HHS Abandons 340B Rebate Pilot After Court Defeats; Seeks New Stakeholder Input

The U.S. Department of Health and Human Services formally abandoned its 2025 340B Rebate Model Pilot Program following a series of legal setbacks in federal court. The decision was immediately followed by a new Request for Information issued on February 13, 2026, that could shape the future of 340B drug pricing.

In August 2025, the Health Resources Service Administration announced a voluntary pilot program to transition the 340B benefit from an upfront discount to a backend rebate model. The pilot was initially limited to 10 high-cost drugs subject to Medicare price negotiation. Under the model, safety-net providers (called 340B covered entities) would pay the full Wholesale Acquisition Cost and later submit claims to manufacturers for a rebate of the 340B savings.

Covered entities argued the model created "irreparable harm" through massive cash-flow disruptions and administrative burdens. The American Hospital Association sued the federal government to prevent implementation of the rebate model. On December 29, 2025, the U.S. District Court for the District of Maine blocked the program, ruling that HRSA's "threadbare administrative record" failed to consider 30 years of hospital reliance on upfront discounts.

On January 7, 2026, the U.S. Court of Appeals for the First Circuit denied the government's request to stay the injunction, agreeing that the government failed to show a likelihood of success on the merits. On February 5, 2026, recognizing the legal flaws, the Department of Justice filed a joint motion to vacate the program entirely and remand it to HRSA, effectively ending the current version of the pilot.

As of February 13, 2026, HRSA has pivoted to a formal information-gathering phase. The RFI signals a "reset" rather than a total abandonment of the rebate concept. Key areas where HRSA is seeking stakeholder input include operational impact, specifically the cost of hiring new staff or modifying IT systems to track and claim rebates; cash-flow concerns, including evidence regarding whether a rebate model would compromise the ability of safety-net providers to maintain services; suggestions for specific "safeguards" to prevent manufacturers from unfairly denying rebate claims; and statutory interpretation of whether the 340B statute's language allows for a choice between "rebates" and "discounts" at the agency's discretion.

Comments on the new HRSA RFI are due by March 19, 2026.

The 340B Drug Pricing Program, created in 1992, requires drug manufacturers participating in Medicaid and Medicare Part B to provide discounted drugs to eligible 340B health care providers. It is intended to help safety-net providers (such as community health centers and certain hospitals) stretch federal resources and expand services for the patients and communities they serve. Providers supply the discounted drugs to patients and then bill public and private health plans at a higher price, using the profit for health care services. The program has grown rapidly from $44 billion in 2021 to $81 billion in 2024.

Beginning in 2020, pharmaceutical manufacturers imposed sweeping restrictions on 340B contract pharmacy arrangements nationwide. The 340B program is federally regulated and overseen by the Health Resources and Services Administration under the U.S. Department of Health and Human Services. Participating health centers are subject to strict eligibility requirements and audits, and 340B savings must be reinvested into services that expand access to care.