Federal Court Halts HHS 340B Rebate Model Pilot Program: Key Takeaways for Stakeholders

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A significant development unfolded on December 29, 2025, as the U.S. District Court for the District of Maine issued a preliminary injunction blocking the U.S. Department of Health and Human Services (HHS) from implementing its new 340B Rebate Model Pilot Program, which was set to take effect January 1, 2026. The case, American Hospital Association v. Robert F. Kennedy, Jr., No. 2:25-cv-00600, represents a potentially noteworthy development for hospital groups and safety-net providers.  

I. Background: The 340B Program and the Rebate Model Pilot Program

Established in 1992, the 340B Drug Pricing Program requires drug manufacturers to provide discounts (traditionally provided at the time of purchase) on outpatient drugs to eligible safety-net hospitals and clinics. These discounts are argued to be vital for eligible providers serving rural and low-income communities, enabling them to stretch scarce resources and expand patient care.

On July 31, 2025, the Health Resources and Services Administration (HRSA), a division of HHS, announced a pilot program allowing participating drug manufacturers to shift from upfront discounts to a rebate model for certain drugs. Under the pilot program, after paying full market price, providers would then have to seek rebates from manufacturers—a process expected to take weeks. This departure from the longstanding practice of immediate price reductions would require providers to cover the difference between the actual price and the discounted price while waiting for the rebate. Among other complaints, this change alone is expected to create significant burdens on participating providers.

II. The Legal Challenge

Hospital groups, led by the American Hospital Association (AHA) and the Maine Hospital Association (MHA), filed suit on December 1, 2025, alleging that HHS’s implementation of the rebate model pilot program violated the Administrative Procedure Act (APA).[1] Plaintiffs argued that the agency failed to adequately consider the financial and operational burdens the change would impose on 340B hospitals and disregarded public comments highlighting these concerns.

III. The Court’s Ruling

The Court granted a preliminary injunction, finding that the plaintiffs demonstrated a likelihood of success on the merits and irreparable harm if the pilot program were allowed to proceed.[2] The court’s analysis focused on several key points:

• Inadequate Administrative Record: The court found that HHS’s administrative record was “threadbare,” lacking sufficient evidence that the agency had reasonably considered the impact of the rebate model on 340B hospitals. The court was particularly critical of the agency’s failure to address the reliance interests of hospitals that have operated under the upfront discount model for over 30 years.
• Failure to Consider Costs: The court noted that HHS had not fully evaluated the administrative and financial costs to providers, including the burden of paying full price upfront and the risk of delayed or denied rebates. The agency’s ongoing review of these costs was deemed insufficient under the APA.
• Irreparable Harm: The court accepted evidence that hospitals would face substantial compliance costs, potential service cutbacks, and other disruptions that could not be remedied by monetary damages if the program went into effect.
• Public Interest and Equities: The injunction preserves the status quo, allowing hospitals to continue serving existing patient populations without the uncertainty and potential financial strain of the new rebate system.

IV. Practical Implications

• For Hospitals: The ruling provides immediate relief, but the future of the rebate model remains uncertain. Hospitals should continue to monitor developments and prepare for potential regulatory changes.
• For Federal Agencies: The decision underscores the importance of robust administrative records and stakeholder engagement in agency rulemaking. This case highlights the APA’s procedural safeguards and the judiciary’s willingness to enforce them, especially where agency action departs from longstanding policy and affects critical public health programs.
• For Manufacturers: The injunction pauses implementation of the pilot program for the approved drugs, affecting pricing, chargeback workflows, and data systems. Expect HRSA either to shore up the record or reconsider design and timing; impacted parties should maintain readiness for revised timelines and data requirements.

V. National Context and Next Steps

This ruling has national implications, particularly for rural health systems and safety-net providers that depend on 340B savings to sustain services and access. As litigation continues, stakeholders should remain vigilant in watching for further developments that could reshape drug pricing and access under the 340B program. 

For questions, please contact the Health Care attorneys at Maynard Nexsen.

Sources:

• ORDER on Motion for Preliminary Injunction, AMERICAN HOSPITAL ASSOCIATION v. KENNEDY, 2:25-cv-00600, (D. Me. Dec 29, 2025), ECF No. 90.
• COMPLAINT, AMERICAN HOSPITAL ASSOCIATION v. KENNEDY, 2:25-cv-00600, (D. Me. Dec 29, 2025), ECF No. 1.
• HRSA Announces Application Process for the 340B Rebate Model Pilot Program and Request for Public Comment, HRSA News Room (July 31, 2025).
• 90 FR 36163 (Aug. 1, 2025) (340B Program Notice: Application Process for the 340B Rebate Model Pilot Program).
• 90 FR 38165 (Aug. 7, 2025) (340B Program Notice: Application Process for the 340B Rebate Model Pilot Program; Correction).
• 340B Rebate Model Pilot Program, HRSA.

_{[1] See Complaint, available here.}

_{[2] See Order for Motion on Preliminary Injunction, available here.}