Hospitals Sue HHS Over 340B Pilot Program Changes

The American Hospital Association (AHA), a Maine hospital group, and four nonprofit systems have filed a lawsuit seeking a temporary restraining order against the Department of Health and Human Services (HHS) and its Health Resources and Services Administration (HRSA) over a new pilot program affecting the 340B Drug Pricing Program. The program, announced in the summer, represents a significant shift from the traditional upfront discount model to a system requiring hospitals to submit paperwork to qualify for drug rebates. Hospital groups argue that this pilot will lead to implementation costs and delayed revenues potentially threatening the financial stability of safety-net providers. The pilot mandates participation from approximately 14,600 providers, affecting several widely prescribed medications starting next year. The hospitals contend that such a major policy change with broad financial implications should have undergone a formal notice-and-comment rulemaking process, which HRSA did not conduct adequately despite receiving numerous public comments. Historically, the 340B program has enabled safety-net providers to purchase medications at discounted prices from drug manufacturers, but the new pilot deviates from this by switching to a rebate-based system targeting drugmakers' concerns about program expansion and alleged abuses. The 340B program purchase volume has grown substantially, reaching $66.3 billion in 2023, which some critics argue deviates from the program’s original intent. Legislators, including Senate Health Committee Chair Sen. Bill Cassidy, have expressed concerns about whether 340B savings translate to lower patient costs or improved access. The HRSA maintains that the pilot is a limited effort to explore new models that address fraud and abuse issues. The lawsuit highlights the increased scrutiny and regulatory challenges surrounding the 340B program and safety-net hospital financing.