In a noteworthy development for hospital groups and safety-net providers, The Department of Health and Human Services (HHS) has dropped the HRSA 340B Rebate Pilot Program (Pilot Program) that was scheduled to go into effect January 1, 2026. The Pilot Program, if enacted, would have required Covered Entities to purchase the negotiated drugs at their full Wholesale Acquisition Cost (WAC) and subsequently request a rebate, placing the financial burden of temporarily carrying higher WAC-based drug costs on providers’ balance sheets.
On February 5th, HHS announced in a court filing that it will drop its current Pilot Program and potentially restart the administrative process for such a program. The announcement comes after a lawsuit filed by the American Hospital Association (AHA), and others, challenging the Pilot Program resulted in a preliminary injunction blocking implementation of the program. In a joint motion, HHS notes that further litigation would not be productive and has agreed to vacate the existing Pilot Program so it can consider an alternative administrative process. In accordance with the Court’s decision, manufacturers who were approved for participation in the Pilot Program to effectuate 340B pricing through a rebate mechanism will now be required to continue to offer all of their covered outpatient drugs to 340B covered entities at the 340B ceiling price as an up-front discount.
If HHS moves forward with a new 340B rebate program, the agency has indicated it will issue a new notice, including soliciting new applications from manufacturers and requested new comments from covered entities. In an effort to address the previous allegations that the agency had not reasonably considered the impact of the Pilot Program on 340B hospitals, including the reliance interests of entities that have operated under the upfront discount model for years, and failed to fully evaluate the administrative and financial costs to providers, HHS will solicit comments either prior to or concurrently with a new notice, or both. In the court filing, HHS also agreed to “set any effective date for any new 340B rebate program to no earlier than 90 days following the public announcement of any approval of drug manufacturer applications” in hopes of avoiding future litigation.
While the ruling provides immediate relief, the future of a rebate model remains uncertain. Advis will continue to monitor developments and can assist in preparing for potential regulatory changes.
Published February 6, 2026
