CMS Proposes Rule Linking Medicare Drug Payments to Actual 340B Hospital Costs
On July 2, 2026, the Centers for Medicare and Medicaid Services issued a proposed payment rule that would tie Medicare reimbursements to what hospitals actually paid for drugs acquired through the 340B drug discount program. CMS estimates the rule would save Medicare $4.55 billion and reduce patient out-of-pocket costs by $1.15 billion in its first year. The 340B program, which requires drug manufacturers to provide steep discounts to safety-net hospitals, grew to approximately $100 billion in drug sales in 2025.
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The 340B drug discount program was established under the Public Health Service Act to require drug manufacturers to provide discounted outpatient drugs to hospitals serving low-income patients. According to the Washington Examiner, the program has grown to $100 billion in drug sales as of 2025, making it, the outlet stated, "the largest government program most people have never heard of."
The proposed CMS rule, issued under the leadership of CMS administrator Dr. Mehmet Oz, would align what Medicare pays hospitals to administer 340B drugs with what those hospitals actually paid for those drugs. CMS's own estimates project $4.55 billion in Medicare savings and $1.15 billion in reduced patient cost-sharing in the first year alone.
The Washington Examiner, which ran an op-ed by Phil Kerpen, president of American Commitment, described the program as having become "a massive revenue engine for big nonprofit hospital systems." The piece cited CMS data showing that 340B hospitals reported their actual drug acquisition costs at roughly half the rate of non-340B hospitals — a 28.6% compliance rate — when CMS requested the data. CMS also identified cases where a patient's 20% coinsurance payment exceeded the total amount the hospital paid for a drug under 340B.