status of the drugs is opaque to the manufacturer, the rebate may be paid to the PBM. If the PBM does not pass on these rebates to the payer, on the grounds the drugs may be 340B and may not qualify for rebates, the PBM generates revenue. Any such revenue generated by PBMs will be lost once a drug begins using 340B rebates, since its 340B status becomes transparent. This may incentivize PBMs to change drug formularies as a result.

A potential benefit for PBMs arising from the 340B rebate pilot for MFP drugs is it brings clarity around what will and will not be considered 340B.

Manufacturers

Data submission requirements contained in the 340B rebate model pilot will substantially reduce duplicate discounts for the Initial Price Applicability Year (IPAY) 2026 drugs in the 340B rebate pilot. This will be true for multiple types of duplicate discounts involving drugs purchased through the 340B program, including MFP rebates, commercial third-party rebates, and Medicaid rebates.

Contract pharmacies

The interaction of MFP and 340B will impact contract pharmacies in several ways. For example, if the drug was purchased through the 340B program, the MFP rebate might be unpaid, adjusted, or unimpacted depending on the relative values of MFP and the 340B price. As of September 2025, there is no public information about how manufacturers will handle this situation.

Furthermore, given that contract pharmacy fees are often based on the reimbursed amount, which for IPAY 2026 drugs will fall by 56.5%, contract pharmacies may lose substantial 340B revenue.

Finally, the complexity of MFP and 340B will create operational challenges for contract pharmacies. For example, they will have to reconcile payments coming from both the Part D plan and manufacturers through the Medicare transaction facilitator, and they will have to deal with payment adjustments or non-payments of MFP rebate claims.

The combination of risk surrounding payment of MFP rebate claims, lower fees, and increase in operational complexity may incentivize contract pharmacies to abandon participation in the 340B program for MFP drugs.

Conclusion

The simultaneous implementation of MFP and 340B rebates will introduce complex dynamics across the drug supply chain, and stakeholders will need to monitor the situation and adapt quickly. For example, how much overlap will there be for MFP drugs purchased through the 340B program? How much will MFP reimbursement erode 340B spread revenue? And how will hospitals and clinics, PBMs, and contract pharmacies react? Monitoring these effects will require a combination of claims data, the ability to determine the 340B status of claims, subnational sales including 340B sales, physician-facility affiliation data, and the expertise to connect them and track how these factors change over time.