CMS takeover of 340B looms as some health systems double down on drug discount strategy

Editor's Note

The federal 340B Drug Pricing Program may soon shift from the Health Resources and Services Administration (HRSA) to the Centers for Medicare and Medicaid Services (CMS), a move that could bring tighter oversight and lasting consequences for safety-net providers, Modern Healthcare June 2 reports. The proposed transfer, part of a broader restructuring of the Department of Health and Human Services (HHS), would eliminate HRSA and place CMS in charge of administering 340B beginning in fiscal year 2026.

According to the article, the change would give CMS authority over provider eligibility checks, audits, annual recertifications, and management of the Office of Pharmacy Affairs Information System. Legal experts say this could usher in heightened regulatory scrutiny, as CMS wields greater enforcement power than HRSA. However, consolidating oversight under one agency could also streamline regulation of prescription drug programs and reduce duplicate discount issues, potentially improving transparency.

This shift comes at a time when health systems like Minneapolis-based Fairview Health Services are increasingly reliant on 340B to maintain financial stability, particularly amid potential Medicaid cuts. In a May 27 Modern Healthcare interview, Fairview President and CEO James Hereford described how expanding specialty pharmacy services and maximizing 340B savings have enabled a $600 million financial turnaround over 3 years. The system recently launched Fairview Pharmacy Solutions to help other health systems optimize their pharmacy operations, in part by navigating the growing complexity of 340B compliance.

Hereford warned that while drugmakers are working aggressively to limit 340B discounts through litigation and lobbying, the program remains critical—especially for rural and urban providers caring for underserved populations. “If that federal program went away, maybe half the rural hospitals in the country would go out of business,” he said.

With a Republican-led Congress pushing to slash up to $800 billion in Medicaid funding, Hereford noted that Fairview is bracing for further reimbursement challenges. He emphasized that effective 340B management is becoming essential not only to offset low commercial rates and public payer shortfalls, but also to support innovative care models like hospital-at-home and community-based services.