AHA, MHA, and Four Safety-Net Hospitals File Suit to Stop Costly 340B Rebate Program From Harming Hospitals and Patients

Revised rebate program will force hospitals providing care to America's most vulnerable patients to spend billions on administrative costs, repeating the same flaws courts previously identified.

Portland, Maine (Oct. 9, 2026) -- Today, the American Hospital Association (AHA), the Maine Hospital Association (MHA) and four safety-net hospitals filed a lawsuit in the United States District Court for the District of Maine challenging changes by the Department of Health and Human Services (HHS) to the 340B Drug Pricing Program that would expand the use of a proposed rebate model previously halted by the courts. Estimates show the new program could impose more than $1 billion in annual administrative costs on already-strapped hospitals.

For nearly 35 years, the 340B program has helped hospitals stretch limited resources to provide care and services to millions of patients, including those in rural, low-income and underserved communities. Hospitals use 340B savings to maintain healthcare services, expand access to medications, support behavioral health and oncology care, and provide other programs tailored to the needs of their communities. HHS' proposed rebate mechanism would divert resources that 340B hospitals currently use for patient care toward higher upfront drug costs and new administrative burdens.

"When the government makes a change of this magnitude, it must fully consider what it will mean for the patients and communities that rely on 340B hospitals every day," said Steve Walsh, president and CEO of the AHA. "The AHA and its member hospitals provided detailed evidence showing that the Rebate Program would impose massive new costs and divert resources that support care for millions of patients. We also proposed viable alternatives that would address concerns about transparency and program integrity without imposing the same financial price tag. For the sake of our shared goal of protecting patients and expanding access to care, those costs, consequences and alternatives cannot be treated as afterthoughts. It's unfortunate that we are back in court challenging the same flawed program."

Following HHS' attempt to launch a similar rebate program in 2025, both the U.S. District Court for the District of Maine and the U.S. Court of Appeals for the First Circuit faulted HHS for moving forward with a rebate mechanism without adequately accounting for what it would cost the hospitals required to operate it. Shortly thereafter, HHS moved forward with a revised version of the same Rebate Program - only twice as large and even more expensive.

Before announcing that the revised program would take effect on Jan. 1, 2027, the Health Resources and Services Administration, which oversees the program, received more than 2,400 comments, including extensive evidence from 340B hospitals and other covered entities describing the financial and operational impact of a rebate mechanism. Hospital analyses estimate that administrative costs alone could exceed $1 billion annually - far above HHS' $537 million estimate, which captures only a small part of the burden. HHS' estimate does not fully account for costs associated with reconciliation of incoming rebate payments, startup costs, cash-flow burdens, loss of cost-of-goods-sold benefits, and other operational impacts.

"Maine hospitals cannot afford this Rebate Program. They already operate with an average of less than two weeks cash-on-hand, so these significant new costs will jeopardize their ability to care for the most vulnerable patients in their communities and affect the affordability and accessibility of care across Maine," said Jeff Austin, president of the Maine Hospital Association.

"The proposed shift from upfront 340B discounts to a rebate-based system would place significant financial pressure and administrative burdens on hospitals and clinics that rely on 340B savings to support essential patient care services," said Guy Hudson, MD, president and CEO of Northern Light Health. "For rural health systems in Maine, these changes will divert resources away from direct patient care and create new financial challenges at a time when healthcare providers are already under strain."

Many hospitals and other covered entities participating in the 340B program operate on thin or negative margins and cannot absorb these additional costs without affecting resources available for patient care. Hospitals have proposed viable alternatives that would address concerns about transparency and program integrity without imposing the same financial and administrative burdens. HHS moved forward without fully addressing that cost evidence or those alternatives.

The AHA and Maine Hospital Association are joined in this suit by Eastern Maine Medical Center in Maine, the Unity Medical Center in North Dakota, the Dallas County Medical Center in Arkansas, and the Nathan Littauer Hospital and Nursing Home in New York - all community-based healthcare providers that participate in the 340B program.

Download today's Complaint for Declaratory and Injunctive Relief and Motion for Temporary Restraining Order with Incorporated Memorandum of Law.

About the American Hospital Association (AHA)

The American Hospital Association (AHA) is a not-for-profit association of healthcare provider organizations and individuals that are committed to the health improvement of their communities. The AHA advocates on behalf of our nearly 5,000 member hospitals, health systems and other healthcare organizations, our clinician partners - including more than 270,000 affiliated physicians, 2 million nurses and other caregivers - and the 43,000 health care leaders who belong to our professional membership groups. Founded in 1898, the AHA provides insight and education for healthcare leaders and is a source of information on health care issues and trends. For more information, visit the AHA website at www.aha.org.