CMS Proposes Cuts to 340B Drug Pricing Program Payments in 2027 Medicare Rule

Jul 7, 2026

The Centers for Medicare & Medicaid Services proposed a calendar year 2027 rule on July 2, 2026, to cut 340B Drug Pricing Program payments by $5.7 billion, reducing rates to average sales price minus 33.4%. The proposal aims to save original Medicare beneficiaries $1.15 billion and taxpayers $4.55 billion. The rule also introduces site-neutral imaging payments to save $260 million and expands botulinum toxin utilization management, amid ongoing equity concerns for rural and public hospitals.

340B payment reduction proposal

▪The Centers for Medicare & Medicaid Services proposes to pay for 340B-acquired drugs at average sales price minus 33.4% starting in calendar year 2027, down from average sales price plus 6%.
▪Due to statutory budget neutrality requirements, Hospital Outpatient Prospective Payment System payments for nondrug services would increase by an amount equivalent to the proposed 340B payment cuts.
▪On July 2, 2026, the Centers for Medicare & Medicaid Services proposed a calendar year 2027 rule to cut 340B Drug Pricing Program payments.
▪The proposed Centers for Medicare & Medicaid Services rule would reduce total drug spending by approximately $5.7 billion in 2027.

Medicare beneficiary cost savings

▪The proposed 340B payment change is estimated to save original Medicare beneficiaries a collective $1.15 billion in drug costs in the first year.
▪The proposed 340B payment change is estimated to save taxpayers $4.55 billion in drug expenditures in the first year.

Site-neutral imaging payment equalization

▪The site-neutral imaging proposal is estimated to reduce beneficiary premiums by $70 million and beneficiary cost sharing by another $70 million.
▪The site-neutral imaging proposal is projected to reduce Medicare Part B expenditures by approximately $260 million in the first year, including $190 million in program savings.
▪The Centers for Medicare & Medicaid Services proposed equalizing payment rates between physician offices and off-campus provider-based departments for certain imaging services like x-rays and MRIs.

Botulinum toxin utilization management

▪The Centers for Medicare & Medicaid Services is expanding utilization management in hospital outpatient departments to additional botulinum toxin injection services.
▪Claim volumes for botulinum toxin injection services in hospital outpatient departments surged 42.8% from 2017 to 2024.
▪The Centers for Medicare & Medicaid Services projects more than $17 million in net annual savings from expanding utilization management to botulinum toxin injection services.

340B program equity concerns

▪The proposed 340B payment cuts occur amid ongoing questions regarding whether 340B program savings are successfully reaching the patients the program was designed to help.
▪Research on the remedy for prior, court-invalidated 340B payment cuts found that hospitals left out of repayments were disproportionately rural, publicly owned, and nonacademic.