1/12/2025 – Rebate Pilot Litigation Update: Parties Agree to “Drop” Appeal

This morning, DOJ filed a letter with the First Circuit Court of Appeals (First Circuit) stating that the government and hospital plaintiffs agree to stop litigation on HRSA’s 340B rebate pilot. The letter states that the parties are “engaged in discussions” about returning the rebate pilot approvals to HRSA for reconsideration in “short order.” The letter states that both parties agree that there is no need to expedite the schedule because DOJ plans to dismiss the appeal request.

The DOJ letter represents a reversal of tactics by the government. The DOJ filed a motion to pause the injunction and appealed the case from the District Court for the District of Maine (District Court) to the First Circuit in attempts to preserve the rebate model following the December 29th preliminary injunction by the District Court pausing the rebate pilot and the First Circuit’s rejection of the DOJ’s motion to pause the injunction and order to develop an expedited briefing schedule for the appeal.

The letter suggests that HRSA will now revamp its rebate pilot to consider the legal issues raised in the litigation, which center on HRSA’s failure to abide by the Administrative Procedures Act in developing its rebate pilot. In their orders, both courts emphasized HRSA’s failure to provide a contemporaneous, reasonable explanation for the rebate pilot and failure to consider covered entity costs and reliance on upfront discounts. HRSA’s rebate pilot website has not yet been updated with this new information.

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