Court Halts Controversial 340B Rebate Program: What’s Next?

Federal Court Delays Implementation of Controversial 340B Rebate Pilot Program

A federal judge in Maine put a halt to the Health Resources and Services Administration’s (HRSA) controversial 340B Rebate Pilot Program on December 29. The judge granted a preliminary injunction that effectively paused the program, which was scheduled to begin on January 1, 2026, citing a “paucity of the administrative record” in the program’s development and implementation. This, according to the judge, likely violated the Administrative Procedures Act which mandates that agency actions must be both reasonable and reasonably explained.

In response, HRSA appealed to the U.S. Court of Appeals for the First Circuit and also requested a stay from the district court to allow the 340B Rebate Pilot Program to proceed while the case is under appeal. However, the judge denied the stay during HRSA’s appeal to the First Circuit.

First Circuit Maintains Status Quo, Declines Emergency Removal of Injunction

Despite HRSA’s appeal, the First Circuit decided against removing the preliminary injunction on an emergency basis on December 31. Consequently, the 340B Rebate Pilot Program will not commence as scheduled on January 1.

For nonprofit, safety-net healthcare providers that are eligible as 340B covered entities, this means they can continue to purchase pharmaceutical products at a discounted 340B price. This avoids the need for them to pay for product at manufacturer list prices or waiting for rebate payments to reach the 340B price.

What This Means for 340B Stakeholders

Although the case is ongoing and the First Circuit could reverse the lower court decision, 340B stakeholders are advised to closely monitor developments and prepare for potential implementation of the 340B Rebate Pilot Program following a First Circuit ruling.

The Rebate Pilot was put on hold due to a remarkably thin administrative record for a change of such significant impact. HRSA’s incomplete examination of administrative costs to stakeholders for the pilot contributed to this thin record. However, this does not mean that HRSA won’t implement this or a similar rebate-style program once it has a robust administrative record.

The courts have clearly noted that Congress has given HRSA the option to implement a rebate program. With manufacturers investing significant resources into the concept, a rework of the program should be expected.

Potential Rework and Unresolved Issues

The form that this potential rework could take is unclear. If HRSA aims for swift action, it could consider scaling back the program to include voluntary 340B covered entities. With numerous 340B covered entities ready to operate on a rebate basis, there is a sizable pool of potential volunteers for a pilot rebate program.

However, unresolved issues remain, primarily regarding the rationale behind the 340B Rebate Pilot Program. The program was created to prevent duplicate discounts between the 340B program and new maximum fair price (MFP) refunds that become effective on January 1, 2026, for 10 commonly prescribed, expensive products under the Inflation Reduction Act. This issue, alongside the complexities surrounding the role of contract pharmacies and potential duplication of MFP refunds and 340B discounts, has yet to be addressed fully.

Future Considerations and Implications for 340B Stakeholders

Regardless of whether the 340B Rebate Pilot Program had moved forward on January 1, 340B contract pharmacies face substantial uncertainty and financial risk. This is particularly true if they are dispensing MFP products purchased at full price to Medicare beneficiaries at the MFP price, but their refund is disrupted due to questions about 340B eligibility.

Moreover, 340B covered entities are facing a financial shift in 340B revenues as dispensing margins for MFP products shrink, pricing models change, and Medicaid enrollment and ACA plan enrollment adjust to legal and market changes. Despite the relief provided by the delay of the 340B Rebate Pilot Program, there are still significant considerations for 340B stakeholders moving into 2026.

This report was curated by Beth Siemer and Aurora Kammerer, attorneys at Spencer Fane. For more insights, visit spencerfane.com.

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