Proposed Changes to 340B Drug Program Impacting Medicare Reimbursements

The Centers for Medicare & Medicaid Services (CMS) has proposed a significant change to the 2027 Medicare Hospital Outpatient Perspective Payment System (OPPS) rule, aiming to cut Medicare reimbursement rates for the 340B drug program. The suggested revision would modify the reimbursement from the average sales price (ASP) plus 6% to ASP minus 33.4%, marking a substantial 37% decrease. This proposal is designed to align Medicare reimbursements more closely with the actual drug acquisition costs for hospitals.

The 340B Drug Pricing Program requires participating drug manufacturers to provide significant outpatient drug discounts to qualifying nonprofit and government healthcare providers. This initiative primarily supports facilities serving low-income and underserved populations. Nonetheless, concerns linger regarding the administration of 340B, with claims that the savings are not adequately helping patients and that hospitals might expand networks primarily to exploit these discounts.

CMS's proposal stems from a cost acquisition survey conducted in early 2026, mirroring an earlier 2018 initiative that the Supreme Court blocked in 2022. If approved, the reductions in 340B reimbursements are set to take effect on January 1, 2027. This shift is expected to differently affect hospitals based on their dependency on 340B drug revenues versus non-drug outpatient services.

To ensure budget neutrality, CMS plans to counterbalance the reduced spending on 340B drugs—projected to save $4.85 billion in 2027—by boosting payments for non-drug outpatient services by 8.44%. This adjustment could lead to revenue shifts, with hospitals reliant on non-340B services seeing increased funding, whereas those depending heavily on 340B might face financial cuts. Medicare beneficiaries relying on 340B drugs could experience reduced out-of-pocket expenses, while others might encounter elevated cost-sharing for non-drug outpatient services.

Certain exemptions apply, including rural sole community hospitals, children's hospitals, and specific cancer hospitals, which will not be impacted by these adjustments. Importantly, critical access hospitals, predominantly located in rural areas, will remain unaffected.

The growing scale of the 340B program has initiated discussions among hospitals, pharmaceutical firms, and policymakers regarding its future and the necessity for regulatory compliance changes. Legislative proposals have surfaced to either sustain or restrict the program's scope while bolstering transparency requirements. Although some pharmaceutical companies have proposed a rebate model to maintain discounts, attempts to deploy such frameworks have encountered legal challenges.

Stakeholder engagement remains vital as CMS and other authorities continue to assess these proposals, striving to achieve a balance between fiscal responsibility and supporting underserved communities.