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The American Hospital Association has filed an explosive lawsuit attacking the Health Resources and Services Administration’s handling of a flawed 340B Drug Discount Program rebate scheme.
The plaintiffs charge that HRSA is in collusion with the pharmaceutical industry to foist the rebate wreck on thousands of safety-net hospitals: “Upon information and belief, this program was developed in meetings between drug companies and HRSA.”
For decades, the 340B program has operated as an up-front discount to hospitals and clinics that serve high numbers of poor patients. They use the savings for patient care and to help keep their facilities running. Instead, the misconceived rebate model hands control of the popular 340B program to the drug industry with unenforceable rules about when and whether manufacturers will reimburse safety-net providers.
The complaint also charges that HRSA has illegally overlooked a multitude of written objections to the rebate, which is set to start January 1, 2026 with nine popularly prescribed medicines. “HRSA’s surprise announcement garnered more than 1,200 comments from stakeholders raising concerns about the Rebate Program,” says the suit. “HRSA ignored those comments” leading to a “textbook disregard for administrative law.”
The suit also points out that HRSA has made a 180-degree reversal on the rebate issue since the Biden administration rejected the idea five times in 2024. Further, it notes the scheme is neither voluntary nor a pilot and would require 4,000 times more administrative burden for hospitals than drug companies.
We’re curious if Health and Human Services Secretary Kennedy is aware of the tight grip Big Pharma appears to have over HRSA. If he is, we doubt he would allow it to continue. President Trump has made it clear he wants to stand up to drug companies and get lower prices for Americans.
On December 19th, during oral arguments the plaintiffs argued for an immediate injunction on the grounds that the proposed model will cost health providers millions of dollars to float up-front purchases at top prices and require herculean amounts of unreimbursed administrative time. Secretary Kennedy has a golden opportunity to show that he stands with America’s safety-net hospitals and clinics, and not with the greedy Pharma companies that can never get enough taxpayer dollars in their pockets. The federal judge assigned to the case said he plans to issue a ruling “very soon”, potentially delaying the start of the pilot on January 1, 2026.
Others in the suit include the Maine Hospital Association, St. Mary’s Regional Medical Center, Nathan Littaeur Hospital and Nursing Home, Unity Medical Center and Dallas County Medical Center. The trade associations AAMC, 340BHealth and America’s Essential Hospitals have filed amicus briefs.