Eli Lilly Cuts 340B Drug Discounts to Noncompliant Hospitals, Sparking Legal Backlash
Key Insights
Eli Lilly has begun eliminating 340B drug discounts to select hospitals that refused to submit comprehensive claims data, following through on a policy announced in January.
Hospital trade groups including the AHA and 340B Health (search) argue the move is illegal, warning it will undermine patient access to care and urging federal regulators to intervene.
Affected hospitals must now purchase eligible Lilly drugs at wholesale prices instead of receiving the mandated 20% to 50% discount under the federal program.
Eli Lilly has begun eliminating mandated price breaks to a few dozen hospitals participating in the federal 340B drug discount program, following through on a controversial ultimatum after the hospitals failed to provide comprehensive claims data. The move, which took effect Thursday, marks a significant escalation in the ongoing tension between pharmaceutical companies and healthcare providers over the scope and administration of the 340B program.
The drugmaker had warned earlier this month it would take such a step as part of a policy announced in January, aimed at reducing what it calls duplicate discounts paid to hospitals. Lilly maintained that more than 2,300 hospitals had complied with its demand, but some larger hospital systems around the U.S. refused to do so. Up to 1,000 had initially not complied, and Lilly indicated it was pressing about 50 larger hospitals to provide data.
Hospitals Decry Move as Illegal
Hospital trade groups swiftly condemned Lilly's action. "We believe Lilly's actions violate the law and are an unprecedented attempt to rewrite the 340B rules without congressional approval," said Maureen Testoni, president and CEO of 340B Health (search), which represents more than 1,600 hospitals participating in the drug discount program.
Rick Pollack, president and CEO of the American Hospital Association (search) (AHA), called on federal regulators to step in: "HRSA and HHS cannot continue to stand by while Eli Lilly and others rewrite the rules for their own benefit and skirt their obligations."
The affected hospitals now face a major financial impact, as they must purchase eligible Lilly drugs at wholesale prices instead of receiving the 20% to 50% discount mandated under the 340B program. Hospital groups argue this directly contradicts the intent of 340B, which was established in the early 1990s to help cash-strapped providers afford pricey prescription drugs.
The Data Dispute
Lilly described its data submission policy as a "crucial step" to root out 340B fraud and abuse, taken "reluctantly" after a small group of well-resourced hospitals refused to voluntarily comply, according to a letter the company sent to the Health Resources and Services Administration (search) (HRSA), the HHS agency that oversees 340B.
The company argues its policy is consistent with decades of guidance from regulators allowing manufacturers to request information to prevent drug diversion and duplicate discounts. However, hospital lobbies contend that the 340B statute does not allow drugmakers to make discounts conditional on hospitals sharing the data that Lilly wants.
Broader Implications for the 340B Program
A significant concern for hospitals is that other drugmakers will enact similar policies if regulators fail to oppose Lilly's approach. Novo Nordisk is already implementing its own data-sharing requirements, raising the prospect of a broader industry shift.
This is not the first time hospitals and drugmakers have clashed over 340B. In 2024, a group of pharmaceutical companies — including Lilly — proposed requiring hospitals to pay full price for 340B drugs and receive savings as rebates later, after verification of eligibility. Those programs did not go into effect after federal judges agreed with HRSA and the hospital industry that Congress did not give drugmakers the authority to unilaterally alter 340B's payment structure.
HRSA declined to comment on the record about Lilly's new policy and whether regulators planned to intercede. Under the Trump administration, however, the agency has shown greater openness to reinterpreting the 340B status quo. HRSA had planned to pilot a rebate program in 340B but scrapped the idea in February after hospitals sued to block it.
The 340B program has grown substantially in recent years. Roughly 3,000 hospitals benefit from discounted drugs under the program, which accounted for a record $66.3 billion in purchases in 2023, according to government data — up more than 50% from $43.9 billion just two years prior. This growth has intensified scrutiny from pharmaceutical companies, lawmakers, and health policy experts who argue the program is spiraling out of control.