The 340B Drug Pricing Program has faced mounting legal pressure throughout 2026, including Eli Lilly’s enforcement of a claims-data requirement that has left roughly 1,000 noncompliant covered entities exposed to suspended 340B pricing, and CVS’s motions to dismiss lawsuits from hospital systems alleging the company diverted hundreds of millions in 340B savings. Now CMS is proposing its own major change to the program.
The 2027 Medicare Hospital Outpatient Prospective Payment System proposed rule from CMS would cut Medicare reimbursement for 340B drugs from average sales price by 37%, according to a July 29 KFF analysis.
Here are four things to know:
- Safety-net hospitals would see a 5.8% net reduction in OPPS revenue under the proposal, while for-profit hospitals, which are not eligible for the 340B program, would see a 7.4% net increase. Large urban hospitals with 500 or more beds (-5.2%) and major teaching hospitals (-4.3%) would also see net losses, while rural sole community hospitals (5.7%) and small urban hospitals with fewer than 100 beds (4.8%) would see gains.
- CMS said the change would better align Medicare reimbursement with hospitals’ actual costs of acquiring 340B drugs, basing the proposed cut on a cost acquisition survey hospitals completed in early 2026.
- Because of budget neutrality requirements, CMS proposed an 8.44% across-the-board increase in payments for non-drug outpatient services to offset an estimated $4.85 billion reduction in 340B drug spending in 2027.
- Rural sole community hospitals, children’s hospitals and PPS-exempt cancer hospitals would be exempt from the cut. Critical access hospitals, which make up most rural hospitals, are not reimbursed under OPPS and would not be affected.
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