As of January 7th:

A federal appeals court in Boston declined the federal government’s request to immediately reinstate the 340B rebate pilot, leaving a lower court order blocking the program in place.

On January 7, a three-judge panel of the U.S. Court of Appeals for the First Circuit denied HHS’ emergency appeal of a Maine federal judge’s December ruling that halted the pilot nationwide. The court found that HHS had not yet shown it was likely to succeed on appeal.

What the Courts Reviewed — and Why It Matters:

Had it gone live, the pilot would have changed how 340B savings were delivered for certain IRA-negotiated drugs, replacing upfront discounts with a post-purchase rebate process. HRSA halted the rollout at the end of December, ahead of the planned January start. The IRA’s Medicare drug pricing program itself remains in effect and unaffected by the litigation.

In reviewing the case, the First Circuit agreed that HHS had not sufficiently evaluated the financial and operational impact a rebate model could impose on hospitals, particularly safety-net providers. The court emphasized that shifting from upfront discounts to rebates would represent a significant departure from how the 340B program has operated for more than three decades. Judges also rejected HHS’ argument that delaying the pilot would cause irreparable harm, noting that any immediate financial impact would primarily fall on manufacturers rather than the federal government.

Hospital groups welcomed the decision, framing it as an important pause on a policy they argue could destabilize safety-net care. Manufacturers, by contrast, continue to argue that rebate-based models are necessary to address transparency concerns and avoid overlapping discounts between the 340B program and IRA-negotiated Medicare prices.

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What did not change 

• The Inflation Reduction Act’s Medicare drug price negotiation program took effect on January 1 and is not impacted by this litigation
• The courts did not rule that 340B rebates are unlawful in general
• The broader legal question of whether HHS has statutory authority to approve or regulate 340B rebate models is still pending in a separate D.C. Circuit case

What Covered Entities Should Expect Next

Short term:

• Upfront 340B pricing continues for now
• No action is required to prepare for the HHS rebate pilot while it remains paused
• Courts are likely to issue additional rulings in the coming months, not weeks

Longer term:

• Rebate-based models are still very much part of the broader policy discussion
• There is still no finalized guidance on how 340B discounts and IRA Medicare price reductions will be coordinated or kept from overlapping
• Data integrity, documentation, and defensible processes will continue to be central to any future model—upfront or rebate-based

We know this evolving landscape makes planning more challenging. We’re closely monitoring both the First Circuit appeal and the separate D.C. Circuit case and will continue to share updates as the courts provide further guidance.

With regulatory and pricing frameworks still in flux, organizations benefit from teams that anticipate change and build resilient systems in advance. RxTrail is committed to providing that level of proactive support so programs can navigate change with confidence.

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