Hospitals Sue to Block 340B Rebate Model Pilot

The American Hospital Association, along with the Maine Hospital Association and several safety-net hospitals, sued the Department of Health and Human Services (“DHHS”) on October 9, 2026 in the U.S. District Court for the District of Maine to stop DHHS from moving forward with the program. The hospital associations and hospitals argue that even though DHHS made modifications to the program after a similar lawsuit last year, the revised program will still result in disruptions to patient care. They also argue DHHS failed to weigh alternative approaches that would be less disruptive to hospitals.

The 340B program has traditionally been based on upfront discounts, with hospitals purchasing covered drugs from drug manufacturers at the discounted 340B pricing. Manufacturers have advocated for shifting the program to a rebate model, where hospitals would purchase covered drugs at regular commercial prices and then submit rebates to receive the 340B discounted pricing.

DHHS developed the current, revised rebate-based pilot program after a federal court blocked an earlier version of the program last year. The Health Resources and Services Administration has approved ten drug manufacturers to participate in the revised program, which is scheduled to launch January 1, 2027. Under this program, participating manufacturers would be required to provide timely rebates after validating eligible claims.

The hospital associations and hospitals joining the lawsuit argue the revised program is still flawed, that it would negatively impact safety-net and rural hospitals, and that it could cause hospitals to incur more than $1 billion in annual costs due to the administrative burdens involved with submitting rebate claims. Drug manufacturers, on the other hand, support the pilot program. They allege hospitals are unjustly profiting from the current 340B program and that growth in 340B spending is evidence the program is susceptible to abuse. Last year alone, hospitals and outpatient facilities purchased $100 billion worth of 340B drugs, up 23% from the year prior.

The safety net hospitals joining the lawsuit are Eastern Maine Medical Center in Maine, the Nathan Littauer Hospital and Nursing Home in New York, Unity Medical Center in North Dakota and Dallas County Medical Center in Arkansas.

A copy of the complaint is available at: https://www.documentcloud.org/documents/28739575-aha-v-kennedy-340b-complaint-for-declaratory-and-injunctive-relief-1/?_sp=3f0d552b-f547-45ff-ab67-36980f245a5a.1793076648840.