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    Cuts to Medicare Payment for 340B-Acquired Drugs

    Under the first Trump administration, the Centers for Medicare & Medicaid Services (CMS) significantly reduced Medicare Part B reimbursement rates for physician-administered drugs acquired through the 340B program. From Jan. 1, 2018, through Sept. 27, 2022, the agency reduced payment rates for these drugs from the average sales price plus 6% to average sales price minus 22.5%. The agency’s justification for this reduction in payment rates was that because 340B hospitals acquire these drugs at a discount, they should not be reimbursed at the same level as non-340B hospitals. The agency further contended that the policy would help to reduce out-of-pocket expenses for Medicare beneficiaries, who are responsible for a 20% coinsurance payment under Part B. Because the agency pursued this policy through the Medicare Outpatient Prospective Payment System (OPPS) annual rule, the agency was statutorily required to implement the change in a budget-neutral manner, resulting in slightly higher payments for nondrug items and services.

    After this policy was finalized, the AAMC — along with the American Hospital Association (AHA), America’s Essential Hospitals, and three hospitals — sued the administration, arguing that the agency had exceeded its statutory authority. In June 2022, the U.S. Supreme Court reached a unanimous decision striking down the policy. In their opinion, the court determined that because the government did not conduct a survey of OPPS hospitals’ acquisition costs before finalizing these payment cuts, the policy is therefore unlawful. Following the Supreme Court decision, the AAMC and the other hospital group plaintiffs issued a statement noting, “This decision is a decisive victory for vulnerable communities and the hospitals on which so many patients depend.” After the court decision, the CMS finalized a rule to repay 340B hospitals the full $10.5 billion in Part B drug payments that were withheld from 2018 to 2022. The CMS also finalized a policy to begin recouping the $7.8 billion in budget neutrality payments for nondrug items and services beginning in 2026.

    In July 2025, the CMS indicated its interest in revisiting this policy via the calendar year (CY) 2026 OPPS proposed rule, which proposed to conduct a survey of hospital acquisition costs to inform reimbursement of separately payable drugs under OPPS in future rulemaking. This survey was finalized in November 2025 and the survey formally launched on Jan. 1, 2026, running through April 7, 2026.

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