What Covered Entities Need to Know Following the
Federal Court Injunction
Earlier this week, the 340B community received a major and unexpected development: a Maine federal district court judge temporarily blocked the Health Resources and Services Administration (HRSA) from implementing its highly controversial 340B rebate model pilot program, which had been scheduled to take effect on January 1.
While the ruling pauses implementation of the pilot, it does not resolve the broader legal questions surrounding the Rebate Model pilot. Litigation is expected to continue in the weeks and months ahead.
This white paper outlines the background of HRSA’s rebate pilot, summarizes the court’s ruling, and provides practical guidance on what covered entities should be doing now to remain prepared.
Background: HRSA’s 340B Rebate Pilot
In late July, HRSA announced its voluntary Rebate Model Pilot Program limited to 10 drugs. These drugs would be eligible to participate in a rebate-based model rather than providing traditional upfront 340B discounts.
This proposal represented a significant departure from the way the 340B program has operated for more than three decades. Instead of receiving discounted pricing at the point of sale, covered entities would pay higher upfront costs and later seek rebates from manufacturers.
Almost immediately, covered entities raised concerns related to:
- Increased administrative and compliance burden
- Cash-flow disruption and financial risk
- Operational complexity across pharmacies and claims workflows
Despite widespread opposition and advocacy efforts, HRSA continued moving forward with the pilot and approved several manufacturer rebate models in the months following the announcement.
Legal Challenge: Hospitals File Suit
On December 1, a group of hospitals—including the American Hospital Association, the Maine Hospital Association, and four large health systems—filed a lawsuit in federal district court in Maine challenging HRSA’s rebate pilot.
Notably, the lawsuit did not argue against the use of rebates in the 340B program broadly. Instead, it focused specifically on HRSA’s implementation of the pilot and whether the agency followed required federal procedures.
The plaintiffs argued that HRSA failed to adequately consider:
- The administrative and operational burden on covered entities
- The scale and irreversibility of the financial harm
- Alternative approaches to addressing overlap between the IRA and 340B
Central to the case was the Administrative Procedure Act (APA), with hospitals asserting that HRSA did not follow appropriate rule-making requirements for a program that fundamentally alters the structure of the 340B program.
The Court’s Decision: Preliminary Injunction
Following a hearing on December 19, the federal district court issued a preliminary injunction on December 29, temporarily blocking HRSA from implementing the rebate pilot.
In its ruling, the court cited concerns that the pilot could impose hundreds of millions of dollars in compliance and operational costs on hospitals, potentially affecting patient services. The judge also emphasized that these harms would not be easily remedied after the fact.
Importantly, the injunction applies nationwide and covers all 340B covered entities—not only the hospitals involved in the lawsuit.
What the Injunction Means Today
As of now:
- HRSA cannot implement the 340B rebate pilot
- The pilot cannot take effect on January 1
- Covered entities are not required to operate under a rebate-based model
However, this injunction is temporary. The underlying legal questions remain unresolved, and future court rulings could allow the pilot to proceed or permanently block it.
Appeals and What Happens Next
The federal government has appealed the ruling to the First Circuit Court of Appeals and requested that the injunction be paused while the appeal is considered. That request was denied by the district court.
Separately, several drug manufacturers sought to intervene directly in the case, arguing that the government did not fully represent their interests. While the court denied those requests, manufacturers have appealed that decision as well.
There is no defined timeline for when the First Circuit may act. While appeals courts sometimes move quickly when federal programs are blocked, they are under no obligation to do so.
Practical Guidance for Covered Entities
While implementation of the rebate pilot is paused, covered entities should remain proactive.
Covered entities should:
- Maintain operational readiness: Continue system and process planning in case the pilot resumes
- Evaluate financial exposure: Assess cash-flow and compliance risk under a rebate-based model
- Coordinate with partners: Stay aligned with TPAs & pharmacies
- Monitor developments closely: Legal and regulatory updates are evolving rapidly
Conclusion
The court’s injunction marks a pivotal moment for the 340B program and underscores the significance of procedural compliance when agencies attempt major policy shifts. While the immediate outcome provides temporary relief for covered entities, uncertainty remains.
As litigation continues, covered entities should stay informed, prepared, and flexible—ready to adapt as the future of the 340B rebate model takes shape.
