Yesterday’s Federal Register includes CMS’s annual 2026 Physician Fee Schedule Final Rule, which describes how CMS will exclude 340B claims from the calculation of the rebate amount that manufacturers must pay Medicare for raising their drug prices faster than the rate of inflation under the Inflation Reduction Act (IRA). The rule adopts the two methodologies set forth in the proposed rule, which are: 1) pairing prescriber and contract pharmacy information to identify 340B claims (Prescriber-Pharmacy Methodology) to calculate the rebate amount; and 2) creating a data repository to which covered entities may voluntarily submit claims data. Although CMS acknowledges that neither methodology will accurately exclude all 340B claims, the agency rejected covered entities’ longstanding recommendation to establish a neutral clearinghouse for managing 340B claims, an option that would likely yield more accurate results.

Under the Prescriber-Pharmacy Methodology, CMS will identify claims as 340B if the NPI of the prescribing provider is affiliated with a covered entity and the dispensing pharmacy is a contract pharmacy of the covered entity on OPAIS. CMS will remove any paired claims from the calculation of the IRA Part D rebate amount. CMS stated that this methodology is expected to remove about 10% to 35% of total Part D units from the calculation.

Concurrently, CMS will test a voluntary 340B repository to which covered entities may submit certain data elements from Part D 340B claims for dates of service on or after January 1, 2026 to allow CMS to remove those claims from the Part D rebate calculation. The data elements to be included are: 1) date of service; 2) prescription number; 3) fill number (i.e., original or refill); 4) pharmacy NPI; and 5) NDC. CMS states that it expects to make an announcement that the repository is available in the Fall of 2026.

CMS proposed both provisions in its 2026 Physician Fee Schedule Proposed Rule published in July. RWC-340B commented on both proposals, expressing concern over the accuracy of both methodologies. RWC-340B wrote that the repository represents a step in the right direction because it would allow for the retrospective identification of 340B claims, which is one of the advantages of the clearinghouse proposal. Identification of 340B claims at the point of sale is a longtime barrier to contract pharmacies dispensing 340B drugs on behalf of covered entities. However, RWC-340B is still concerned about the data repository approach because it will give manufacturers access to covered entities’ 340B claims data. It will also not be neutral because the validation of 340B claims will be performed by manufacturers rather than HHS or an HHS contractor. Plus manufacturers will likely apply difference metrics, leading to an inconsistent and decentralized mechanism for separating 340B claims from non-340B claims.

In its comments, RWC-340B proposed a neutral third-party clearinghouse model to identify and validate 340B claims for Part D rebate calculations. Such a clearinghouse would be operated by the Medicare Transaction Facilitator or another government contractor that is independent from both manufacturers and covered entities, ensuring impartial, standardized, and consistent application of rules across the program. CMS acknowledged the RWC-340B comment but stated that it believes that Prescriber-Pharmacy Methodology provides a “reasonably accurate identification of the total number of 340B units for the applicable period.” CMS stated that it would address the possibility of mandatory reporting to the 340B repository in future rulemaking.

In the meantime, CMS encouraged covered entities to submit data during the voluntary period to prepare for mandatory reporting in the future. CMS notes that it “expects” DSH hospitals, FQHCs and critical access hospitals to submit data during this testing phase. CMS estimates that 6,500 covered entities would submit data to the voluntary repository and would spend eight hours each submitting the data. CMS did not provide a burden estimate beyond 2026 for data submission.

Powers will continue to monitor activity surrounding exclusion of 340B claims from Part D rebate calculations and other drug pricing developments. Please contact Powers’ drug pricing team, or your lead Powers attorney, if you have any questions.