The U.S. District Court for the District of Maine has issued a temporary restraining order blocking the Health Resources and Services Administration’s (HRSA) 340B Rebate Model Pilot Program from taking effect on January 1, 2026. The case, American Hospital Association, et al., v. Robert F. Kennedy, et al., challenges HRSA’s approval of manufacturer rebate models intended to replace the traditional up-front 340B ceiling price discount for certain drugs.

Although the administration immediately appealed, both the District Court and the U.S. Court of Appeals for the First Circuit declined to stay the order while appeals proceed. The First Circuit has indicated it will rule quickly on whether the order will remain in effect. The administration may also seek emergency relief from the U.S. Supreme Court, though no petition has yet been filed.

HRSA Response

In light of the ruling, HRSA has formally paused the implementation of the 340B Rebate Model Pilot Program. HRSA has provided that “manufacturers who were approved for participation in the pilot to effectuate 340B pricing through a rebate mechanism will now be required to continue to offer all of their covered outpatient drugs to 340B covered entities at the 340B ceiling price as an up-front discount.”

Background

HRSA’s Office of Pharmacy Affairs (OPA) issued requests for proposals on August 1, 2025, for a new rebate-based pilot model covering ten drugs subject to Medicare Fair Pricing (MFP). Despite an accelerated timetable for submission and approval process and more than 1,100 public comments, HRSA approved nine manufacturers’ models by October 30, 2025, and approved Novartis shortly thereafter. Multiple hospital associations and health systems filed suit on December 1, 2025, seeking to block the program.

Court’s Ruling

Chief Judge Lance E. Walker concluded that HRSA likely violated the Administrative Procedure Act (APA) by announcing and approving the manufacturers’ pilot models without sufficient analysis of the program’s operational impact. The District Court contrasted that while HRSA acknowledged that “rebate models could fundamentally shift how the 340B Program has operated for over 30 years,” the agency’s administrative record was silent on the costs 340B covered entities would absorb while awaiting a manufacturer’s rebate. Because 340B covered entities “rely on upfront price concessions to stretch few resources as far as possible to serve rural and poor communities,” the Court concluded that HRSA’s “rather threadbare administrative record” did not permit HRSA to “fly the plane before they build it.”

The Court’s injunction blocking implementation of the rebate pilot models is effective immediately and applies to all 340B covered entity types, including Federally Qualified Health Centers (FQHCs), Ryan White clinics and other federal grantees participating in the 340B drug discount statute, as well as 340B-eligible hospitals and health systems. As noted above, the administration has appealed Judge Walker’s ruling.

What This Means for 340B Participants

• No change to current purchasing practices: Covered entities should continue receiving the 340B ceiling price up front.
• Pilot-related operational changes should remain on hold until further court action.
• Manufacturers remain obligated to honor existing 340B pricing requirements.
• Future developments are likely on an expedited timeline given ongoing appeals.

Next Steps

We recommend that covered entities and manufacturers:

• Monitor appellate activity closely.
• Document any communications regarding pilot implementation or pricing changes.
• Pause any system or contracting changes tied to rebate processing until the litigation is resolved.

We will continue to track developments related to the 340B Rebate Model Pilot Program and provide updates as the case progresses.

If you have questions about how this ruling may affect your organization, please contact Steve Kuperberg.