This post was co-authored with Ivy Miller, legal intern at Robinson+Cole. Ivy is admitted to practice in Massachusetts.

On December 29, 2025—just three days before the 340B Rebate Model Pilot Program (the Rebate Program) was set to begin—the U.S. District Court for the District of Maine issued an order granting a preliminary injunction to block the government’s implementation of the Rebate Program on January 1, 2026, after determining that the Health Resources and Services Administration (HRSA) likely violated the Administrative Procedure Act (APA) during the Rebate Program’s rollout.

Background

Under the 340B Program, drug manufacturers are required to offer their products for sale to certain safety-net health care providers at a discounted price. Since the 340B Program was established, HRSA has required that the discounts be offered to providers as “upfront” price concessions. Safety-net providers often rely on savings achieved from the upfront discounts to support programs to ensure access for the vulnerable patient populations they serve. On July 31, 2025, HRSA announced the Rebate Program, which would permit an approved group of drug manufacturers to offer 340B drug price reductions in rebate form rather than as an upfront discount. The Rebate Program would require safety-net providers to pay the full market cost of the drug and then claim a rebate to realize the discount. HRSA in part contends that the Rebate Program is intended to “de-duplicate” price concessions that certain safety-net providers may obtain via the 340B Program and the Inflation Reduction Act’s Drug Price Negotiation Program. Although only nine drug manufacturers were approved to participate in the Rebate Program, and the Rebate Program covers ten drugs, those manufacturers would be permitted under the Rebate Program to implement the rebate model with respect to all 340B safety-net providers—meaning, all 340B safety-net providers would be required to pay full price and implement the rebate model with respect to the ten drugs. Importantly, the announcement of the Rebate Program appeared to be a reversal of the 340B Program’s prior use of upfront discounts since the 340B Program’s inception in 1992. In fact, late in 2024, HRSA sent violation letters regarding proposed rebate models to some of the very same drug manufacturers who were subsequently approved for participation in the Rebate Program.

Complaint

On December 1, 2025, the American Hospital Association (AHA), the Maine Hospital Association (MHA), and four safety-net providers (collectively, the Plaintiffs) sued the federal government, alleging in their complaint that the rollout of the Rebate Program bypassed the requirements of the APA. The Plaintiffs claimed that HRSA did not address the issues raised by affected stakeholders during the statutorily required comment period, instead going ahead with the implementation of the Rebate Program as planned. On that same day, the Plaintiffs urged the court to temporarily block the January 1 start date for the Rebate Program, citing the potential for “hundreds of millions of dollars in costs” to 340B Program participants as a result of the Rebate Program, as well as “inevitable disruptions to patient care.”

On December 10, 2025, several drug manufacturers, including AbbVie, AstraZeneca, Boehringer Ingelheim, Novo Nordisk, and the trade group Pharmaceutical Research and Manufacturers of America (PhRMA), moved to intervene in the suit as a matter of right, claiming the government could not adequately represent their interests in the case—namely, the potential for financial losses from duplicative discounts, as well as the government’s contrary position regarding 340B rebate models in other ongoing litigation. The Court, however, rejected the drug manufacturers’ bid to intervene in the case, noting that because the case (which consists of five alleged violations of the APA) “turns entirely” on the administrative record, the drug manufacturers would not feasibly be able to illuminate that record better than the government. Additionally, the Court stated that although the government does not itself face the financial implications alleged by the drug manufacturers, this does not inherently mean that the government cannot adequately represent the drug manufacturers’ interests.

Court’s Decision

In its decision to grant the preliminary injunction, the Court examined whether HRSA adhered to the APA’s arbitrary and capricious standard in its rollout of the Rebate Program. The Court explained that when a federal agency introduces new programs or policies impacting the rights and privileges of the public, those actions must be “reasonable and reasonably explained” in order to satisfy the arbitrary and capricious standard.

The Court noted that the Rebate Program represented a “departure from [HRSA’s] decades-long practice of requiring upfront discounts on 340B eligible drugs” and that the administrative record—which is central to the issue of whether HRSA violated the APA—was “rather threadbare.” The decision went on to conclude that the government “failed to follow the APA’s basic blueprint in assembling” the Rebate Program, thereby warranting a preliminary injunction to prevent its implementation nationwide.

The Court’s analysis centered on the following factors:

1. Substantial Likelihood of Success on the Merits. The Court noted that there was a paucity of information in the administrative record. In reviewing what information was produced, the Court indicated that HRSA must stand by its reasoning at the time it decided to establish the Rebate Program rather than relying on post-hoc rationalizations or documentation from manufacturers—i.e., they must “do their own homework” vis-a-vis building an administrative record demonstrating the thought process behind the Rebate Program. The Court also found that HRSA failed to provide a reasonable explanation regarding the design of the Rebate Program, and that there was no evidence that HRSA weighed the Plaintiffs’ decades of industry reliance on the upfront discount model against the stated goals of the Rebate Program and approach favored by manufacturers, or evaluated Plaintiffs’ costs to float the full cost of the drugs until receiving the 340B rebate. Further, the Court found “fatal” the HRSA’s failure to consider the costs and benefits of the Rebate Program, as it was only now reviewing administrative costs of the Rebate Program.
2. High Likelihood of Irreparable Harm. The Court concluded that Plaintiffs demonstrated irreparable harm if the Rebate Program were to be implemented, even without relying on “speculative concerns” about delays and denials of rebates for claims involving 340B drugs. Instead, the Court relied on Plaintiffs’ “estimate[d] $400 million in compliance costs, the downstream effect causing them to cut back services and suspend partnerships with drug distributors.”
3. Balance of Equities/Public Interest. The Court found that there was strong public interest in preserving the status quo and the reach of 340B covered entities to provide critical medical services, particularly in light of the Court’s conclusion that Plaintiffs would likely succeed on the merits of their APA claims.

Implications and Next Steps

Importantly, the Rebate Program is not impermissible under this Order, and in fact, the government has discretion under the 340B Program to opt for 340B rebates. However, any Rebate Program imposed on the public as a final agency action must withstand the requirements of the APA. In this regard, the decision indicates a more fulsome administrative record would need to be established addressing the basis for the Rebate Program compared to the prior policy, its design, and how it weighed Plaintiffs’ reliance interests and administrative costs of compliance. Although the Court declined to weigh in on policy arguments related to what would be less costly alternatives, dispute resolution mechanisms for rebate models, and the use of the rebate database, these questions will also likely need to be addressed in any future iteration of the Rebate Program. Finally, the Court was clear that the preliminary injunction is not limited to the Plaintiffs, and that the Court was authorized to preliminarily enjoin the whole agency action on a national level.

The federal government immediately appealed the order to the First Circuit seeking an emergency stay of the preliminary injunction, and it remains to be seen whether that appeal will prove successful on such a short timeline, as the Rebate Program was to begin January 1, 2026. The drug companies have separately appealed the denials of their motions to intervene, the resolutions of which may impact the suit’s timeline and progression. We will continue to monitor the Rebate Program litigation and implications for 340B compliance.