CMS proposes narrowing the 340B markup that can push coinsurance above a hospital's drug cost

The figures come from HHS, presented in a STAT opinion piece by an author who works at the department ^[2]. The strongest evidence in it is a policy that was switched on and then off. From 2015 through 2017, overall outpatient drug payments rose by close to 15% annually. After the lower rate took full effect, payments adjusted for inflation mostly leveled off ^[10]. Spending on the affected 340B drugs stayed around $7 billion between 2019 and 2021 ^[10]. After ASP plus 6% returned, they rose from $7.1 billion in 2021 to $10.7 billion in 2023 ^[13].

Some of that rise is the rate itself. The two rates sit 28.5 percentage points of average sales price apart ^[19]. At unchanged prices and volumes, moving from 77.5% of ASP to 106% raises the payment on each unit by about 37% ^[20]. Applied to $7.1 billion, that is roughly $2.6 billion, leaving about $1 billion of the increase for everything else ^[21]. The author wrote that the total combines the direct payment effect with induced changes in hospitals' dispensing quantities and manufacturers' underlying prices ^[15]. The split assumes every affected drug moved between the two rates, so the $1 billion is approximate.

The thing this doesn't tell you is how much of that $1 billion came from hospitals choosing costlier drugs. A before-and-after comparison has no untreated group, so anything else that changed between 2021 and 2023 is folded into the same figures. The author is candid about this at off-campus departments. Payments for their affected 340B drugs rose about $800 million over those two years, while claims fell and the number of beneficiaries stayed similar ^[16]. The piece says those amounts do not show how many practices hospitals bought because of the markup ^[16]. More money on fewer claims means more paid per claim. The rate change by itself would produce that, and so would a shift toward costlier drugs.

Subtracting the totals shows where the growth landed. Overall outpatient drug payments rose $3.3 billion from 2021 to 2023 ^[22], less than the $3.6 billion rise in the affected 340B drugs ^[13]. If those drugs are counted inside the outpatient total, everything else slipped from about $7.2 billion to $6.9 billion ^[23].

In the op-ed's account, the coinsurance problem comes from the same spread: the patient's share follows Medicare's payment formula, while the hospital paid the discounted price ^[1]. Because the spread scales with price, it also makes physician practices and infusion clinics more valuable once a 340B hospital acquires them ^[4]. "The patient's treatment needn't change. The owner and billing site do," the author wrote ^[18]. Contract pharmacies, another route to the spread, went from about 1,300 in 2010 to over 31,000 by mid-2026, and the biggest chains dominate the network ^[8].

The 2022 ruling turned on procedure. The Supreme Court held that HHS could not vary payment rates by hospital group without first running the acquisition-cost survey the statute requires ^[11]. "The court didn't find that hospitals were economically entitled to the markup. It found that HHS lacked a procedural prerequisite," the author wrote ^[12].

Eligible purchases grew about 24% a year, compounded, from 2015 to 2024 ^[24]. They now exceed net Medicare Part B and Medicaid drug spending, and among public prescription drug programs only Medicare Part D is larger ^[6].