CMS Proposes Changes That Would Impact 340B Covered Entities

7/22/2025 – CMS Proposes Changes That Would Impact 340B Covered Entities

Last week, CMS published two proposed rules impacting 340B covered entities. On July 16, CMS published its annual 2026 Physician Fee Schedule Proposed Rule (PFS), which includes alternative proposals for identifying 340B drugs for purposes of the Inflation Reduction Act (IRA). On July 17, CMS published its annual 2026 Outpatient Prospective Payment System Proposed Rule (OPPS), which includes two provisions that would impact 340B hospitals.

2026 PFS Proposed Rule. In this rule, CMS makes two proposals for implementing the requirement that CMS exclude 340B drugs for purposes of calculating IRA Part D rebates amounts: 1) exclude 340B claims based on pairing prescriber and contract pharmacy information; and 2) create a data repository to which covered entities would submit claims data. In the preamble discussion, CMS states that it will default to the first approach. Any shift to the second approach would be announced by CMS via notice-and-comment rulemaking. Comments on the proposals are due by September 12, 2025.

Under the first option, called the “Prescriber-Pharmacy Methodology,” CMS would identify 340B claims by pairing the NPIs of prescribers who provide care at covered entities with contract pharmacy designations on OPAIS. Any paired claims would be removed from the calculation of the IRA rebate amount for the Part D rebate. CMS acknowledges that the Prescriber-Pharmacy Methodology is unlikely to identify accurately all 340B claims and it proposes to conduct a manual review of this matching algorithm to identify and correct errors or omissions. For example, referral prescriptions would not be captured by this approach because the prescriber NPI would not be exclusive to a covered entity, and prescriptions written by prescribers who practice at a covered entity and outside of a covered entity might be incorrectly captured.

Under the second option, CMS proposes to test a voluntary 340B repository to which covered entities would submit certain data elements from Part D 340B claims to allow CMS to remove those claims from the Part D rebate calculation. The proposed data repository, while falling short of the neutral clearinghouse model advocated by covered entities, would still allow for the retrospective identification of 340B claims which is one of covered entities’ longstanding priorities. Among other things, a data repository would make it more likely that covered entities could carve in IRA drugs within their contract pharmacy arrangements. 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. In the preamble to the proposed rule, CMS states that it is considering mandatory reporting in the future and encourages covered entities to submit data during the voluntary period to prepare for that possibility. CMS expects the repository to be available in the Fall of 2026 to allow covered entities to submit data with dates of service on or after January 1, 2026. CMS also notes that it “expects” DSH hospitals, FQHCs and critical access hospitals to submit data during the testing period and that more information about submission deadlines and related details will follow. Additional details about the voluntary repository proposal can be found in the agency’s request for OMB approval to collect information via the data repository.

2026 OPPS Proposed Rule. Two items in the hospital OPPS proposed rule relate to the Supreme Court’s decision that CMS’ previous reduction in Medicare reimbursement to hospitals for 340B Part B drugs violated a provision in the Medicare statute that requires CMS to take a survey of hospital costs before making this type of payment cut. Am. Hosp. Ass’n v. Becerra, 142 S. Ct. 1896, 1906 (2022). Comments on the rule are due September 15, 2025.

In the preamble to the proposed rule, CMS announced that it will conduct a hospital acquisition cost survey of outpatient drugs to allow it to reduce Medicare payment to hospitals for Part B 340B drugs in the future. The survey will be open beginning at the end of 2025 through early 2026. CMS is seeking comments on how to interpret non-responses to the survey. CMS stated that it plans to use the data to inform hospital outpatient payment rates for 2027.

In the 2023 OPPS final rule, CMS had finalized a plan to offset the settlement payments to 340B hospitals that it made in 2024 as the result of the Supreme Court decision by reducing OPPS payments for non-drug items and services by .5% over 16 years. CMS now proposes to accelerate the OPPS payment cuts by applying either a 2% reduction over a 6-year period or a 5% reduction over three years.

Powers will continue to monitor these proposals and other drug pricing developments. Please contact Powers’ drug pricing team, or your lead Powers attorney, if you have any questions.