Trump’s HHS Backs Rejection of Drug Discount Plan Rebate Model

The Trump administration is defending a Biden-era decision to reject drug manufacturer plans that would allow them to discount medicines through a rebate rather than up front under a federal drug discount program.

The US Department of Health and Human Services said Monday that its decision wasn’t arbitrary and capricious “at this time” when it rejected rebate model proposals from Eli Lilly & Co., Bristol Myers Squibb Co., and Novartis AG, according to the agency’s cross motion for summary judgment filed in the US District Court for the District of Columbia.

At issue before the court is whether the US Health Resources and Services Administration—an agency operating under the HHS—lawfully rejected the three drugmakers’ proposed plans to discount drugs as a rebate rather than up front under the 340B Drug Pricing Program.

Drugmakers under 340B are required to discount drugs for covered entities, such as qualifying hospitals, clinics, and providers that treat a disproportionate number of low-income and uninsured patients. The covered entities currently purchase drugs at a steep discount, but under the drugmakers’ rebate models, providers would buy medicine at commercial prices and then submit data to receive a rebate.

Manufacturers argue the rebate model would bring more transparency to the 340B program, which has long faced scrutiny over its integrity, how discounts are used, or where they’re provided.

HRSA on Monday doubled down on its argument that implementing a rebate model is inconsistent with the 340B statute and requires approval from the HHS secretary. The agency, however, signaled that it could be open to further consideration of the plan.

“The statute does not prohibit rebate models in the abstract, but it does prohibit instituting rebate models unilaterally,” HRSA wrote. “The Agency advised Plaintiffs that that the Secretary had not ‘provided for’ the rebates that Plaintiffs proposed ‘to date.’ The Agency never said never.”

HRSA also urged the court Monday in a separate lawsuit to reject Kalderos Inc.’s challenge against the agency for prohibiting manufacturers from using its rebate model system.

The cases are Eli Lilly & Co. v. Kennedy, D.D.C., No. 24-cv-3220, cross motion for summary judgment 3/17/25; Bristol Myers Squibb Co. v. Kennedy, D.D.C., No. 1:24-cv-03337, cross motion for summary judgment 3/17/25; Novartis Pharmaceuticals Corp. v. Kennedy, D.D.C., No. 1:25-cv-00117, cross motion for summary judgment 3/17/25; Kalderos, Inc. v. United States of America, D.D.C., No. 1:21-cv-02608, cross motion for summary judgment 3/17/25.