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A US appeals court blocked the Trump administration’s drug rebate plan, ruling safety-net hospitals cannot be forced to pay full prices upfront for Medicare-negotiated medicines meant for low-income patients.
A US appeals court has delivered a setback to President Donald Trump’s healthcare agenda, blocking a controversial drug rebate scheme that would have forced safety-net hospitals to shoulder higher upfront costs for key medicines used by low-income patients.
The ruling halts an effort by the Trump administration to alter how hospitals access discounted drugs under Medicare negotiations, with judges warning that the move would disrupt a long-standing system designed to protect rural and underserved communities from rising prescription costs.
STORY CONTINUES BELOW THIS ADIn a ruling on Wednesday, the US appeals court ruled that .the Trump administration cannot require hospitals serving low-income Americans to pay full price upfront for the first 10 medications to become subject to Medicare drug price negotiations and wait for rebates,
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A three-judge panel of the Boston-based 1st U.S. Circuit Court of Appeals rejected a request by President Trump’s administration to put on hold an injunction a judge in Maine issued at the behest of the American Hospital Association and several healthcare providers that blocked the new program.
The panel said the Health Resources and Services Administration’s program upended a decades-long practice of providing safety-net hospitals serving rural and low-income communities with upfront discounts to buy prescription drugs.
The judges, all appointees of Democratic former President Joe Biden, pointed to a lack of evidence that the agency considered the impact the program would have on hospitals, who said the plan would saddle them with hundreds of millions of dollars in new costs.
Rich Pollack, the head of the American Hospital Association, in a statement welcomed the ruling, saying the program “would have a devastating effect on America’s most vulnerable patients and communities, and the hospitals that serve them."
The U.S. Department of Health and Human Services, which oversees the agency, did not immediately respond to requests for comment.
STORY CONTINUES BELOW THIS ADThe Inflation Reduction Act, a 2022 law enacted under Biden, allowed the government to negotiate a maximum fair price that Medicare, the healthcare program for people aged 65 and older or those with disabilities, would pay for certain costly drugs.
State Medicaid programs, which provide health insurance for low-income Americans in collaboration with the federal government, receive a rebate to ensure they only pay the Medicare-negotiated price on behalf of qualifying patients.
The first 10 drugs to be subject to negotiations include the blood thinner Eliquis sold by Pfizer and Bristol Myers Squibb; Johnson & Johnson’s rival medication Xarelto; and Merck & Co’s diabetes drug Januvia.
Several of the medications were already subject to the federal 340B Drug Pricing Program, which for decades has required drugmakers seeking Medicaid and Medicare coverage for their drugs to provide upfront discounts to safety-net healthcare providers.
HRSA said its 340B Rebate Model Pilot Program, which it announced in July, was intended to help drugmakers avoid duplicate price concessions to hospitals, which they were allowed to avoid under the IRA.
STORY CONTINUES BELOW THIS ADDrug companies under the pilot program could charge hospitals their products’ wholesale prices and issue rebates later to reflect their ultimate discount.
The American Hospital Association sued last month, saying the pilot program was adopted in violation of the Administrative Procedure Act. U.S. District Judge Lance Walker, a Trump appointee in Maine, agreed and issued an injunction on December 29 that blocked the planned January 1 implementation.
With inputs from agencies
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