Health Law Daily Wrap Up, PHARMACEUTICAL NEWS—AHA asks FTC and DOJ to investigate ‘rebate models’ used by drug companies, (Sep 12, 2025)

By Peter Reap, J.D., LL.M.

The largest drug companies have banded together to restrict access to 340B program discounts, says the hospital group.

The nearly 5,000 hospitals and health systems that make up the American Hospital Association (AHA) have sent a letter to Gail Slater, Assistant Attorney General in charge of the Justice Department’s Antitrust Division, and Andrew Ferguson, Chairman of the FTC, calling for an investigation into some of the world’s largest drug companies’ concerted efforts to impose “rebate models” within the 340B Drug Pricing Program. According to the AHA, the new rebate model would harm patients and hospitals participating in the program by requiring the hospitals to purchase drugs at full price and only then submitting a claim for a rebate, in violation of the antitrust laws.

The 340B Program. Section 340B of the Public Health Service Act of 1992 established a drug discount program for qualifying healthcare provider organizations that operate "safety-net" hospitals and clinics that treat populations that are medically underserved. Under the program, the Department of Health and Human Services enters into contracts with manufacturers to provide a defined discount, specific to each individual drug entailed in the program.

For more than 30 years, the 340B Program has helped safety-net hospitals manage costs and expand care. However, drug companies have begun to aggressively limit access to these discounts. For example, beginning in 2020, drug companies began restricting the distribution of 340B drugs through community or specialty pharmacies, also known as contract pharmacies, the letter from the AHA details.

The Mosaic case. For example, in the currently proceeding case of Mosaic Health, Inc. v. Sanofi-Aventis U.S., LLC, plaintiffs alleged that defendant drug companies violated both federal and state antitrust law by conspiring to limit the 340B drug discount for certain diabetes drugs purchased through contract pharmacies. Just last month, the Second Circuit concluded that the Mosaic plaintiffs adequately pleaded an antitrust conspiracy: “The proposed second amended complaint plausibly alleges that Defendants acted similarly enough in substance by restricting Section 340B Drug Discount pricing and raising prices in the market of certain popular diabetes medication” (Mosaic Health, Inc. v. Sanofi-Aventis U.S., LLC, No. 24-598 (2d Cir. Aug. 6, 2025)).

New “rebate model” threatens 340B drug discounts. While the Mosaic case remains ongoing, a group of competitor drug companies—many of which also participated in the alleged Mosaic scheme—attempted to impose another mechanism, a “rebate model” to restrict access to 340B drug discounts, the AHA asserts:

These drug companies sought to switch from providing “upfront discounts” on 340B drugs to a model in which 340B hospitals must purchase even the costliest drugs at full price and then submit for a rebate. If successful, this concerted effort would essentially obligate America’s safety-net hospitals to advance interest-free loans to the world’s largest and most profitable drug companies. This new “rebate model” would inflict untold harm on hospitals, patients and communities. And for your purposes, the publicly available information suggests potential anticompetitive activity.

The AHA’s letter details how the largest drug companies have sought, within an “astonishing[ly]” short timeframe, to impose this new rebate model one right after another:

Like their earlier imposition of contract pharmacy restrictions, this abrupt pivot by several drug companies occurred in concert — to an astonishing degree. In August 2024, Johnson & Johnson announced that it would be implementing a rebate model for 340B drug discounts. Within a week, Eli Lilly announced the same. And then, like clockwork, over the course of the next few months, Bristol Myers Squibb, Sanofi, and Novartis all made similar announcements.

According to the AHA, the chronology speaks for itself and the activity here is remarkably similar to what the Second Circuit found to plausibly allege an antitrust conspiracy in Mosaic.

Here, the AHA sees a comparable and perhaps even more extensive pattern of parallel conduct by these large drug companies with the rebate models. The requisite antitrust “plus factors” are present, too, including a shared financial benefit motive and ample opportunity to conspire.

This potential antitrust conspiracy could devastate the 340B hospitals that serve the nation and it is therefore time for FTC and DOJ to act, writes the AHA.

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