CMS Proposes a Sharp Cut to What Medicare Pays Hospitals for Drugs Bought Through the 340B Discount Program

On July 2, 2026, CMS issued a proposed rule for 2027 hospital outpatient payments that would significantly change how Medicare reimburses hospitals for prescription drugs purchased through the 340B Drug Pricing Program. Under that program, created by Congress in 1992, drug manufacturers must sell certain medications to qualifying hospitals and clinics at steep discounts. Currently, Medicare reimburses hospitals for those drugs at the drug's average sales price plus 6 percent. The proposed rule would cut that rate to average sales price minus 33.4 percent, a shift of nearly 40 percentage points. CMS cited a survey of hospital acquisition costs conducted between January and April 2026 showing that 340B hospitals pay substantially less for those drugs than the current Medicare payment implies. Because Medicare beneficiaries owe a share of the Medicare reimbursement rate as their copay for Part B drugs administered in hospital outpatient settings, a lower reimbursement rate would reduce patient out-of-pocket costs for treatments such as infusion therapies and certain cancer medications. CMS designed the proposal to be budget neutral, meaning projected savings from lower drug payments would be redistributed to higher reimbursements for other hospital outpatient services. Comments on the proposed rule are due August 31, 2026.