07/07/2026 – Proposal to Change Federal Funding Rules Threatens RWCs’ 340B Participation

Overview

The federal government recently published a proposed rule that would substantially alter management of federal grant programs. The rule gives agencies greater discretion to terminate grants and adds many new, significant restrictions on the use of grant funds.

While the proposed policies do not mention Ryan White HIV/AIDS Program (RWHAP) grants or the 340B program, the rule gives broad discretion to the agencies to impose restrictions on grant use that could result in changes to RWHAP or the 340B program and, in turn, reduce RWCs’ ability to educate or assist certain vulnerable patient groups.

The proposal is receiving significant pushback, with thousands of comments opposing the rule already submitted to the White House Office of Management and Budget. Multiple stakeholders are publicly stating that they will strongly oppose a final rule and, if needed, file a lawsuit to stop it. 125 members of the U.S. House signed a letter demanding the administration reverse the rule. If the government continues to advance the rule, it is likely several months away from becoming effective and would be delayed if litigation pauses the rule.

Key Proposed Changes

Under the rule, an agency could terminate a grant if it determines an award no longer advances the program goals, the agency’s priorities, or the national interest. If an agency terminates a grant under this new authority, the agency is no longer required to offer the grantee an opportunity to object, appeal, or have a hearing. While the rule offers organizations whose grants are terminated the opportunity to pursue a contract style legal claim, a successful claim would most likely be an award of monetary damages rather than grant reinstatement.

The rule would require grants to be reviewed and approved by senior political appointees before being issued. The appointee would ensure the grant advances the President’s policy priorities and does not “fund, promote, encourage, subsidize, or facilitate … racial preferences or other forms of racial discrimination,” promote “denial by the recipient of the sex binary in humans or the notion that sex is a chosen or mutable characteristic, “illegal immigration,” or “other initiatives that compromise public safety or promote anti-American values.” The rule would prohibit grant use for purposes related to diversity, equity, and inclusion, “gender ideology,” or “‘transition’ of a child under 19 years of age from one sex to another.”

The rule also places restrictions on the use of grants for lobbying, issue advocacy, conferences, memberships, subscriptions, advertising, public relations, publications, printing, selling, and marketing. Non-state grant recipients would have to provide written justification for each grant payment request, including detailed descriptions of activities, milestones, or performance documentation. The rule would also establish additional reporting requirements and review steps prior to payment.

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Powers will continue to monitor developments regarding the proposed rule. Please contact Powers’ drug pricing team, or your lead Powers attorney, if you have any questions.