What the Rebate Pilot Would Have Changed
Under the long-standing 340B framework, drugmakers provide upfront discounts to hospitals that serve large numbers of low-income and uninsured patients. The proposed pilot would have flipped that model.
Hospitals would have paid full price for medications and later sought rebates — a structural shift that alarmed hospital leaders who argued it would strain already thin margins, particularly in rural and underserved communities.
Pharmaceutical manufacturers have long criticized the current discount structure, contending it invites fraud and abuse. Several drug companies proposed alternative rebate models of their own but were rebuffed by HRSA.
The hospital industry was caught off guard in July when HRSA announced it would pursue its own rebate pilot — a move that triggered swift backlash.
Court Orders and Appeals
The American Hospital Association and several hospitals filed suit in early December, arguing the proposed rebate program violated the Administrative Procedure Act and that the government failed to adequately consider public feedback. The pilot had been slated to take effect Jan. 1.
On Dec. 29, U.S. District Judge Lance Walker issued a temporary injunction halting the program before it could begin. The federal government quickly sought emergency relief from the First Circuit Court of Appeals.
But on Jan. 8, a First Circuit panel declined to pause the injunction, leaving the lower court’s block in place and tightening the legal vise around the agency’s plan.
