4/8/2026 – Federal Court Strikes Down HRSA’s 2013 GPO Prohibition Policy

A federal court struck down the Health Resources and Services Administration’s (HRSA) 2013 policy requiring certain 340B hospitals to make their initial purchases of covered outpatient drugs at non-340B, non-group purchasing organization (GPO) prices. The court found that HRSA had failed to provide a reasoned basis for its policy.

The 340B statute prohibits disproportionate share hospitals, children’s hospitals, and cancer hospitals from obtaining covered outpatient drugs through a GPO or another group purchasing arrangement. Unlike the statute’s prohibitions against diversion and fee-for-service Medicaid duplicate discounts, the GPO prohibition is an eligibility requirement. In 2013, HRSA issued a new policy requiring hospitals that are subject to the GPO prohibition to make their initial purchases of covered outpatient drugs at non-340B, non-GPO prices. Due to the policy, hospitals had to begin making their initial purchases of some drugs at wholesale acquisition cost (WAC), which is normally higher than 340B and GPO prices. Hospitals generally purchased their initial inventories on their GPO accounts prior to 2013.

Premier, a GPO, filed a lawsuit challenging the 2013 policy, arguing that it is arbitrary and capricious in violation of the Administrative Procedure Act (APA). The court agreed with Premier and vacated the policy, finding that “HRSA offers almost no reasoning in the 2013 Policy—and the little it does provide fails to explain why the agency reached the conclusion it did.”

HRSA has 60 days to appeal the court’s decision. If HRSA does not appeal, the agency might issue a new policy to try to reestablish the 2013 requirement, but in a manner intended to comply with the APA. That would mean it would have to provide a reasoned explanation for its WAC-first purchasing policy. Alternatively, HRSA could conclude that the policy lacks statutory support, in which case, the agency might replace the 2013 notice with a different policy or not issue a replacement policy. Hospitals should carefully consider the decision and consult with legal counsel before changing their purchasing practices, particularly because the GPO prohibition is a 340B eligibility requirement.

Please contact Powers’ drug pricing team, or your lead Powers attorney, if you have any questions.