Pricing
How hospitals can prepare for heightened 340B oversight
Proposed changes to the 340B Drug Pricing Program threaten to make the program administratively burdensome for U.S. hospitals.
Published
8 hours ago
Momentous change may be looming for the 340B Drug Pricing Program, currently managed by the Health Resources & Services Administration (HRSA). An ongoing debate regarding the program’s effectiveness reflects broad concerns regarding transparency, oversight and program integrity.
At the center of the debate are questions about implementation of HRSA’s 340B Rebate Model Pilot Program. Although a federal court decision on Dec. 29, 2025, paused the program, the agency has since reopened discussion on the rebate-based framework through a request for information seeking stakeholder feedback.a
Hospital associations and safety-net providers argue that replacing upfront discounts with rebates after purchase could create significant financial pressures, increase administrative burden and divert resources away from patient care.b Meanwhile, policymakers, regulators and manufacturers continue to pursue changes aimed at increasing oversight and accountability within the program, creating immediate operational questions for hospital leaders.
A policy shift on 340B’s model
Safety-net providers and HRSA see 340B as a flexible tool for equitable access. But reformers aligned with CMS and pharmaceutical companies contend that transparent, legally binding policies and data-driven monitoring are necessary for a program of this scale. These views are driving a 340B policy shift from a trust-based model toward a more regulated one, with stricter compliance expectations.
That shift is already visible in federal policy. In the FY26 federal budget, the Trump administration proposed transferring oversight of the 340B program from HRSA to CMS within the “Make America Healthy Again” initiative, with CMS assuming core 340B program functions, including eligibility assessments, recertifications, audits and management of the Office of Pharmacy Affairs information system.c
Although HRSA continues to administer the program, the transfer proposal reflects how federal policymakers may view 340B’s future direction. (See the first and second sidebars at the end of this article for further discussion of the push by CMS and pharmaceutical companies toward rebate model for 340B, and for a review of 340B transparency reform proposals by federal legislators.)
Meanwhile, CMS has proposed payment modifications to the program that signal increased scrutiny of reimbursement and acquisition costs. CMS is pursuing a long-term 340B remedy repayment plan, including a 0.5% reduction to the OPPS conversion factor for non-drug items and services beginning in CY26. Although CMS had proposed accelerating recoupment through a larger annual reduction, the previously finalized 0.5% reduction for CY26 was retained, while a larger reduction beginning in CY27 may be revisited.d
5 steps for strengthening 340B operations
The central question for hospitals is how to protect the 340B revenue stream while demonstrating its consistency with the program’s intent. If CMS assumes authority, hospitals should expect stronger checks on compliance processes and the need for more detailed financial reporting linking 340B savings to measurable community benefits. HRSA audits have become more frequent and data-intensive, signaling what may become the norm under CMS administration.e
Hospitals can best prepare for such changes by adopting the following recommendations.
1 Strengthen governance and compliance infrastructure. One of the most effective measures for this purpose is to create an internal 340B oversight committee, with a focus on assessing regulatory readiness and ensuring regular program integrity monitoring. The committee should include representatives from pharmaceutical services, compliance, finance, legal and data analytics. HRSA’s 340B Compliance Improvement Guide suggests that covered entities form cross-departmental oversight teams to coordinate education, auditing and leadership accountability efforts.f Conducting a “pre-audit” internal assessment based on HRSA’s audit framework can help organizationsidentify and correct weaknesses before CMS implements new standards. Key points of review for an assessment include patient eligibility documentation, contract pharmacy oversight, Medicaid exclusion files and internal audit frequency.g
2 Build internal transparency and tracking tools. Beyond compliance, hospitals should proactively strengthen financial transparency. If CMS assumes control, it may seek to align 340B reporting with its cost report and uncompensated care frameworks. To prepare, hospitals should begin tracking how they use 340B savings and categorizing expenditures by community benefit type, such as charity care, prescription assistance and behavioral health programs. Building an internal dashboard that quantifies savings and downstream community impact could improve accountability and protect hospitals from public criticism regarding how they use 340B funds. HRSA’s existing program guidance underscores the need for auditable financial trails, and CMS would likely formalize such expectations.h
3 Upgrade data and technology systems. Data and technology infrastructure will be essential. Hospitals should assess whether their pharmacy information systems, electronic health records and claims processing platforms can enable them to:
- Reconcile and report 340B drug transactions at the product or FDA National Drug Code leveli
- Reconcile inventory between in-house and contract pharmacies
- Distinguish between 340B-eligible and non-eligible prescriptions
Recent manufacturer requirements for claims-level data submissions further highlight the importance of robust data infrastructure and the ability to generate transaction-level records linking 340B purchases to eligible patients and encounters.j Investing in automated audit and analytics tools can help prevent human error, reduce compliance costs and facilitate smoother integration with CMS data environments.
