The future of the Department of Health and Human Services’ 340B Rebate Model Pilot Program is in jeopardy after two setbacks in federal court.

A federal court issued a preliminary injunction preventing HHS from implementing the limited model, which was to test replacing the discounts that pharmaceutical companies provide to eligible providers participating in the section 340B prescription drug program when they purchase prescription drugs with post-purchase rebates for products they have already purchased.

In issuing its injunction, the court wrote that

… the Administrative Procedure Act’s (APA) arbitrary and capricious standard imposes vanishingly minimal requirements that a federal agency must satisfy before launching a new program or policy.  Those minimal requirements are simply that the agency’s action be reasonable and reasonably explained.  Thus, before a new program that affects the rights and privileges of the public can be up and running, the agency must undertake the basic task of developing a contemporaneous record of the relevant factors it considered and provide a reasoned explanation for its course of action.

In the court’s opinion, HHS’s decision to introduce the program failed to meet this standard and justified implementing a temporary injunction preventing the program’s implementation.

Last July, HHS announced that it would launch the 340B Rebate Model Pilot Program, establishing a pathway for manufacturers to offer post-sale rebates instead of upfront discounts.  The program was to include only certain negotiated drugs beginning on January 1, 2026.

Learn more from the full decision in the case.

HHS immediately appealed the court’s ruling and the court quickly rejected the agency’s appeal.  Based on this second defeat, the administration has indicated that it will drop its appeal in the case; read about that decision here.

Community safety-net hospitals have a special stake in the 340B program and are wary of any changes that might jeopardize the program’s effectiveness and its value both to those hospitals and to their patients.  340B is a vital part of community safety-net hospitals’ overall approach to serving the low-income residents of the communities in which they  are located, enabling those hospitals to provide prescription drugs to patients who otherwise could not afford them.  The program also generates savings that community safety-net hospitals reinvest in services for the low-income, underinsured, and uninsured residents of their communities.