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- with readers working within the Healthcare industries
Highlights
- In American Hospital Association v. Kennedy, the U.S. Court of Appeals for the First Circuit denied the government's motion to stay the U.S. District Court for the District of Maine's nationwide preliminary injunction against Health Resources and Services Administration (HRSA)'s 340B Rebate Model Pilot Program. Following the First Circuit's denial, the government asked the court to dismiss the appeal.
- On Feb. 10, 2026, the District of Maine granted the parties' joint motion to vacate the Pilot Program and to remand to HRSA for the agency to reassess and adjust the program.
- HRSA has paused the Pilot Program while the 340B ceiling price upfront remains in place for the affected drugs. Covered entities should continue to receive upfront 340B discounts for the affected drugs, without shifting to a rebate workflow.
Background
The 340B Drug Pricing Program, administered by HRSA under Section 340B of the Public Health Service Act, requires drug manufacturers to sell outpatient drugs to eligible safety-net providers at or below a statutory ceiling price paid upfront at purchase. HRSA's Pilot Program would have replaced the upfront discount with manufacturer rebates paid after dispensing certain drugs, in an effort to address duplicate discount concerns and to coordinate with the Inflation Reduction Act (IRA)'s Maximum Fair Price (MFP) process.
Health systems, hospitals, and contract pharmacies were concerned that the Pilot Program would impose material cash flow, working capital, and operational burdens, making the program's design and rollout consequential for covered entities and patients.net providers at or below a statutory ceiling price paid upfront at purchase. HRSA's discount concerns and coordination with the Inflation Reduction Act.
Procedural History
In December 2025, the American Hospital Association, the Maine Hospital Association, and four safety-net hospitals filed a lawsuit in the U.S. District Court in Maine to block a new HRSA Pilot Program. The program would have allowed drug manufacturers to replace upfront discounts under the 340B drug pricing program with a rebate system, meaning hospitals would pay full price first, then apply for a rebate after providing the manufacturer with details regarding the sale of the product and receiving refunds later.
The hospitals argued that HRSA failed to properly consider the financial burden and administrative impact on hospitals that have relied on the existing, upfront discount system for decades. Ultimately, the Maine federal court sided with the hospitals and issued a preliminary injunction halting nationwide implementation of the Pilot Program. The judge found that HRSA likely violated federal rules for agency decision-making by not adequately explaining its reasoning or considering the costs to hospitals.
On appeal, the First Circuit refused to lift the injunction and noted the same problems the lower court had identified. Shortly after, the government decided not to further pursue the appeal, and the appeal was dismissed. The parties jointly agreed that HRSA should have the opportunity to correct its own mistakes without requiring the court to review an admittedly incomplete or incorrect record. On Feb. 10, 2026, U.S. District Court in Maine officially dismissed the case and remanded the matter back to HRSA in order for the agency to revisit the program's framework.
As a result of the litigation, HRSA has suspended the Pilot Program, and the current 340B system remains in place with ceiling prices and upfront 340B discounts for the affected drugs. Hospitals and other covered entities should continue receiving upfront discounts on affected drugs rather than waiting for rebates after purchase. If HRSA decides to put forth a revised rebate program, it has committed to issuing a new public notice, allowing time for public feedback, and waiting at least 90 days after announcing any approvals before the changes would take effect.
Key Operational Takeaways
- HRSA has paused the Pilot Program while the 340B ceiling price upfront remains in place for the affected drugs. Covered entities should continue to receive upfront 340B discounts for the affected drugs, without shifting to a rebate workflow.
- HRSA will return to the drawing board, and any future 340B rebate model would proceed through a new notice and comment process.
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