On December 29, a federal district court in Maine granted a preliminary injunction to prevent the Health Resources and Services Administration (HRSA) from implementing the 340B Rebate Pilot Program on January 1, 2026, when it was scheduled to go into effect. Hospital associations and hospital co-plaintiffs filed suit to stop the Pilot Program, raising concerns that it would increase costs and delay access to 340B drug pricing program savings. (See here for our previous content about the Pilot Program).
The government has appealed the decision to the First Circuit Court of Appeals and asked for either a stay to pause the injunction while the appeal continues or an administrative stay to put the injunction on hold for a short period to allow for a decision on the stay request. The district court denied the request, and we now expect the government to seek a stay from the First Circuit. Without a stay, the Pilot Program will not go into effect on January 1. It is possible the Pilot Program could go into effect if the court grants an administrative stay that lifts the injunction for a short period, but if the court ultimately denies the full stay pending appeal, the injunction would go back into effect, and the Pilot Program would go offline. There are several potential scenarios that could play out, and stakeholders will need to monitor closely for next steps.
The decision pauses implementation based on the hospitals’ arguments that HRSA failed to follow the proper process required under the Administrative Procedure Act (APA) when implementing the Pilot Program. The court found that the plaintiffs demonstrated a likelihood of success in making these arguments. However, the decision does not answer the question of whether HRSA may implement the Pilot Program or other variations of rebate models in the future. The court found that HRSA’s authority to administer a rebate model program was not in question, “only the quality of the Rebate Program’s current rollout effort in light of the APA.” The court said Congress clearly gave HRSA the option to approve rebate models, but in this case, HRSA failed to follow the requirements under the APA to implement a rebate program.
While the injunction is in place, the court will continue to hear the case and decide whether the Pilot Program is lawful. The fact that the court preliminarily found that the hospital plaintiffs demonstrated a likelihood of success suggests that the court will not find the government’s arguments persuasive and will ultimately invalidate the Pilot Program, at least on the current record. However, even if that occurs, HRSA could attempt to implement a revised Pilot Program that considers the impact on hospitals and follows the APA requirements. In other words, the injunction will temporarily block implementation of the Pilot Program, and the court may ultimately invalidate the Pilot Program, but HRSA could still correct its errors and implement a revised Pilot Program in the future.
If you have any questions about the 340B Rebate Pilot Program and related litigation, please contact the authors.