HEALTHCARE HEADLINES
340B Rebate Pilot Program Update
As an update to our August 1, 2025, alert on the proposed 340B rebate pilot program (the Pilot), the Health Resources and Services Administration (HRSA), which oversees the 340B program, has extended the comment period for the Pilot to September 8, 2025. Applications from manufacturers for inclusion in the Pilot are due September 15, 2025. HRSA expects to transmit approvals for the Pilot by October 15, 2025, with approved plans allowed to go into effect on January 1, 2026. While participation in the Pilot by the manufacturers is voluntary and limited to select drugs, HRSA states that the Pilot "will help to inform the development of a process for approving future models."
HRSA has also posted a series of frequently asked questions about the Pilot. Highlights from the FAQs include:
- HRSA makes clear that all other covered outpatient drugs, without an approved rebate model, remain subject to up-front discounted 340B prices. Only the initial group of 10 drugs selected for the Medicare Drug Price Negotiation Program are eligible to participate in the Pilot.
- Prior to any plan's implementation, the Office of Pharmacy Affairs (OPA) "will publish a summary of all approved rebate model plans on its website." Manufacturers are also required to "communicate details of their plans directly to covered entities no later than 60 days prior to implementation."
- A manufacturer may choose to include all covered entities in a rebate model or restrict it to only certain types of covered entities.
- OPA reserves the right to rescind any approved rebate model if a manufacturer "trends toward not paying rebates within 10 days" of data submission by the covered entity.
- Covered entities should continue to order drugs through their 340B wholesale account. Manufacturers "should update price files with their [wholesaler(s)] to appropriately reflect the [wholesaler acquisition cost (WAC)] or other commercial acquisition price in the 340B account, so that once the rebate is paid, the 340B ceiling price is effectuated." HRSA notes that if there is not an approved 340B rebate model in place, "WAC should not be loaded into the 340B wholesale account, but rather the 340B ceiling price should be loaded into the 340B wholesaler accounts."
Iowa PBM Law Challenge Update
On June 11, 2025, Iowa's governor, Kim Reynolds, signed Senate File 383 into law, placing new restrictions on pharmacy benefit managers (PBMs). For more detail, read our summary of the law's key provisions in our June 2025 newsletter. A coalition of Iowa employers and employee benefit plans immediately sued to block the law, and in our July 2025 newsletter, we reported that a district court judge granted a preliminary injunction halting certain portions of the law from going into effect on the basis that portions of it were (1) preempted by the Employee Retirement Income Security Act (ERISA) and (2) violative of the First Amendment as prohibiting commercial speech.
While the preliminary injunction blocked broad portions of the law, including prohibitions on discrimination against pharmacies or pharmacists with respect to participation and reimbursement, any-will provider standards, and requirements on mandatory contract provisions, the district court judge's order allowed some provisions of the law to go into effect that exclusively apply to PBMs, not ERISA plans or their sponsors. On August 7, 2025, the law's challengers filed a notice of cross-appeal in Iowa federal court to appeal the portions of the district court judge's order that denied their motion for preliminary injunction.
The results of this case may impact similar legislation proposed and pending in other states. We will continue to monitor this case as it proceeds.
Whistleblower Provision of FCA Under Judicial Scrutiny
After receiving a $150 million False Claims Act (FCA) verdict in last year's jury trial in the federal district of New Jersey, Janssen is appealing the decision to the United States Court of Appeals for the Third Circuit. In its appeal, Janssen asserts both that the relator who brought the case in the name of the United States government has not proven the necessary elements of its FCA case and the case should be dismissed because the FCA's qui tam provision, allowing whistleblowers to pursue FCA cases on behalf of the federal government, violates Article II of the US Constitution. The qui tam provision of the FCA states that a private person may bring a civil action for violation of the FCA in the name of the US government The government may elect to intervene and proceed to conduct the action, may decline to do so, or may move to dismiss the action.
Janssen argues that Article II vests executive power in the president, including the power to "take Care that the Laws be faithfully executed," and private whistleblowers are neither appropriately "appointed by nor accountable to the President" such that they may control the qui tam litigation "if the government declines to intervene." Multiple industry groups, including the National Association of Manufacturers, United States Chamber of Commerce, American Tort Reform Association, and Washington Legal Foundation, submitted amicus briefs supporting Janssen's position that the FCA's qui tam provisions violate Article II.
The position that relators' pursuits of qui tam suits absent government intervention may be unconstitutional is not new. In fact, Supreme Court justices Thomas, Kavanaugh, and Barrett have noted in recent concurring and dissenting opinions that the qui tam provisions of the FCA may be inconsistent with Article II of the US Constitution. While the Supreme Court has not yet taken up the issue directly, these justices have acknowledged their intention to do so when an appropriate case arises.
The argument comes as the Trump administration recently announced its renewal of the Department of Justice (DOJ) and Health and Human Services (HHS) False Claims Act Working Group. The working group specifically "encourages whistleblowers to identify and report violations of the federal False Claims Act involving priority enforcement areas." The working group is also tasked with considering whether the DOJ should move to dismiss certain FCA qui tam complaints. While Janssen's argument about the invalidity of the FCA's qui tam provision would apply only to those cases that move forward despite the federal government electing not to intervene, there is potential for discord to arise between the executive encouragement of whistleblower action and the judicial warning of its potential unconstitutionality.
Schumer Introduces Bill to Repeal Cuts to Medicaid and ACA Tax Credits
On July 30, 2025, Sen. Charles Schumer (D-NY) introduced the Protecting Health Care and Lowering Costs Act (S.2556). As part of the One Big Beautiful Bill Act (OBBBA), which was signed into law in July, Congress had approved significant cuts to Medicaid. The senator's proposed legislation responds to these cuts and addresses the expiring enhanced tax credits under the Patient Protection and Affordable Care Act (ACA). The proposed legislation repeals the entirety of "Subtitle B—Health" as enacted under the OBBBA. Subtitle B includes cuts to Medicaid, limits of Medicare coverage, and funding to improve rural healthcare access. The proposed legislation would also permanently extend the enhanced tax credits that were initially introduced under ACA. Set to expire at the end of 2025, the tax credits provide additional subsidies for certain individuals purchasing health insurance plans through ACA exchanges.
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