Yesterday, President Trump signed an executive order (EO) that signals the potential reinstatement of Medicare reimbursement cuts for 340B-acquired drugs, which were in effect from January 2018 to June 2022 before being found unlawful by the courts (due to procedural missteps by CMS). The EO also signals a desire to implement payment adjustments for clinician administered drugs. More information on each is below:
The EO signals forthcoming changes to Medicare reimbursement for 340B-acquired drugs.
The order directs the Health and Human Services (HHS) secretary to publish a plan within 180 days for conducting a survey “to determine the hospital acquisition cost for covered outpatient drugs at hospital outpatient departments.” CMS previously enacted cuts through CY 2018 OPPS/ASC Final Rule, reducing acquisition costs from ASP plus 6% to ASP minus 22.5% (equated to a 27% decrease in Medicare reimbursement for 340B-acquired drugs). While the Supreme Court ruled the differential rates unlawful in June 2022, because HHS failed to conduct a prior survey of acquisition costs, the EO requires such a survey and could result in more permanent cuts. Pursuant to budget neutrality requirements in the Social Security Act, a decrease in reimbursement for drugs would necessitate the increase in reimbursement for other services.
Assuming HHS intends to utilize the typical OPPS/ASC rulemaking cycle to accomplish this survey, as it has in the past for prior 340B-related payment considerations, then it seems likely that the plan to conduct the survey will be in the proposed rule that is typically released in July. This rule would then be finalized after a 60-day comment period in October or November. This final rule would then be effective in January 2026. If HHS can then collect provider data from this survey in advance of the next proposed rulemaking cycle, i.e., before July 2026, then it could publish its proposal for any related reimbursement reductions at that time, and finalize the same in October or November 2026. Under this framework, any reductions are not likely to come into effect until January 2027, unless the Administration identifies another path to expedite the rulemaking process.
Despite potential negative financial impacts imposed by these proposed federal actions, state legislative trends favor 340B protections. Several states have passed legislation barring manufacturers from restricting the use of contract pharmacies by 340B covered entities, with several more states with legislation under consideration. Further, at least 12 states, including Texas and Illinois, have passed or proposed legislation barring any Pharmacy Benefit Managers (PBMs) from requiring enrollees to obtain a covered clinician-administered drug from a pharmacy selected by the health benefit plan or PBM with the intent to transport the drug to another site of service for administration (known as “white-bagging”). The positive financial impacts of these state-level protections, where applicable, may indirectly offset the impact of any federal 340B-acquired drug reimbursement reductions.
Rulemaking pursuant to the EO could revive prior Site Neutrality proposals.
The EO also directs HHS to evaluate whether payment within the Medicare program encourages a shift in drug administration volume away from “less costly” physician office settings to “more expensive” hospital outpatient departments. The directive will likely resurrect prior proposals aiming to impose additional regulatory requirements and implement site neutral payments for off-campus hospital outpatient departments (HOPDs). One such proposal, the Lower Costs, More Transparency Act, passed the House in December 2023. Similar language from this Act was also most recently included in a proposed bipartisan budget bill last Fall. Notably, the prior iteration of this bill included a requirement for mandatory compliance attestations and unique National Provider Identifiers (NPIs) for all off-campus HOPDs. While most prior site neutrality proposals explicitly target grandfathered off-campus HOPDs, this EO does not contain the same limitation, potentially extending the concept to both off- and on-campus HOPDs.
Advis is ready to serve as a resource, whether it is providing strategic advice, projecting reimbursement impacts, or completing provider-based compliance assessments and/or attestations for your organization. Please reach out to your Advis consultant with any questions or for further assistance.
Published April 16, 2025
