Medicare will pay hospitals far less for 340B drugs starting next year. The Centers for Medicare & Medicaid Services (CMS) finalized the cut on Wednesday, Nov. 4, in its 2027 payment rule for hospital outpatient care.
What changed
The 340B program lets eligible hospitals buy outpatient drugs from manufacturers at steep discounts. Until now, Medicare has paid those hospitals the drug's average sales price (ASP, the average price manufacturers charge) plus 6%. Under the final rule, Medicare will pay ASP minus 28%.
CMS bases the cut on a survey conducted from January to April 2026. The agency says the survey found large gaps between what hospitals pay for 340B drugs and what Medicare pays them. CMS estimates the change will reduce Medicare drug spending by about $5.5 billion in 2027.
Who gains and who loses
Federal law requires the change to be budget neutral, so CMS will pay more for non-drug outpatient services by the same amount. Patients benefit directly: CMS expects those who receive a qualifying drug in a hospital outpatient department to save an average of $900 in 2027.
The redistribution is uneven. For-profit hospitals cannot join 340B, so they receive the higher payments without losing drug revenue. A KFF analysis published Nov. 6 finds that their outpatient revenue will rise 6.8% on net, and concludes that the cuts will hit safety-net hospitals hardest. The American Hospital Association objects to the rule and warns that lower payments will strain hospitals serving rural and low-income communities.
What else to watch
The payment cut is not the only change pending for 340B.
- The rebate pilot. On Jan. 1, a federal pilot will let 10 drugmakers, covering 21 drugs, replace upfront 340B discounts with rebates paid after the sale. Hospitals would pay full price first and recover the discount later. The American Hospital Association and others sued in October to block the pilot, and a bipartisan House bill would delay it. We covered the details in 340B in Late 2026: What Hospitals Should Watch.
- The SECURE 340B Act. This House bill would freeze rebate programs for four years while a new system for checking claims is built. It had not reached a vote when last reported.
As of Nov. 8, we found no new ruling on either item this week.
The bottom line
The change from ASP plus 6% to ASP minus 28% is a 34-point drop in the payment rate, and it changes the economics of 340B for hospitals that depend on it. Hospitals will want to estimate their 2027 outpatient revenue under both effects of the rule: the lower drug payments and the higher payments for other services.
Sources: Medicare will cut billions from 340B, expand site-neutral payments in 2027, BioPharma Dive; Medicare Outpatient Final Rule Expands Surgical Options, Lowers Out-of-Pocket Costs for 340B Drugs, CMS; Medicare Cuts to 340B Drug Payments Will Hit Safety-Net Hospitals While Benefiting For-Profit Hospitals, KFF; 5 big questions as the 340B rebate pilot nears launch, Becker's Hospital Review; Inside the 340B Rebate Pilot Standoff, Pharmaceutical Commerce; Why It Matters: 340B drug discount program splits, Legis1.