The rule, which was issued by the Trump administration but never took effect, would have required community health centers pass the 340B discounts they get for insulin and Epi-Pens to patients.
The Biden administration argued Tuesday the rule would put "undue administrative costs and burdens" on health centers.
Health centers would need to create and sustain new practices to determine a patient's eligibility to receive the drugs at or below the price paid by the health center, "resulting in reduced resources available to support critical services to their patients," according to a notice published Tuesday in the Federal Register.
The Trump administration said the rule would reduce out-of-pocket costs for patients who uninsured or have high-cost sharing requirements.
Republicans and drugmakers have expressed concern about the growth of the 340B program, which provides community health centers and hospitals serving low-income populations to access prescription drugs at discounted prices.
But supporters of the program note that federally qualified health centers are legally required to reinvest savings from the 340B program in community services.
Hospitals don't have the same requirement and drugmakers argue there is not enough clarity to know whether 340B savings are benefiting low-income patients.