The American Hospital Association is suing the Trump administration to stop a new test of a federal drug discount program that would replace upfront price cuts with after-the-fact rebates. This is the second time the hospital lobbying group has taken the government to court over a version of this plan. In 2025, a judge temporarily halted a more limited pilot, and the Health and Human Services Department voluntarily withdrew that proposal after losing an appeal.
In February, the agency announced an expanded version of the plan, scheduled to take effect on Jan. 1, 2027. This new iteration targets 25 of the costliest and most widely used drugs covered by Medicare, up from the 10 drugs in the original proposal.
The AHA argues that the government has not accurately calculated the financial burden on hospitals. Under the proposed model, hospitals would have to pay market prices for drugs and then apply for rebates, a process the group claims ignores the true costs involved. The lawsuit notes that the Health Resources and Services Administration, the HHS division that administers the 340B program, received more than 2,400 comments on this second iteration of the rebate model. Among those comments were descriptions from hospitals detailing what they called the catastrophic impact of the change.