The American Hospital Association, Maine Hospital Association and four safety-net hospitals filed a lawsuit Oct. 9 seeking to block a revised federal 340B drug rebate program that they say could impose more than $1 billion in annual administrative costs on hospitals.
The lawsuit, filed in the U.S. District Court for the District of Maine, challenges HHS’ plan to replace upfront 340B drug discounts with post-sale rebates for certain medications beginning Jan. 1, 2027. The hospital groups argue the change would increase drug purchasing costs, strain cash flow and divert resources away from patient care.
Hospital analyses estimate the revised model could generate more than $1 billion in annual administrative costs, compared with HHS’ estimate of $537 million, according to the AHA. The association argues the federal estimate does not fully account for startup expenses, rebate reconciliation, cash-flow burdens and other operational costs.
The Health Resources and Services Administration, which oversees the 340B program, approved 10 drugmakers and 21 drugs for the revised pilot Oct. 1. Under the model, participating hospitals and other covered entities would purchase drugs at wholesale acquisition cost and submit claims data within 45 days of dispensing. Manufacturers would then have 10 days to approve or deny completed rebate requests.
The lawsuit follows a previous legal challenge that blocked HHS’ initial rebate pilot in December. Federal courts raised concerns about the agency’s failure to adequately assess the financial impact on participating hospitals, prompting HHS to withdraw the original program in February.
The AHA said the revised program is roughly “twice as large” as the original proposal and that HHS moved forward despite receiving more than 2,400 public comments, including concerns about the financial and operational burdens on hospitals.
“When the government makes a change of this magnitude, it must fully consider what it will mean for the patients and communities that rely on 340B hospitals every day,” AHA President and CEO Steve Walsh said in an Oct. 9 news release.
“The AHA and its member hospitals provided detailed evidence showing that the Rebate Program would impose massive new costs and divert resources that support care for millions of patients, Mr. Walsh said. “We also proposed viable alternatives that would address concerns about transparency and program integrity without imposing the same financial price tag. For the sake of our shared goal of protecting patients and expanding access to care, those costs, consequences and alternatives cannot be treated as afterthoughts. It’s unfortunate that we are back in court challenging the same flawed program.”
Jeff Austin, president of the Maine Hospital Association, said hospitals in the state have an average of less than two weeks of cash on hand and warned that the additional costs could threaten access to care.
The four hospitals joining the lawsuit are Eastern Maine Medical Center in Bangor, Unity Medical Center in Grafton, N.D., Dallas County Medical Center in Fordyce, Ark., and Nathan Littauer Hospital and Nursing Home in Gloversville, N.Y.
The plaintiffs are also seeking a temporary restraining order to prevent the revised program from taking effect.
Becker’s has reached out to HHS for comment and will update this article as more information becomes available.
