Hospitals aren't ringing in a new 340B rebate program

A federal court in Maine has ordered a temporary pause on a new rebate model within the 340B Drug Pricing Program that has left hospitals worried about billing and claims under the new rules.

The U.S. District Court for the District of Maine issued a preliminary injunction on the rebate model set to take effect on Jan. 1. The Health Resources and Services Administration (HRSA) stated on its website that HHS will comply, halting implementation for all covered entities pending further legal rulings.

Hospital groups filed for an injunction of the new 340B pilot model in early December, claiming that the HRSA did not follow proper protocols under the Administrative Procedure Act.

"On behalf of our members -- including safety-net hospitals serving rural and underserved communities -- we are pleased with today's decision. The court's decision halts a rule that would have caused a devastating sea change in a 30-year-old program relied upon by hospitals that serve America's most vulnerable patients and communities," Rick Pollack, president and CEO of the American Hospital Association (AHA), said in a statement. AHA was the leading hospital plaintiff in the case against the rebate model.

There has been an ongoing battle for the rebate model announced by HRSA in 2025. The pilot aims to evaluate the effectiveness of retrospective discounts for outpatient drugs covered under the 340B Program compared to upfront discounts. Under the pilot, hospitals and other 340B covered entities would be required to purchase certain drugs at the full wholesale acquisition cost, then submit a rebate request to the drug manufacturers.

Hospital groups have opposed the rebate model, which would be mandatory for all providers participating in the 340B program. They have argued that it would create severe financial strain from paying full upfront costs for outpatient drugs while putting significant administrative burden on facilities to alter their billing and claims management processes to comply.

However, an analysis from IQVIA released in early December 2025 found that cash flow for 340B hospitals and clinics would remain largely unchanged under the rebate model. It found that providers would pay less than 0.2% of a drug's list price in annual financing costs, meaning that provider financing costs would not increase on average due to the pilot.

AHA claimed in the lawsuit that the pilot would cost its members approximately $400 million to comply with changes under the rebate model, resulting in potential loss of services.

Judge Lance Walker, who issued the preliminary injunction against the rebate model, appears to lean in favor of hospital groups, much to the chagrin of pharmaceutical companies. Pharmaceutical groups have supported the rebate model, saying it will boost 340B program integrity and reduce incidences of duplicate discounts.

Walker indicated that hospital groups are likely to win their case, banishing the rebate model based on the administrative argument against HHS. In his ruling, Walker called the pilot model's administrative record "anemic," which supports "a conclusion that Plaintiffs have made a strong showing of likelihood of success, at least as matters stand today."

"Additionally, Plaintiffs' showing of economic impact and disruption to services is substantial and, paired with such a strong showing on the merits, sufficient to demonstrate irreparable injury," Walker continued.

HHS has launched an emergency appeal of the decision to the U.S. First Circuit Court of Appeals. However, the court denied the request as it continues to review the case, according to America's Essential Hospitals. Hospital groups, though, plan to go further to rid the 340B program of the rebate model entirely.

"For more than three decades, the 340B program has functioned through upfront discounts that give hospitals predictability and allows them to reinvest savings directly into patient care," Maureen Testoni, president and CEO of 340B Health, said in statement emailed to RevCycle Management. "Replacing that system with an untested rebate program, without a full accounting of the burden on covered entities, creates unacceptable risk for the safety net and communities 340B hospitals serve."

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.