On January 12, 2026, the parties in the rebate pilot case, American Hospital Association v. Kennedy, informed the U.S. Court of Appeals for the First Circuit that they plan to dismiss the government’s appeal and “return the approvals challenged by the litigation to [HHS] for reconsideration”1. This signals that both sides agree the issues are better resolved through administrative processes than through an immediate ruling on the case.
What This Means for the 340B Rebate Pilot Going Forward
At this point, the 340B rebate pilot is not being implemented as initially scheduled and approved; HRSA has publicly stated it is pausing implementation pending these legal developments. Rather than face a binding appellate decision, the agency appears likely to review and potentially revise the underlying approvals that supported the pilot.
This shift could result in:
Delays to any future implementation timeline.
Revisions to the pilot’s design, including clearer rationale and stronger administrative support.
Continued legal challenges if stakeholders believe statutory or procedural norms aren’t met.
While the pilot hasn’t been permanently blocked, its rollout is on hold. Any future iteration of the rebate program will likely need a much more robust explanation and process to withstand both legal and stakeholder scrutiny.
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[1] American Hospital Association v. Kennedy, No. 25-2236 (1st Cir. Jan. 12, 2026).
The HRSA 340B Model Pilot Program page
U.S. Court of Appeals for the First Circuit Jan 7th decision
History of litigation
American Hospital Association, the Maine Hospital Association, and several health systems filed their lawsuit on December 1, 2025 alleging that HRSA violated the Administrative Procedure Act in approving the pilot, alleging it was arbitrary and capricious.
A federal district court in Maine temporarily enjoined HRSA’s implementation of the rebate pilot just before its slated January 1, 2026 start, finding procedural and substantive flaws in the agency’s rollout.
On January 7, 2026, the First Circuit denied the government’s request for a stay of that injunction, effectively keeping the pilot on hold pending further litigation.
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Why This Matters:
For covered entities, this development means the 340B rebate pilot is effectively paused, reducing near-term operational and cash-flow risk, but leaving ongoing uncertainty as HHS reconsiders whether, and how, the program could move forward in a revised form.