Mintz IRA Update — 340B Roundup: CMS Proposes Steeper OPPS Clawbacks, Launches Drug Cost Survey with Public Comment

This article is part of the Mintz IRA Update – Fifth Edition. Explore the full series of IRA-related insights here.

In July 2025, CMS issued its 2026 Hospital Outpatient Prospective Payment System (OPPS) proposed rule, which includes two significant 340B policies. First, it includes cuts in the OPPS rates paid to hospitals to accelerate the reduction to the OPPS conversion factor for non-drug services to account for the “overpayment” made to hospitals from 2018 – 2022 as a result of the first Trump administration’s reduction in payment for outpatient 340B drugs during that time. The proposed rule also notified hospitals that CMS plans to conduct a hospital drug acquisition cost survey. The two proposals stem from the same complicated fight between the government and 340B hospitals over reimbursement.

OPPS Payment Cuts

Most drugs under the OPPS are bundled or packaged into the Ambulatory Payment Classifications (APCs) that are established for a procedure. Broadly, APCs are payment rates CMS establishes for outpatient procedures that are meant to capture the cost it would take to provide those services. However, new and/or high-cost drugs are not bunded into the standard APC payment rates that providers receive. These non-bundled drugs, referred to as “separately payable drugs,” have accounted for more than a quarter of all spending under the OPPS in recent years.

Prior to 2018, the Medicare OPPS reimbursed hospitals at 106% of average sales price (ASP) for separately payable drugs. CMS calculates and publishes an ASP — which is the average amount that drug manufacturers receive for a drug product after accounting for all discounts and rebates — pricing file quarterly based on sales and discount data submitted by manufacturers.

In 2018, under the first Trump administration, CMS reduced the OPPS rate paid to 340B hospitals for separately payable drugs by nearly 30% (from 106% of ASP down to ASP minus 22.5%), reasoning that these hospitals (which can acquire drugs at a discounted rate) were receiving a windfall from Medicare. Non-340B hospitals continued to receive the 106% of ASP rate for separately payable drugs. However, the Medicare statute imposes a budget neutrality requirement, meaning any change in payment policies must not increase or decrease Medicare spending by more than a set threshold. As such, the 2018 payment reduction to 340B hospitals for separately payable drugs was offset by an increase in OPPS reimbursement rates for non-drug items and services for all hospitals.

The American Hospital Association (AHA) challenged the 340B payment cuts shortly after they were finalized in 2017. In 2022, the Supreme Court in American Hospital Association et al. v. Becerra et al. ruled that the payment reduction was unlawful and remanded the case. On remand, the district court, rather than formally vacating the OPPS ruling, instructed HHS to remediate the underpayments made to 340B hospitals between 2018 – 2022.

Following the Supreme Court’s ruling, the agency issued a one-time $9 billion payment to approximately 1,600 affected providers and restored 340B reimbursement to 106% of ASP beginning in 2023. As noted, CMS had increased payments for non-drug items and services by $7.8 billion during that same period. To ensure budget neutrality, CMS announced that it would impose a 0.5% annual reduction to the OPPS conversion factor for non-drug services starting in 2025 and ending in 2041 to, in effect, claw back the overpayments made from 2018 – 2022.

As part of the CY 2026 OPPS proposed rule, CMS is seeking to accelerate this clawback / annual payment reduction from 16 to 6 years by increasing the annual conversion factor reduction from 0.5% to 2%. Hospitals paid under the OPPS, including many 340B hospitals, have raised concerns about the financial strain of this acceleration and frontloading of the payments.

Drug Acquisition Cost Survey

Simultaneously, CMS announced that it was conducting a survey on drug acquisition costs and soliciting public comment. The Supreme Court’s ruling in the Becerra case that the 340B payment cuts were invalid was based in part on the fact that the agency did not conduct a proper survey to justify imposing disparate reimbursement on 340B versus non-340B hospitals. Therefore, the survey appears to be laying the groundwork for reimposing reduced OPPS payment to 340B hospitals in the future, although the fact that CMS is soliciting comments on whether participation in the survey should be mandatory for all OPPS hospitals indicates the Trump administration is considering broader payment cuts in Medicare. The survey is expected to run from late 2025 through early 2026 and will inform the 2027 OPPS rulemaking cycle.

Hospitals and stakeholders should closely monitor the evolving regulatory landscape, particularly the implications of the proposed clawback acceleration and the potential for future rate setting based on newly collected acquisition cost data.

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