This is the first article in a three-part series estimating the magnitude of 340B/Medicare Maximum Fair Price (MFP) duplicate discounts. It provides background on the issue and explains why these duplicate discounts are central to the debate over the revised 340B rebate model pilot (the Pilot) that will be effective as of January 1, 2027. In this series, a "duplicate discount" refers to a situation in which the MFP price and a 340B price are provided on the same units of a drug. This study finds that MFP/340B duplicates substantially outweigh the implementation costs of the Pilot, even after fully considering the impact of lower list prices on some MFP drugs and the removal of some others from that program beginning in 2027.

Introduction

The importance of duplicate discounts

For years, government and other analysts have expressed serious concerns about the integrity of the 340B Drug Discount Program (the 340B Program), including two unlawful practices: (1) duplicate discounts involving 340B pricing and Medicaid fee-for-service (FFS) or Medicaid managed care rebates and (2) 340B drug diversion. Government reports expressing these concerns include analyses prepared by the HHS Office of Inspector General (OIG),¹ the Government Accountability Office,² and the U.S. House Committee on Energy and Commerce.³

Because most 340B prices have been paid through upfront discounts, there has been no means of ensuring that a 340B price is eligible at the time it is paid. Under the 340B statute, manufacturers whose drugs are covered by Medicaid and Medicare Part B must offer low prices on their outpatient drugs to certain hospital and other purchasers. Those low 340B prices are not required when a duplicate Medicaid rebate is claimed by a state for the drug. 340B pricing also does not apply when drugs have been diverted, which involves any circumstance where a 340B drug is transferred to any person or entity that is not the patient of the entity eligible to participate in the 340B Program.

Since 2017, pharmaceutical manufacturers and others have sought to expand the use of rebates in determining and paying 340B prices in order to better control these documented concerns regarding duplicate discounts and diversion. Importantly, the rebate model also involves the submission of a limited set of data that permits a manufacturer to assess whether a 340B price is owed on that drug before a rebate payment is made.

The Pilot and duplicate discounts

The efforts to implement a rebate model grew more intense with the introduction of Medicare Maximum Fair Prices (MFP) under the Inflation Reduction Act (the IRA). Under the IRA, the government requires manufacturers to sell their drugs at low prices for use by Medicare patients. If manufacturers fail to accept the price required by the government, the manufacturer is subject to an excise tax that affects all of its U.S. sales. However, a manufacturer that accepts the MFP cannot be required to provide a 340B price on that drug unless that 340B price is lower than the MFP price. As a practical matter, the IRA does not create a mechanism that permits a manufacturer to identify duplicate MFP/340B discounts. Accordingly, the IRA creates a substantial risk of increased duplicate discounts.

Responding to these concerns, the Health Resources and Services Administration (HRSA), the agency with oversight for the 340B Program, issued a Notice stating that it would require covered entities to participate in a 340B rebate model as a pilot.⁴ Consistent with a rebate model, the Pilot requires covered entities to submit limited data on the MFP drugs that they dispense, which the manufacturer can use to assess whether it is obligated to pay the 340B price. Effective January 1, 2027, the Pilot is designed to help prevent MFP/340B duplicate discounts.

Although the Pilot described in the Notice focuses on the first drugs subject to MFPs in 2026 and 2027, the rebate model may ultimately be expanded to cover additional MFP drugs and to address other 340B duplicate discounts, such as Medicaid FFS and Medicaid managed care utilization. Indeed, the Notice permits manufacturers to use data from the Pilot to identify Medicaid duplicate discounts and to pursue other mechanisms, such as Administrative Dispute Resolution proceedings or manufacturer audits, to address those duplicate discounts.⁴

The magnitude of duplicate discounts

Stakeholders responded with radically different assessments of the Notice driven by their different views of the size of the MFP/340B duplicate discount problem. The American Hospital Association (AHA), which successfully sued HRSA to stop the first iteration of the rebate model at the end of 2025,⁵ has called the 340B rebate model "a 'solution' in search of a problem".⁶ Recently, the AHA and others filed suit to halt the most recent version of the Pilot.⁷ In that lawsuit, plaintiffs assert that the Pilot was unlawfully established in part because MFP/340B duplicate discounts are insubstantial.

