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News
The Department of Health and Human Services says the 340B Drug Pricing Program has "expanded beyond its original intent," fueling hospital consolidation and inflating costs. A new HHS report backs a proposed rule that would slash 340B reimbursements significantly below current rates. Hospital groups are pushing back hard — and threatening lawsuits.
The HHS has released a pointed new report arguing that the 340B Drug Pricing Program — originally designed in 1992 to help safety-net hospitals afford medications — has ballooned far beyond its intended scope, now topping $100 billion in purchases in 2025. According to HHS, the program's generous reimbursement margins are incentivizing hospitals to consolidate, pursue high-cost drugs, and prioritize revenue over patient outcomes.
To rein things in, the administration is proposing to cut 340B reimbursements from the current average sales price (ASP) plus 6% down to 33.4% below ASP — a dramatic reduction. HHS data shows that outpatient drug spending growth "generally plateaued" during a similar payment cut imposed by CMS from 2018–2021, then surged ~25% per year after the Supreme Court reversed it in 2022 — lending support to the new proposal.
Hospital groups aren't having it, calling the proposal "straightforwardly unlawful" and threatening litigation. Critics also note that a budget-neutral offset boosting non-drug outpatient payments could actually benefit for-profit hospitals while burdening safety-net facilities and their patients.
By the Numbers:
Why it matters: The 340B program is a financial lifeline for many safety-net hospitals, but HHS argues it's being used in ways that drive up costs for patients and payers alike. The outcome of this policy battle could reshape how hospitals fund care for vulnerable populations.
