On December 1, 2025, the American Hospital Association (AHA), the Maine Hospital Association (MHA), and four nonprofit hospital systems (Plaintiffs) filed a federal lawsuit in Maine (Complaint) challenging the Health Resources and Services Administration’s (HRSA’s) new 340B Rebate Model Pilot Program (Pilot Program).1 Plaintiffs simultaneously moved for a temporary restraining order (TRO) to halt implementation of the Pilot Program before its January 1, 2026 effective date. A hearing on the TRO motion is set for December 19, 2025.
The Pilot Program
Under the 340B program, manufacturers are required to sell certain outpatient prescription drugs (340B drugs) to certain safety net hospitals and other providers (covered entities) at a substantial discount. On August 1, 2025, HRSA announced it would be implementing the Pilot Program, pursuant to which certain manufacturers would no longer provide upfront discounts on certain 340B drugs to covered entities (Notice). Instead, “a covered entity would pay for the drug at a higher price upfront and then later receive a post-purchase rebate that reflects the difference between the higher initial price and the [discounted] 340B price.” According to the Notice, the Office of Pharmacy Affairs (OPA), which administers the 340B program,
is introducing this pilot program to test the rebate model on a select group of drugs . . . in a methodical and thoughtful approach to ensure a fair and transparent 340B rebate model process for all stakeholders involved. OPA is also implementing this pilot to better understand the merits and shortcomings of the rebate model from stakeholders’ perspectives, and to inform OPA consideration of any future 340B rebate models consistent with the 340B statute and the Administration’s goals.
The Notice further suggests that the Pilot Program might help reduce the likelihood of manufacturers paying multiple discounts on the same unit of a particular drug; for example, providing, with respect to the same unit (i) both a 340B discount and a Maximum Fair Price (MFP) discount under the Inflation Reduction Act (IRA), or (ii) both a 340B discount and a rebate under the Medicaid Drug Rebate Program (MDRP).
Manufacturers were invited to apply for participation in the Pilot Program by September 15, 2025. HRSA indicated it would select Pilot Program participants by October 15, 2025, and then implement the Pilot Program on January 1, 2026. HRSA invited public comment on any aspect of the Pilot Program on or before September 2, 2025, but the agency also stated that it was “under no obligation to respond or act on the comments.”
In response to its invitation, HRSA received more than 1,100 comments. Many commenters argued that the upfront costs hospitals (particularly safety-net hospitals) would incur under the Pilot Program would limit their ability to expand coverage to underserved populations and invest in community-benefit projects, such as infrastructure and expansion of service lines. According to commenters, these costs would include (i) administrative costs to submit, track, recover, and potentially dispute the rebates; (ii) upfront-payment costs of the Wholesale Acquisition Cost (WAC) of drugs under the Pilot Program; (iii) hiring or reassigning full-time employees; and (iv) non-monetary costs to patients and communities that will result from reduced access to healthcare. Others supported the Pilot Program, emphasizing that rebates work in other federal programs, such as Medicaid, and that applying this model to the 340B program could improve program integrity and streamline efforts to prevent duplicate discounts.
On October 30, 2025, HRSA (i) announced the approval of nine manufacturer rebate plans covering ten eligible drugs, (ii) published a number of Pilot Program FAQs, and (iii) stated that the Pilot Program will be administered by Beacon, a technology platform operated by Second Sight. Eight of the plans are scheduled to take effect on January 1, 2026, with the ninth scheduled to take effect on April 1, 2026.
The Lawsuit
The Complaint advances six themes, all tied to alleged violations of the Administrative Procedure Act (APA):
- First, Plaintiffs contend that HRSA has required upfront, point‑of‑sale 340B discounts for more than 30 years and repeatedly rejected rebate proposals from drug companies on the ground that rebates would impose higher upfront costs on covered entities and disrupt access. According to Plaintiffs, HRSA failed to explain its change of position or account for the reliance of covered entities on upfront discounting.
- Second, although HRSA received more than 1,100 comments in 31 days, the agency took the position that it was “under no obligation to respond” to those comments. Plaintiffs argue that the law requires “reasoned responses” to significant comments.
- Third, Plaintiffs allege that HRSA’s Notice and FAQs do not assess the administrative costs, upfront payment issues, or patient access impacts of the Pilot Program. According to Plaintiffs, the Pilot Program will require covered entities to spend over 1.5 million hours, at a cost of over $200 million, on data collection activities in 2026.
- Fourth, Plaintiffs allege that HRSA has not explained in the Notice or FAQs why the Pilot Program needs to be implemented on all covered entities nationwide in order to address the purported risks associated with the current model.
- Fifth, Plaintiffs raise several concerns related to operational readiness and compliance. For example, the Plaintiffs allege that Beacon’s terms (i) provide limited recourse to covered entities if the platform fails and (ii) permit the sale of patient data.
- Finally, while Plaintiffs agree with HRSA that the potential for duplicate discounts/rebates needs to be addressed, they argue their proposed alternative—to create an HHS data clearinghouse to standardize data submission requirements, eliminating the need for manufacturers to impose their own varying models—should have been adopted by the agency.
Takeaways
For many years now, the 340B program has been a poster child for legislative and regulatory dysfunction. As a result, drug manufacturers and covered entities—periodically policed by the judiciary—have been engaged in a variety of what effectively amounts to self-help, with covered entities (largely) trying to preserve their gains and manufacturers (largely) trying to recapture lost territory. This latest skirmish generally falls into the latter category. How the U.S. District Court for the District of Maine will weigh-in remains to be seen, but whether the Pilot Program proceeds effective January 1, 2026 or not, the following is clear: we have not heard the last word from Congress, HRSA, manufacturers, or covered entities on either the longer term scope or structure of the 340B program, or the possible transition from an upfront discount to a back-end rebate model specifically.
- The four systems are (i) St. Mary’s Regional Medical Center in Maine, (ii) Nathan Littauer Hospital & Nursing Home in New York, (iii) Unity Medical Center in North Dakota, and (iv) Dallas County Medical Center in Arkansas. ↩︎
