Medicare Finalizes Lower 340B Drug Payments, Estimating $5.45 Billion Less Drug Spending In 2027
CMS's final 2027 outpatient rule also extends lower imaging rates and adds eight botulinum toxin codes to prior authorization.
The Centers for Medicare & Medicaid Services (CMS), which runs Medicare, finalized a 2027 outpatient payment rule that lowers what Medicare pays for drugs bought under the 340B program, and CMS estimates it would cut total drug spending by about $5.45 billion in 2027 alone. The rule covers hospital outpatient departments and ambulatory surgical centers, and CMS says patients who receive a qualifying drug in a hospital outpatient department would save an average of $900 in calendar year 2027.
The 340B savings estimate
CMS said a survey found hospitals acquire 340B drugs at an average cost significantly below the Average Sales Price. The agency said that matches findings from the Medicare Payment Advisory Commission and industry reports showing Medicare has paid well above acquisition costs.
CMS estimates the change would save people with Original Medicare $1.1 billion in drug costs and save taxpayers a further $4.35 billion, which together make up the $5.45 billion. The agency said the policy passes hospital drug discounts to the beneficiaries who receive the drugs and to taxpayers.
CMS Administrator Dr. Mehmet Oz said the reforms, by "right-sizing payments and rooting out waste," will drive affordability for current beneficiaries.
Cheaper imaging, more surgery options
CMS is extending its policy of paying the lower Physician Fee Schedule equivalent rate, instead of the Outpatient Prospective Payment System rate, for imaging without contrast at off-campus provider-based departments. That covers certain bone density scans, x-rays, ultrasounds, CT scans and MRIs, and the policy already applies to clinic visits and drug administration there. CMS estimates savings of $260 million in 2027 and over $9 billion from 2027 to 2036.
The rule also continues to phase out the Inpatient Only procedure list and adds several hundred surgical procedures to the ASC covered procedures list. CMS said the changes give physicians more flexibility in choosing a care setting and will often lower patients' cost-sharing.
CMS also finalized a proposal letting hospital accrediting organizations with CMS-approved deeming authority check certain administrative requirements of the Emergency Medical Treatment and Labor Act during routine accreditation surveys.
Botulinum toxin prior authorization
CMS will add eight botulinum toxin injection codes to the list of hospital outpatient services requiring prior authorization. Claims for those codes rose 42.8% from 2017 to 2024, an average of 4.6% per year, while overall hospital outpatient service volume fell 8.3%, CMS said.
The agency said it found no clinical or coding explanation for the increase and cited Justice Department reports of fraudulent billing, misbranded products and improper payments involving these services. Medicare will keep covering medically necessary injections, including for chronic migraines and certain other conditions, when a physician documents the need.
CMS directs readers to the Federal Register's public inspection page for the final rule text.
Sources
- Medicare Outpatient Final Rule Expands Surgical Options, Lowers Out-of-Pocket Costs for 340B Drugs — Centers for Medicare & Medicaid Services
- The 2026 election wins could allow Democrats to tackle healthcare costs. What can they do? | Vox — vox.com
- Medicare Drug Costs Are Rising 50 Percent for Seniors: What To Know - Newsweek — newsweek.com
- Medicare spends more on hospices owned by private equity firms, study finds | Healthcare Dive — healthcaredive.com
- CMS Administrator Dr. Mehmet Oz on healthcare costs, fraud — CNBC
- Medicare's CJR-X Mandate Shifts $392M From Hospitals. ROMTech®'s AI Helps Them Win It Back. — prnewswire.com
