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The Department of Health and Human Services is dropping the 340B Rebate Model Pilot but could potentially restart the administrative process for the program, according to a court filing.
A federal court’s preliminary injunction order concluded that the claims of the American Hospital Association and other plaintiffs are justiciable and that they are likely to succeed on the merits of their claims, said Yaakove M. Roth, principal deputy assistant attorney general, in the Feb. 5 filing in the case of the American Hospital Association v. HHS.
“After discussion, the Parties ask that the Court order vacatur and remand of the challenged administrative actions,” Roth said. “Courts ‘commonly grant such motions, preferring to allow agencies to cure their own mistakes rather than wasting the courts’ and the parties’ resources reviewing a record that both sides acknowledge to be incorrect or incomplete.”
The court had found that HHS did not meet the minimum standards of the government’s Administrative Procedure Act before launching a new program or policy, the court said.
Roth indicated the agency could potentially restart the administrative process for such a program.
“The Parties agree that, if Defendants decide to begin a new 340B rebate program, Defendants will issue a new notice, including soliciting new applications. Furthermore, the Parties agree that Defendants will solicit comments either prior to or concurrently with a new notice, or both. Furthermore, Defendants agree to set any effective date for any new 340B rebate program to no earlier than 90 days following the public announcement of any approval of drug manufacturer applications—to avoid the prospect of any extremely expedited future litigation,” according to court documents.
WHY THIS MATTERS
On Dec. 29, 2025, a federal judge in Maine temporarily blocked the Department of Health and Human Services from implementing the 340B rebate pilot.
The same day, HHS Secretary Robert F. Kennedy Jr. appealed the decision to the United States Court of Appeals. The next day, Dec. 30, the court denied the motion to stay the preliminary injunction pending appeal.
The rule was scheduled to go into effect on Jan. 1.
AHA President and CEO Rick Pollack said in a statement: “The AHA appreciates HHS’ decision to go back to the drawing board and rethink its Rebate Program. We remain grateful to the district court and First Circuit for quickly recognizing the many legal flaws in the original Program.”
THE LARGER TREND
The American Hospital Association and other groups have fought implementation of the rule they said would harm safety-net providers.
The model would change 340B hospital reimbursement for drugs from upfront payments to back-end rebates.
Hospitals in the 340B program are those that serve a large portion of patients considered vulnerable who are poor and who may be unable to pay for services. These hospitals rely on upfront price discounts from pharmaceutical companies and then are reimbursed by the Centers for Medicare & Medicaid Services at the higher sales price of the drugs. The monetary difference helps pay for hospital operations.
Some pharma companies had asked for, and were denied, intervenor status in HHS’ appeal.
ON THE RECORD
"The AHA is eager to work with the Administration on policies that make drugs more affordable and ensure access to care for American families,” Pollack said. “A rebate program that undermines safety-net hospitals’ ability to offer more comprehensive care would only harm the nation’s most vulnerable communities."
Email the writer: SMorse@himss.org