4 Shape the policy narrative with concrete examples. Policy engagement and narrative framing are equally important. Hospitals and community health centers that depend on 340B revenue should participate in discussions led by national associations such as 340B Health and state hospital associations. These forums provide updates on proposed rulemaking and allow providers to advocate for an implementation approach that preserves 340B’s safety-net mission.
Beyond strictly serving underserved populations, the expanded program has already generated revenue.k Preparing briefs that document how program savings have been reinvested into patient care can help organizations maintain credibility and influence policy discussions during the transition.
5 Revisit mission communication and strengthen the value narrative. Hospitals should also revisit their mission communication. HRSA’s original intent for 340B was to enable covered entities to stretch limited federal resources.
By aligning compliance documentation with that mission, a hospital can best defend the program’s legitimacy if CMS adopts a stricter interpretation of value and accountability by linking 340B savings to measurable community outcomes. Creating case studies that show how 340B funds supported rural outreach, chronic disease management or medication affordability for uninsured patients can strengthen both internal morale and external stakeholder trust.
The overarching message for hospitals
The 340B program is experiencing heightened scrutiny that will be shaped by litigation, evolving manufacturer requirements, transparency initiatives and ongoing debates regarding CMS oversight and rebate-based purchasing models. Whether reforms lead to rebate models, expanded reporting requirements, enhanced audits or CMS oversight, hospitals that have strong governance, transparency and accountability practices and can clearly demonstrate how 340B savings support patient care will be best positioned for success.
By strengthening operations now, hospitals can best navigate policy changes while preserving the 340B’s safety-net mission.
Footnotes
a. Hut, N., “340B rebate model pilot advances as providers warn of added costs,” HFMA, June 15, 2026; and HRSA, “340B Rebate Model Pilot Program,” program updates, date last reviewed, May 2026.
b. American Hospital Association, “AHA’s response to HRSA request for information Re: A potential 340B rebate model pilot program,” comment letter, April 20, 2026; and Hut, N., “340B rebate model pilot advances as providers warn of added costs,” HFMA, June 15, 2026.
c. Early, B., “340B may move from HRSA to CMS: What you need to know,” Modern Healthcare, June 2, 2026; and Hammer, E., “President continues Make America Healthy Again focus in FY 2027 budget,” Applied Policy, page accessed July 21, 2026.
d. CMS.gov, “Calendar year 2026 hospital outpatient prospective payment system OPPS and ambulatory surgical center final rule (CMS-1834-FC),” fact sheet, Nov. 21, 2025.
e. Morgan Lewis, “No surprise: 340B audits are on the rise!” blog post, Sept. 9, 2024.
f. HRSA, 340B Compliance Improvement Guide, Oct. 1. 2015 (appendices K & L updated March 1, 2016).
g. HRSA, “Agency information collection activities: Proposed collection; public comment request; information collection request title: 340B Rebate Model Pilot Program application, implementation, and evaluation, OMB Number 0906-0111 – extension,” Federal Register, Sept. 12, 2025.
h. HRSA, “Program requirements,” page last reviewed June 2024.
i. Code of Federal Regulations, Part 10—340B Drug Pricing Program, Title 42, Chapter 1, Subchapter A, last amended June 6, 2026; and Medicaid.gov, “Medicaid Drug Programs (MDP) system access,” page last updated April 30, 2025.
j. Czajkowski, B., “AstraZeneca tightens contract pharmacy restrictions to require claims data submission,” 340B Report, Sept. 12, 2024.
k. Long, R., et al., Cui Bono? Misaligned incentives in the 340B program, USC Schaeffer Center for Health Policy & Economics, Sept. 29, 2025.
Drug manufacturers’ perspectives and the debate over a rebate-based model for 340B
Amid the federal government’s policy shift with respect to the 340B Drug Pricing Program, drug manufacturers have argued against current policy. The 340B statute is vague on how many contract pharmacies a provider can use, and some hospitals have partnered with dozens or even hundreds of pharmacies.a
As a result, more than 20 major manufacturers have implemented restrictions on 340B pricing for contract pharmacies, citing issues such as duplicate discounts and improper distribution of 340B drugs.b AstraZeneca, Amgen and other companies have pushed for a transition to rebate-based models, arguing that they would improve oversight within the program.c
Some suggest shifting toward a rebate system would restore accountability and transparency. However, many providers counter that rebate-based approaches would create payment delays and weaken the financial viability of safety-net institutions.d Providers believe rebate-based systems increase administrative burden and limit flexibility in how funds are utilized. Financially challenged hospitals and clinics suggest that the loss of up-front discounts could adversely affect service delivery and responsiveness.
Footnotes
a. HRSA, “Contract Pharmacy Services,” 340B Drug Pricing Program, page last reviewed June 2024.
b. Rogers, H-A. “Litigation continues overuse of contract pharmacies in 340B Drug Discount Program,” Congress.gov, legal sidebar, May 23, 2024.
c. Mirga, T., “Amgen sues HHS in defense of the company’s 340B contract pharmacy restrictions,” 340B Report, Dec. 20, 2022; and Czajkowski, B., “AstraZeneca tightens contract pharmacy restrictions to require claims data submission,” 340B Report, Sept. 12, 2024.
d. DiGiorgio, A. M., and Winegarden, W., “Reforming 340B to serve the interests of patients, not institutions,” JAMA Health Forum, July 26, 2024.
