In the 2023 Outpatient Prospective Payment System (OPPS) final rule, the Centers for Medicare & Medicaid Services (CMS) finalized a change to reimbursement for 340B drugs in Medicare Part B, changing reimbursement from average sales price (ASP)-22.5% (as it was from 2018-2022) to ASP+6%. Avalere Health previously estimated the impact of this change to Medicare payments. Based on CMS’s intention to survey hospitals on average acquisition cost as described in the 2026 OPPS proposed rule, Avalere Health refreshed the prior analysis to estimate how overall hospital payment would be impacted by using an alternative, survey-based rate.

A prior survey of acquisition costs conducted in 2020 found that a reimbursement rate of ASP-28.7% may be appropriate. Avalere Health found that if this rate were applied to calendar year (CY) 2024 claims and implemented in a budget-neutral manner, Part B payment would have increased for 78% of all hospitals compared to the current reimbursement methodology of ASP+6%. In addition, by transitioning to a survey-based methodology, CMS would have spent $4 billion less on 340B-acquired drugs in CY 2024.

Background

The 340B program allows eligible hospitals to purchase outpatient drugs at or below an established ceiling price.  Some hospitals negotiate further “sub-ceiling” discounts that vary by drug and facility. In the CY 2025 OPPS proposed rule, CMS suggested that the agency may leverage acquisition costs for 340B-acquired drugs to adjust reimbursement policies for these products in future rulemaking.

In the past, CMS proposed alternative reimbursement approaches for 340B-acquired drugs relying on hospital survey data. In 2020, CMS conducted a survey of hospitals to determine acquisition costs for 340B-acquired drugs, determining an average discount for these products of 34.7%. In the 2021 OPPS Proposed Rule, CMS considered adopting a payment policy of ASP-28.7% to account for the average discount of 34.7% while maintaining an add-on amount equivalent to 6% of ASP. However, CMS ultimately adopted a reimbursement rate of ASP-22.5% and reverted back to ASP+6%.

As CMS is preparing to conduct a new 340B drug acquisition cost survey, Avalere Health assessed the facility-level impact that an alternative reimbursement level of ASP-28.7% would have compared to the current reimbursement rate of ASP+6%. When CMS previously reduced reimbursement rates for 340B-acquired drugs, the policy was implemented in a budget-neutral manner that redistributed savings on 340B drug payments by increasing rates for non-drug items and services among all hospitals. Avalere Health’s analysis assumes a similar approach is utilized, as directed by President Trump in Executive Order 14273.

Findings by Hospital Type

Avalere Health reviewed CMS spending on 340B-acquired Medicare Part B drugs in CY 2024 to assess the impact on payments if CMS were to leverage survey-based rates for reimbursement. By transitioning to a survey-based reimbursement of ASP-28.7%, CMS would have spent $4 billion less in CY 2024, which could be redirected to increase payments for non-drug services. Avalere Health distributed the $4 billion among OPPS hospitals based on their share of total non-drug spending to approximate the approach used in prior rulemaking that made a budget neutrality adjustment to the OPPS conversion factor to increase payment for non-drug items and services.

Based on the analysis, Avalere Health estimates that increased payment for non-drug items and services would increase net payments for 78% of OPPS hospitals, including 68% of rural, 86% of urban, 96% of sole community hospitals, and 75% of rural referral centers. On average, rural facilities would experience a 3% reimbursement increase with urban facilities experiencing an almost 6% bump. Furthermore, 53% of 340B hospitals would see an overall net increase in payment and the average change in reimbursement among all 340B hospitals would be an increase of 0.1%.

Findings by Hospital Size

Avalere’s research indicated that small hospitals with fewer than 100 beds would experience a 6% increase, the biggest impact resulting from a finalized policy. Hospitals with 100-500 beds would have a 4.15% increase, and hospitals with more than 500 beds would face an average decrease of just over 1%.

What’s Next?

The 340B program has continued to grow in recent years, meaning the impacts of a shift to survey-based reimbursement model observed in this analysis were larger than those observed in Avalere’s prior analysis. Redistributing these savings under budget neutrality would therefore have a larger impact on the OPPS conversion factor, and the facility-level impact would depend on what share of a hospital’s revenue is derived from administering 340B drugs versus the non-drug services provided at the site. As CMS proceeds with an acquisition cost survey, stakeholders should continue to assess the impacts to specific hospital types/categories of revised reimbursement methodologies and distribution of Medicare savings on 340B-acquired products.

Funding for this research was provided by the Community Oncology Alliance. Avalere maintained full editorial control.

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Methodology

Avalere used 100% Medicare Part B claims data accessed via the Centers for Medicare & Medicaid Services (CMS) Virtual Research Data Center (VRDC Data) for Medicare FFS beneficiaries from 2024. Avalere annualized claims from the Medicare Outpatient File from Q1 to Q4 of CY 2024, isolating payment for 340B drugs using the “JG” or “TB” modifier billed on separately payable drug claims. Claims from 2024 reflected payment at ASP+6%. Payment was then calculated to reflect an alternative survey-based approach of ASP- 28.7%. In the alternative scenario, the decrease in 340B-acquired drug spending was proportionally distributed among hospitals based on their share of total payments for non-drug items and services. Avalere Health assessed current (as of August 2025) hospital 340B participation using the Health Resources and Services Administration’s Office of Pharmacy Affairs Information System. Avalere also assessed total 340B drug spending in CY2024 for beneficiaries identified with COVID-19 based on diagnosis or medication use and found that this cohort accounted for 11.4% of total 340B drug spend ($1.5B).