The Sustain Act: Resolving 340B Controversies?

PDF

08.10.2026

A bipartisan group of senators - Jerry Moran (R-KS), Tammy Baldwin (D-WI), Shelley Moore Capito (R-WV), Tim Kaine (D-VA), John Boozman (R-AR), and John Hickenlooper (D-CO) - are backing the Supporting Underserved and Strengthening Transparency, Accountability, and Integrity Now and for the Future of 340B Act (the “SUSTAIN Act”).  The legislation would amend the Public Health Service Act to enact the most comprehensive reforms to the 340B Drug Pricing Program since its creation in 1992. The SUSTAIN Act has been introduced in the Senate with bipartisan support.

In recent years, the program has been at the center of escalating legal and policy disputes, and the SUSTAIN Act seeks to address many of the existing controversies.

Contract Pharmacy Changes

The SUSTAIN Act’s changes related to contract pharmacies are significant and would resolve the ongoing legal battle between manufacturers and covered entities over contract pharmacy arrangements.  Currently, the authority for covered entities to use contract pharmacies rests entirely on HRSA’s 2010 guidance—not statute. The bill would codify this authority, expressly authorizing covered entities to use wholly owned pharmacies and one or more contract pharmacies to dispense 340B drugs to eligible patients.

The SUSTAIN Act would require covered entities to register and annually recertify all contract pharmacy arrangements with the Secretary of HHS. Agreements with contract pharmacies must be submitted to the government prior to implementation, and entities must attest to compliance with program requirements.

Additional details are left to the Secretary, including the development of standard contract provisions addressing:

• Pharmacy services and dispensing protocols;
• Data submission to support clearinghouse operations;
• Patient choice protections;
• Access restricted to entity patients;
• Eligibility verification systems;
• Medicaid duplicate discount prevention arrangements;
• Annual independent audits;
• Secretary and manufacturer audit access; and
• Three-year record retention requirements.

The bill also imposes some inactivity restrictions, requiring covered entities to cancel contracts with any pharmacy that has not dispensed covered outpatient drugs in the most recent 12-month period, subject to limited exceptions for ownership changes, service-area modifications, emergency or contingency needs, and other Secretary-determined circumstances.

Further, contract pharmacy information must be made publicly available through HHS, including entity and pharmacy names, addresses, effective dates, dispensing volumes, and whether the pharmacy is a mail-order or payer-mandated arrangement. Manufacturers may audit contract pharmacy records upon demonstrating credible allegations of noncompliance to the Secretary, subject to a 30-day notice-and-cure period.

There are also stipulations on manufacturers. Under the bill, manufacturers would be required to:

• Offer covered outpatient drugs at or below the 340B ceiling price regardless of the dispensing channel (i.e., whether dispensed at an in-house pharmacy or a contract pharmacy);
• Deliver drugs to contract pharmacy locations; and
• Refrain from placing conditions on ceiling-price offers, including restrictions on distribution channels or requirements that covered entities submit claims-level data directly to manufacturers as a prerequisite to receiving discounted pricing.

These provisions would effectively prohibit the unilateral restrictions that manufacturers such as Eli Lilly, AstraZeneca, Sanofi, Novo Nordisk, and others have imposed on contract pharmacy transactions since 2020.

Statutory Definition of “Patient”

The SUSTAIN Act establishes, for the first time, a statutory definition of “patient” for purposes of the 340B program. The absence of a statutory definition has been a source of significant controversy, with stakeholders disagreeing about who properly qualifies for 340B-discounted drugs, even with the existence of subregulatory guidance from HRSA.  Under the bill, a “patient” is an individual who:

• Received an outpatient health care service from the covered entity within the preceding two years;
• Has an auditable medical record maintained by the entity; and
• Received a prescription resulting from that service or from an authorized referral.

Individuals whose only connection to the covered entity consists of drug administration, dispensing for self-administration, or drug infusion are excluded from the patient definition. An exception exists for discharge prescriptions from emergency departments or inpatient stays.

The bill permits certain eligible covered entities—primarily grant-based safety-net providers, critical access hospitals, and sole community hospitals—to provide drugs at 340B pricing when a patient is referred to a non-340B prescribing provider. This authority is subject to extensive requirements:

• Documented referral relationships between providers;
• A 12-month prescription window from the date of referral;
• Dispensing only at entity-owned or contract pharmacies;
• Three-year recordkeeping requirements;
• Prohibition on sharing savings with the prescribing provider; and
• Exclusion of infused and clinician-administered drugs.

Notably, disproportionate share hospitals (“DSH hospitals”), children’s hospitals, and rural referral centers are not eligible for referral prescription authority.

