On December 29, 2025, Chief Judge Lance Walker of the U.S. District Court for the District of Maine granted the plaintiffs’ motion for a preliminary injunction in American Hospital Association v. Kennedy. The court enjoined implementation of HRSA’s 340B Rebate Model Pilot Program “pending further order,” blocking the program from going into effect on January 1, 2026 (and April 1, 2026 for one manufacturer).
As discussed here, on December 1 a coalition of hospital associations and individual safety‑net providers filed a complaint alleging that the Health Resources and Services Administration’s (HRSA) newly announced 340B Rebate Model Pilot violated the Administrative Procedure Act (APA). As framed in the complaint, the pilot would abandon the 30‑year practice of providing 340B discounts at the point of sale in favor of post‑dispense rebates for a set of high‑volume drugs, forcing covered entities to pay wholesale acquisition cost (WAC) upfront and then seek reimbursement from manufacturers. The plaintiffs alleged that this shift would impose hundreds of millions of dollars in administrative and cash‑flow costs on safety‑net hospitals, jeopardize care in rural and underserved communities, and reflect a sudden, unexplained reversal of HRSA’s longstanding view that upfront discounts are the most effective and efficient way to administer the 340B program.
Basis for the Preliminary Injunction
Applying the APA’s arbitrary‑and‑capricious standard, the court granted the preliminary injunction concluding that the plaintiffs are likely to succeed on their claims because HRSA failed to satisfy even the “vanishingly minimal” requirements of reasoned decisionmaking.
The court emphasized three main defects, many of which mirror the themes we flagged in our first blog. First, the administrative record was “anemic,” consisting largely of a press release, a short Federal Register notice, and FAQs, with key justifications supplied only later through a litigation declaration. According to the court, this is precisely the kind of post‑hoc rationalization the APA forbids. Second, the agency did not meaningfully address three decades of hospital reliance on upfront 340B discounts. The court held that a single sentence acknowledging that a rebate model would “fundamentally shift” the program was not enough to show HRSA had identified and weighed those reliance interests. Third, HRSA failed to adequately consider the costs of the pilot, including both administrative burdens and the cash‑flow impact of forcing safety‑net providers to float WAC while awaiting rebates, despite record evidence predicting hundreds of millions of dollars in additional costs.
On irreparable harm, the court credited declarations from hospital leaders projecting substantial compliance and financing burdens and noted that those losses are not compensable in an APA suit. The balance of equities and public interest, in the court’s view, favored preserving the status quo so that 340B entities can continue to stretch resources for vulnerable patients while the legality of the pilot is resolved.
Scope of the Preliminary Injunction
The court rejected the government’s request to limit relief to the specifically identified plaintiffs. Relying on the APA’s directive that courts may “hold unlawful and set aside” agency action, the court concluded it could preliminarily set aside the approvals that constitute the Rebate Program itself. As a result, the injunction bars HRSA from implementing the nine manufacturer applications that make up the 340B Rebate Model Pilot Program nationwide, not only as to the named plaintiffs.
The injunction therefore prevents the program from going into effect on January 1, 2026 (and April 1, 2026 for one application). The court required a nominal $1,000 bond, finding minimal risk of harm to the government from delay and a strong showing on the merits.
Next Steps
For the moment, covered entities remain under the familiar upfront discount model for the ten pilot drugs, and are spared the immediate need to retool systems and financing to accommodate a rebate structure. The opinion makes clear that Congress has authorized HRSA to use a rebate model, but also that any future attempt to do so will need a much more robust administrative record, explicit consideration of 340B hospitals’ reliance on upfront discounts, and a transparent analysis of administrative and cash‑flow costs.
We will continue to monitor developments in AHA v. Kennedy and any subsequent steps HRSA takes to address deduplication between 340B and the Inflation Reduction Act’s drug pricing provisions.