Proposed CMS Changes to 340B Drug Reimbursement Rates for 2027

The Centers for Medicare & Medicaid Services (CMS) has proposed modifications to reimbursement rates for drugs acquired under the 340B Drug Pricing Program. Part of the 2027 Hospital Outpatient Prospective Payment System, this proposal intends to reduce Medicare payments for these medications to the Average Sales Price (ASP) minus 33.4%. This change is projected to decrease drug expenditures by approximately $5.7 billion in 2027.

The proposal emerges following years of legal challenges and policy discussions surrounding 340B payment levels. In 2018, CMS had reduced these payments to ASP minus 22.5%, a decision later overturned by the U.S. Supreme Court in the American Hospital Association v. Becerra case, due to a lack of hospital-specific surveys. The current proposal uses survey data that CMS argues accurately reflect hospitals' acquisition costs, aiming to fulfill the Court's requirements.

The revised reimbursement plan aligns payments with hospitals' actual drug acquisition costs, proposing a payment rate of ASP minus 33.4%. Some facilities, including children's hospitals and PPS-exempt cancer hospitals, are exempt from this new methodology. Nonexempt providers must use a “JG” modifier to identify 340B program-acquired drugs. This proposal seeks to ensure that the benefits from hospital drug discounts reach Medicare beneficiaries and taxpayers.

Budget neutrality is a cornerstone of the proposal, with CMS planning to offset reduced 340B drug payments by increasing reimbursements for non-drug services. However, entities heavily reliant on 340B drug usage compared to non-drug services might find that the increase in non-drug payments does not fully compensate for reduced drug revenue. For hospitals with significant income from 340B-acquired drugs, this could lead to a net decrease in overall revenue.

To comply with the Supreme Court's previous ruling, CMS aims to expedite the payment recoupment process, shortening the timeline from an original 16-year plan to completion by 2029. This will involve increasing annual payment reductions for hospitals impacted by the earlier ruling. Additionally, the proposed reimbursement adjustment to ASP minus 33.4% signifies a substantial cut to 340B drug payments, supported by legally mandated survey data.

This proposal has implications for manufacturers, potentially affecting purchasing patterns and payer agreements due to reduced Medicare reimbursement rates. CMS is open to public feedback on this proposal until August 31, 2026, as announced in the Federal Register. If adopted, the changes will be enforced starting January 1, 2027.