Because 340B covered entities already collect even more extensive data than is required under the Pilot, they already transmit that data to multiple parties, and technology will limit Pilot-related costs, HRSA determined that the incremental costs to covered entities of the Pilot would be marginal.^4(p48,894) Specifically, HRSA found that the incremental administrative and operational costs for more than 15,000 covered entities were $523 million or just $34,320 per entity.^4(p48,893) In addition, HRSA spoke approvingly of a prior analysis of rebate interest costs by our group, which found that, even under 'unfavorable assumptions', interest costs would be less than 1.2% of list prices.^4(p48,901)

Those costs must be weighed against the MFP/340B duplicate discounts that the Pilot is designed to address. Although others have previously estimated the size of MFP/340B duplicate discounts, those estimates preceded the development of the Pilot, did not reflect recent utilization or pricing changes affecting MFP drugs, and did not consider duplicate discounts that are likely to be generated after 2027. Specifically, prior estimates of MFP/340B duplicate discounts predated changes in the list prices for multiple MFP drugs. For instance, Berkeley Research Group (BRG) projected MFP/340B duplicate discounts of $4 billion in 2026.⁸ With additional MFP drugs anticipated in 2027, BRG subsequently projected that MFP/340B duplicate discounts would rise to $5.2 billion.⁹ HRSA also reviewed this research and studies quantifying Medicaid FFS and managed care duplicate discounts in its Notice.4(p48,889) HRSA explicitly concluded that the benefits of the Pilot outweighed its costs.^4(p48,894)

Because prior estimates of MFP/340B duplicate discounts did not reflect subsequent changes in utilization and list prices, we decided to undertake an analysis reflecting those inputs. Our purpose was to determine the potential size of MFP/340B duplicate discounts incorporating more recent data, including changes in the list prices of a number of MFP drugs. As MFP implementation approached, a number of manufacturers reduced their list prices for their MFP drugs. Specifically, list prices were reduced for 5 of the 10 drugs subject to MFP in 2026: Eliquis, Fiasp, Farxiga, Imbruvica, and Jardiance.

These changes in list price have the potential to affect MFP/340B rebates. This is because (1) list prices that move closer to MFP reduce the size of potential duplicate discounts, and (2) list price decreases, after a six-month lag, tend to increase 340B prices, which also reduces the size of potential duplicate discounts. In addition, these reductions in list price also reduce the initial prices that 340B entities pay under a rebate model, reducing their interest costs. Accordingly, an important component of our model is the interaction of list prices, MFP discounts, and 340B prices.

In Part 2 of this analysis, we will first determine MFP/340B duplicate discounts for all Part D drugs, a useful means of understanding the broad potential impact of MFP/340B duplicates in the absence of the adoption of a rebate model as more and more drugs become subject to MFP. After completing that analysis, we will focus on the Pilot itself and the first 25 drugs subject to MFP. This study concludes that billions in MFP/340B duplicate discounts will arise under MFP in 2027 alone and that those duplicate discounts will increase substantially in the years that follow.

References

1. Office of Inspector General, US Department of Health and Human Services. Contract pharmacy arrangements in the 340B Program. OEI-05-13-00431. February 4, 2014.

2. US. Government Accountability Office. Medicare Part B Drugs: Action Needed to Reduce Financial Incentives to Prescribe 340B Drugs at Participating Hospitals. GAO-15-442. July 2015.

3. U.S. House Committee on Energy and Commerce. Review of the 340B Drug Pricing Program. 2018.

4. Health Resources and Services Administration. Notice Regarding 340B Rebate Model Pilot Program. Federal Register, 91 Fed. Reg. 48,883. August 3, 2026.

5. American Hospital Association v. Kennedy. Memorandum Opinion / Order. No. 2:25-cv-00600 (LEW) (D. Me. 2025).

6. American Hospital Association. Response to the HRSA Request for Information: 340B Rebate Model Pilot Program. AHA Comment Letter. 2026.

7. American Hospital Association v. Kennedy. No. 1:26-cv-00515, Complaint (U.S.D.C. Me. Oct. 9, 2026).

8. Berkeley Research Group. Implications for duplication with the 340B channel. BRG Healthcare Publication. 2024.

9. Berkeley Research Group. Update on effectuation of the Maximum Fair Price in 2026 and outlook for 2027. BRG Healthcare Publication. 2025.

Acknowledgements

We thank Kenneth Finegold, Kimberly Westrich, Yevgeniy Feyman, Jeanna Haw, and Luke Greenwalt for suggestions on an earlier draft.

Funding

This study was supported by the National Pharmaceutical Council, which reviewed the manuscript and provided feedback, but had no role in data collection, analysis, or the decision to publish. Full editorial control was retained by IQVIA.