MESSAGE
| DATE | 2026-05-08 |
| FROM | Ruben Safir
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| SUBJECT | Re: [Hangout - NYLXS] [ Docs ] 340B program under attack
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Court vacates 340B policy on hospital drug purchasing: 6 things to know
By: Alan Condon
Tuesday, April 7th, 2026
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A federal court has struck down a 12-year-old Health Resources and
Services Administration policy that restricted how certain 340B
hospitals could make initial drug purchases, finding that the agency
failed to adequately explain its reasoning when the rule was issued.
Six things to know:
1. The case was brought by Premier, a technology and supply chain
company that operates a group purchasing organization program for
hospitals. Premier sued after HRSA declined in late 2023 to exempt its
purchasing arrangement from the policy’s reach.
2. At issue is the “GPO prohibition,” which bans certain
disproportionate share hospitals from obtaining covered outpatient drugs
through a GPO as a condition of program eligibility. The 2013 policy
extended that prohibition to cover the “replenishment model,” a widely
used approach in which hospital pharmacies buy drugs for a commingled
inventory, then use backend accounting to retroactively categorize which
prescriptions qualified for the 340B discount, according to court
documents.
3. The court did not rule on whether HRSA’s bottom-line position was
correct, only that the agency had failed to provide adequate reasoning
to support it, as required by the Administrative Procedure Act.
“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,” U.S. District Judge Loren Alikhan wrote in a March 30 opinion. The
court also noted the administrative record suggested HRSA may have
permitted the replenishment model before 2013, a prior practice the
agency neither acknowledged nor explained departing from.
4. The financial stakes were significant. Court documents indicated that
complying with the 2013 policy cost Premier member hospitals between
$500,000 and $1.6 million per hospital. A survey by 340B Health — which
represents more than 1,100 hospitals participating in the 340B program —
found that about 90% of disproportionate share hospitals subject to the
GPO prohibition reported increased spending in their non-340B accounts
as a direct result of the policy.
5. The ruling vacates the policy but leaves the underlying legal
question open. HRSA can revisit the issue and reach the same conclusion,
as long as it follows the Administrative Procedure Act’s requirements
for reasoned decisionmaking. “HRSA may adopt the same bottom-line view
of the statute it did in the 2013 policy,” the court wrote, “as long as
the agency adheres to the APA and does not exceed its limited rulemaking
authority over the Section 340B program.”
6. The decision arrives as 340B faces broader turbulence. A separate
court vacated HRSA’s 340B Rebate Model Pilot Program in February, also
on APA grounds.
Click here to read the 26-page court ruling.
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