The U.S. Court of Appeals for the District of Columbia Circuit ruled July 21 that drugmakers cannot implement proposed 340B rebate models without approval from the HHS secretary, affirming lower court rulings in favor of the agency.
The case involved Novartis Pharmaceuticals, Johnson & Johnson Health Care Systems, Bristol Myers Squibb and Eli Lilly, which argued they could replace the traditional, upfront 340B discount model with post-purchase rebates for some or all covered drugs. The court held that the 340B statute permits rebate models, but requires the HHS secretary to first provide for or approve such a mechanism before manufacturers may implement it.
According to the ruling, HHS has never authorized a rebate mechanism encompassing the manufacturers’ proposals. As a result, the agency properly required the companies to wait while it reviewed the plans and requested additional information, according to the ruling.
The court also rejected arguments that HHS had to establish rebate requirements solely through pharmaceutical pricing agreements or that the agency acted arbitrarily in requiring preapproval. The judges noted HHS’ review of the manufacturers’ proposals remains ongoing and did not address whether the agency ultimately should approve the proposed rebate models. The district court’s judgments were affirmed.
The ruling caps a legal fight that began in November 2024, when J&J and Lilly first sued HRSA over its refusal to let them switch to rebates. A district court sided with HHS in the Lilly, Bristol Myers Squibb, Novartis and Sanofi cases in May 2025, and a separate judge reached the same conclusion in J&J’s case that June.
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