CMS Proposes Cut to 340B Drug Payments in 2027 Outpatient Rule

The Centers for Medicare & Medicaid Services (CMS) has proposed a rule that would substantially reduce Medicare payment rates for drugs that hospitals acquire through the 340B Drug Pricing Program, part of a broader set of payment changes for hospital outpatient and ambulatory surgical centers (ASC) proposed for calendar year (CY) 2027.¹ The proposed rule would update Medicare payment policies and rates for hospital outpatient and ASC services under the Hospital Outpatient Prospective Payment System (OPPS) and ASC Payment System for CY 2027, affecting approximately 3500 hospitals and approximately 6400 ASCs.

Specifically, CMS is proposing to pay for 340B-acquired drugs at the drug's average sales price (ASP) minus 33.4%, a change estimated to reduce Original Medicare drug payments by $4.55 billion and beneficiary drug payments by $1.15 billion in the first year. Because the statute requires this policy to be implemented in a budget-neutral manner, the reduction would be offset by an equivalent increase in OPPS payments for nondrug services.

What Drove the Policy Proposal?

To assess the size of the gaps between ASP and drug acquisition costs, CMS conducted a survey of hospital drug acquisition costs from January 1, 2026, through April 7, 2026. CMS surveyed the acquisition costs for each separately payable drug acquired by all hospitals paid under the OPPS, and the survey revealed significant disparities between hospital acquisition costs for drugs acquired through the 340B program and those acquired outside of it. In some instances, the survey found that the beneficiary cost-sharing amount, typically 20% of the total payment, exceeded the total price the hospital paid for the drug.

Significance of the Ruling and Looking Ahead

The provision’s significance lies primarily in its effect on the drug-acquisition economics of hospital outpatient departments (HOPDs) that participate in 340B, a group that includes many of the larger health systems that compete with independent community oncology practices for patients with cancer. The 340B program allows certain hospitals to purchase outpatient drugs, including many oncology drugs, from manufacturers at a discounted price.

Under current policy, Medicare has continued to reimburse those hospitals close to a drug's ASP, meaning hospitals have generally been paid more than their acquisition cost. A narrower spread between ASP and the 340B acquisition discount reduces the margin HOPDs generate on infused and injected oncology drugs, which have been a significant source of hospital outpatient drug revenue and has largely encouraged consolidation of practices into the more expensive hospital setting.

“What happens when you're getting 340B price from such hospitals [is that] they are administering the drugs at a much higher cost than [what] we are doing in community oncology. This causes a very significant asymmetry in the market,” Lucio Gordan, MD, president and managing physician of Florida Cancer Specialists & Research Institute, explained in a previous interview with Targeted Oncology. “What I mean by asymmetry [is], the hospitals get much more powerful because there [are] much more financial resources available, and then they start buying out other community oncology practices and further disintegrating a system that is very efficient, responsible, and high-quality.”

In a statement in response to the proposal, Ted Okon, executive director of Community Oncology Alliance, further expanded on this consolidation pattern’s downstream implications for financial toxicity and patient access in community settings: “When Medicare overpays for 340B drugs and hospital outpatient services, it encourages consolidation and shifts cancer care into the higher-cost hospital setting—raising costs while reducing patient access to independent community oncology practices.”²

CMS is accepting public comments on the proposed rule through the standard rulemaking process, with a final rule expected later this year. Whether the ASP-minus-33.4% rate is adopted as proposed will determine how much of the current margin between 340B acquisition costs and Medicare reimbursement narrows for hospital outpatient departments, a factor that community oncology stakeholders have identified as central to the pace of practice consolidation into hospital-owned settings.

For now, the rule remains a proposal, and its ultimate effect on the competitive landscape between hospital-affiliated and independent cancer care will depend on the terms finalized by CMS.

REFERENCES

1. Centers for Medicare & Medicaid Services. Calendar year 2027 hospital outpatient prospective payment system (OPPS) and ambulatory surgical center (ASC) proposed rule (CMS-1850-P). Fact sheet. Published July 2, 2026. Accessed July 6, 2026. https://tinyurl.com/bj3dvnkm

2. COA Applauds CMS Proposal to Restore the 340B Program to Its Patient-Centered Purpose. News release. Community Oncology Alliance. July 6, 2026. Accessed July 6, 2026. https://tinyurl.com/yhjrckxa