After federal judges blocked HHS’ 340B rebate pilot program from taking effect Jan. 1, HHS is discussing whether to reconsider the drug manufacturers’ plans, according to court documents.
On Jan. 7, an appeals court upheld a lower court decision to halt the 340B Rebate Model Pilot Program, which would have allowed select drugmakers to replace the traditional upfront discounts with post-sale rebates.
A Jan. 12 letter from a Justice Department attorney representing the HHS said the federal agency and the lawsuit’s plaintiffs are “in discussions” about returning HRSA’s underlying approvals to drugmakers for their 340B rebate models to HHS “for reconsideration.”
“The agency intends to resolve such proceedings promptly,” the letter said. “Therefore, the parties do not believe that expediting this appeal is warranted at this time and plan to dismiss the appeal in short order.”
The 340B program, which Congress created in 1992, requires drugmakers to offer upfront discounts on outpatient medications to select healthcare providers. Organizations eligible for these discounts include disproportionate share hospitals — which account for 79% of the program’s spending — as well as children’s hospitals, freestanding cancer centers and rural referral centers. In 2024, 340B covered entities purchased $81.4 billion through the program.
Since late 2024, when a few drug manufacturers announced plans for a rebate payment model, hospital groups rebuked the idea, claiming the rebates would cost providers millions of dollars in added annual costs and extensive administrative burdens.
The American Hospital Association, the Maine Hospital Association and four 340B-covered entities filed a lawsuit against the HHS in December, alleging the rebate program violates the Administrative Procedure Act. So far, judges for a district court and appeals court have sided with the plaintiffs.
