The hospital industry has launched a legal rematch with the federal government over the second iteration of its pilot program swapping out safety-net hospitals’ upfront drug discounts for after-the-fact rebates.
The American Hospital Association, the Maine Hospital Association and three community-based providers filed litigation against the Department of Health and Human Services and the Health Resources and Services Administration on Friday in the U.S. District Court for the District of Maine.
They seek a temporary and permanent block on the 340B Rebate Model Pilot Program ahead of its Jan. 1 launch, arguing that HHS and HRSA illegally ignored their feedback on the substantial expenses that would be borne by providers and suggestions for alternative approaches.
“For covered entities to continue providing their current levels of care to their patients, this Court must quickly enjoin this unlawful, unnecessary, and unexplained program that jeopardizes one of the key pillars of U.S. healthcare,” hospitals’ complaint reads. “The Rebate Program is arbitrary and capricious and must be set aside.”
The hospital industry is returning to a successful legal playbook. A prior iteration of the program. slated to launch at the start of 2026. was blocked by the same court and its corresponding appellate, with judges telling the administration the rollout was hasty and did not properly solicit or integrate public feedback on the planned program.
HRSA voluntarily withdrew the first attempt after those temporary blocks and returned to the drawing board with a more drawn-out public comment process. Providers again told the administration that the test program would bring administrative burdens well above HRSA’s estimates—more than a billion dollars per year among hospitals per AHA as opposed to HRSA’s $537.2 million per year among all covered entities—while noting that the pilot’s second iteration had increased the number of eligible products and participants (21 drugs and 10 manufacturers, HRSA announced last week).
“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,” Steve Walsh, president and CEO of the AHA, said in a statement announcing the litigation. “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. 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,” he said.
Fierce Healthcare has reached out to HRSA for comment. Final guidance on the pilot shared in late July did outline guardrails the administration said would address providers’ stated concerns—for instance, specification that the IT systems used for submitting 340B purchase claims necessary for the rebates would be built and maintained by drug manufacturers, and that any rebate denials from manufacturers must include “rationale and specific documentation for reasons claims are denied.”
Policymakers and drug companies alike have sought to impose limits on the 340B program, which has grown to more than $100 billion of purchases in 2025 and, per its critics, fueled higher healthcare spending by padding the margins of large hospitals and health systems. Even ahead of the government’s attempted pilot, drugmakers had pursued their own rebate models to ensure that statutory 340B discounts aren’t being redeemed alongside other Medicaid rebates—referred to as duplicate discounts, which the hospital industry says are exceedingly rare—but were told by the courts that only HHS had the authority to impose such a model.
HHS, meanwhile, has made it clear that it views 340B as a program that has “expanded beyond its original intent” of propping up struggling safety-net facilities. The department has also said it plans to substantially trim the rate of government 340B drug rebates, from 6% above average sales price to 33.4% below average sales price. Hospital groups have signaled they will challenge that policy change in court as well.