Federal 340B transparency reform proposals
As legal pressures intensify and manufacturers increasingly seek transaction-level visibility into 340B utilization, federal legislators are also advancing transparency reforms to create more standardized reporting across 340B.
Between 2023 and 2024, three bipartisan proposals sought to establish universal reporting requirements and direct 340B savings toward patient care:
The SUSTAIN (Supporting Underserved and Strengthening Transparency, Accountability and Integrity) 340B Act would assess the equity impact of savings by requiring covered entities to report annually on prescription discount totals, 340B transaction profits, spending categories and patient demographic information.a
The 340B ACCESS (Affording Care for Communities and Ensuring a Strong Safety-net) Act proposes transparency dashboards showing how each covered entity claims to use 340B savings, along with audits targeting entities flagged for potential non-compliance.b
The 340B PATIENTS (Pharmaceutical Access To Invest in Essential, Needed Treatments & Support) Act of 2024 would obligate covered entities to show the impact of 340B funds on low-income or uninsured populations, and HRSA would be required to publicly report organizations’ compliance performance grades.c
A 2025 report from Sen. Bill Cassidy (R-La.), chair of the Senate Committee on Health, Education, Labor and Pensions, highlights the lack of clarity surrounding how major covered entities utilize 340B savings and calls for more detailed annual reporting on usage related to patient benefits and contract pharmacy agreements.d
These reforms, along with those by states, have met with resistance from both manufacturers and providers, highlighting competing visions for 340B’s future (for examples of state reforms, see the sidebar “Proposed reforms of 340B at the state level,” below). Provider groups such as the American Hospital Association (AHA) argue that mandatory spending requirements may reduce flexibility and negatively impact providers in rural or underserved areas.e The AHA supports voluntary reporting and has promoted its own Good Stewardship Principles while opposing federal mandates that are administratively burdensome.
Footnotes
a. Thune, J., “Supporting Underserved and Strengthening Transparency, Accountability, and Integrity Now and for the Future of 340B Act (SUSTAIN 340B Act),” discussion draft explanatory statement and supplemental RFI, accessed June 22, 2026.
b. Congress.gov, “HR 8574 – 340B ACCESS Act, H.R.8574,” 118th Congress, Dec. 17, 2024.
c. Welch, P., “Welch introduces 340B PATIENTS Act to lower prescription drug costs for health care providers serving America’s most vulnerable, rural, and low-income patients,” press release, Sept. 11, 2024.
d. U.S. Senate Committee on Health, Education, Labor and Pensions, “Chair Cassidy releases report on 340B reform, calls for congressional action,” press release, April 24, 2025.
e. AHA, “340B hospital commitment to good stewardship principles,” May 13, 2024.
Proposed reforms of 340B at the state level
In addition to federal-level efforts to reform the 340B Drug Pricing Program, states are actively pursuing such efforts. Washington, Maine and Minnesota have all passed laws mandating that covered entities report their 340B-related income and expenditures annually). In Minnesota, covered organizations must disclose metrics such as total purchase cost, payments received for 340B drugs, contract pharmacy payments, and the number of claims, all broken down by payer type.a Hospitals in Maine must report their 340B savings in relation to total pharmaceutical spending, the community benefits derived from those savings, and the internal oversight processes they use, with a summary report made publicly available.b In Washington, reporting is tied directly to informing future Medicaid payment reforms.c
California has adopted the strictest reforms to date. Proposition 34 requires that at least 98% of 340B savings be used for patient care services, with monetary fines or loss of state funds for noncompliance.d This regulation shifts the focus back to patient benefit and has become a model for stricter enforcement of transparency at the state level. California Assembly Bill 1460 aims to protect contract pharmacy agreements from manufacturer discriminatory pricing practices, prohibiting manufacturers from restricting 340B discount eligibility based on pharmacy agreements and permitting state enforcement.e
Footnotes
a. Newton, W., “Minnesota imposes nation’s first 340B covered-entity reporting requirements,” 340B Report, June 23, 2023.
b. Maine Health Data Organization, “Maine hospitals participating in federal 340B Drug Program,” paged accessed June 29, 2026.
c. Animashaun, F., “State 340B Legislation Protects Drug Access, Sets Reporting Requirements,” America’s Essential Hospitals, April 9, 2024.
d. Legislative Analyst’s Office, “Proposition 34: Restricts spending of prescription drug revenues by certain health care providers,” Nov. 5, 2024.
e. LegiScan, CA State Legislature page for AB1460, “California Assembly Bill 1460: Prescription drug pricing,”engrossed as of July 16, 2025.
