AHA sues to block 340B drug rebates pilot program

Modern Healthcare – Monday, December 1, 2025
By Bridget Early

The fight between the hospital sector, the pharmaceutical industry and the Health Resources and Services Administration over prescription drug rebates has returned to the courts.

The American Hospital Association, the Maine Hospital Association and four safety-net hospitals filed a lawsuit against the Health and Human Services Department on Monday to block a pilot program that will replace some upfront discounts with rebates under the 340B Drug Pricing Program.

Starting in January, nine drugmakers including Bristol Myers Squibb, Boehringer Ingelheim, and Johnson & Johnson will be permitted to institute rebates for safety-net providers participating in 340B for 15 medicines subject to the Medicare Drug Price Negotiation Program, including Eliquis, Jardiance and Xarelto.

The 340B Drug Pricing Program grants qualifying safety-net providers such as hospitals and community health centers 25%-50% discounts on prescription medications. Rebates will undermine provider finances, burden them with administrative costs and enable drugmakers to withhold rebates at their discretion, the AHA and others have argued.

Providers have resisted a shift toward rebates since several pharmaceutical manufacturers including Bristol Myers Squibb and Johnson & Johnson attempted to implement them without HRSA approval last year. HRSA OK’d the one-year rebates pilot in July after the U.S. District Court for the District of Columbia ruled in May that the drugmakers didn’t have the authority to do so on their own.

“Defendants’ decision to hastily implement this unlawful rebate program is causing irreparable harm to the very providers the 340B program is meant to support,” the plaintiffs wrote in their complaint to the U.S. District Court for the District of Maine. “Struggling hospitals will spend millions of dollars to comply with this unlawful program, none of which can be recovered. And hospital money earmarked for patient care instead will now be diverted to drug companies, inhibiting providers’ ability to fulfill their missions and deliver healthcare to the neediest Americans.”

The AHA and its co-plaintiffs want the court to temporarily suspend the 340B rebates pilot program while it considers their challenge.

“Defendants’ actions violate the most basic and well-established principles of administrative law. The decisions to reverse course on a 34-year policy without explanation and leave 1,100 comments fully unconsidered are paradigmatically ‘arbitrary and capricious,’” the plaintiffs wrote.

Along with the AHA and the Maine Hospital Association, the complainants are Lewiston, Maine-based St. Mary’s Regional Medical Center; Gloversville, New York-based Nathan Littauer Hospital and Nursing Home; Grafton, North Dakota-based Unity Medical Center; and Fordyce, Arkansas-based Dallas County Medical Center.

In September, the AHA urged the Justice Department and the Federal Trade Commission to investigate whether pharmaceutical companies colluded to devise the rebates plan.

Pharmaceutical companies, which have battled safety-net providers and HRSA over 340B for years, contend the program has grown beyond its original scope at great cost to the drug industry and taxpayers. The rebate program will enable drugmakers and HRSA to prevent ineligible providers from getting lower-price medicines, the Pharmaceutical Research and Manufacturers of America and others have argued.

Separately, America’s Essential Hospitals, which represents safety-net providers, wrote HRSA Administrator Thomas Engels on Monday requesting a meeting and greater detail on the agency’s implementation and oversight plans for the rebates pilot.

“We appreciate HRSA’s steps to communicate details about the rebate pilot and its extension of the comment period prior to moving forward with the program,” America’s Essential Hospitals President and CEO Jennifer DeCubellis wrote. “However, the current implementation approach — particularly the absence of publicly posted manufacturer plans and the lack of response to numerous questions raised during the comment process — raises substantial legal and operational concerns.”

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