Child Sites: Oversight and Integration Requirements

The SUSTAIN Act requires that hospital covered entities document and annually recertify that each child site satisfies all of the following:

• Wholly owned by the parent entity;
• Clinically integrated (shared privileges, unified medical records, coordinated care);
• Financially integrated (shared income/expenses, Medicare cost reporting);
• Administratively integrated (shared billing, HR, payroll, purchasing); and
• Publicly identified as part of the covered entity.

Each child site must also operate under the same financial assistance policy, the same license (where state law permits), and provide care consistent with the parent entity’s policies.

Importantly for hospitals evaluating expansion opportunities, newly acquired child sites face a three-year waiting period before becoming eligible for 340B participation. A hardship exemption allows eligibility within 180 days in certain limited circumstances. Newly constructed sites must meet all integration requirements from the outset. There is a grandfathering provision, covering sites already deemed provider-based by CMS.

Transparency and Reporting Requirements

The SUSTAIN Act imposes extensive annual reporting obligations on covered entities, including information on the following:

• Total patients served and prescriptions by payer type;
• Charity care costs;
• How 340B savings are used (with C-suite attestation);
• Patient financial demographics;
• Medication access policies;
• Third-party administrator contracts;
• Medicare/Medicaid funding shortfalls;
• Outpatient volume; and
• Program operating costs.

Data must be published in a searchable electronic format on the HHS website within 90 days of submission. The Secretary retains authority to audit program savings records. These requirements represent a significant expansion of program transparency, responding to longstanding criticisms that covered entities have not been required to demonstrate how 340B savings benefit patients and communities.

Enhanced Program Integrity

Under the SUSTAIN Act, the Secretary gains authority to audit covered entities (including child sites and contract pharmacies) and manufacturers for violations related to:

• Improper eligibility claims;
• Drug diversion;
• Duplicate discounts;
• Contract pharmacy misuse; and
• Inaccurate ceiling prices.

Audits must follow generally accepted auditing standards, and corrective action plans must be fully implemented before audit closure.

The bill introduces increased audit frequency for repeat violators, corporate officer responsibility for corrective actions, disenrollment for entities failing to implement corrective action plans within 180 days, and consequences for eligibility violations that cannot be corrected retroactively. Covered entities must contract only with vendors that agree to submit data to auditors and respond in a timely manner.

The Secretary must verify that private nonprofit hospitals claiming 340B eligibility through contracts with state or local governments maintain bona fide, current contracts that explicitly require services to low-income individuals not eligible for Medicare or Medicaid.

340B Rebate Model Pilot Program Sunset

The SUSTAIN Act requires the Secretary to conclude the 340B Rebate Model Pilot Program (or any substantially similar program) within one year of enactment and prohibits any expansion of the program. This provision effectively mandates a transition away from the rebate model and toward the new data clearinghouse framework established elsewhere in the bill.

Preventing Duplicate Discounts

The SUSTAIN Act addresses one of the most technically complex aspects of the 340B program: preventing “duplicate discounts” where a manufacturer provides both a 340B ceiling price and a Medicaid rebate on the same drug unit. It supports the creation of a national data clearinghouse that will collect claims-level data from state Medicaid agencies and covered entities to identify and prevent duplicate discounts in real time.

Manufacturers, health plans, and PBMs may use clearinghouse data only for the purpose of preventing duplicate discounts. Any unauthorized use is subject to civil monetary penalties, and all data handling must comply with HIPAA-consistent privacy requirements.

Group health plans, insurers, and PBMs are expressly prohibited from interfering with duplicate discount prevention or recoupment processes. Covered entities must repay manufacturers for identified duplicate discounts, including those arising from state Medicaid errors or managed care arrangements.

Patient Financial Assistance Requirements

The bill establishes mandatory financial assistance standards for covered entities. Key requirements include:

• Written financial assistance policies meeting IRS Section 501(r)(4)(A) standards;
• Applicability to patients at or below 200% of the federal poverty level;
• Sliding fee scales for patients above that threshold;
• Uniform application across child sites and contract pharmacies;
• Submission of policies to the Secretary on request; and
• Plain-language availability to patients.

Importantly, although some of the requirements overlap with existing financial assistance requirements, the bill provides compliance safe harbors shielding covered entities from Anti-Kickback Statute and Stark Law liability for financial assistance provided in accordance with these requirements.

User Fee Program

The SUSTAIN Act introduces a user fee program beginning in fiscal year 2031 for covered entities with total annual collections starting at $50 million (adjusted annually for CPI). Fees are allocated proportionally based on each entity’s share of total 340B prescriptions.

Key Takeaways

For covered entities and others, the SUSTAIN Act would provide certainty in several areas currently marred by controversy. Stakeholders should carefully evaluate the bill’s provisions, consider their current operations and begin planning for potential compliance requirements.