For many low-income patients, the 340B Drug Pricing Program keeps access to life-saving medications and vital health services within reach. The savings 340B pricing provides in turn funds community programs, expands access to care, and keeps doors open where other providers have closed. Unfortunately, potential federal Medicaid cuts could jeopardize the ability for some hospitals to qualify for the program, putting both the discounts and the patients who rely on them at risk. Simultaneously, states like Vermont and Oregon are passing laws to prevent drug manufacturers from cutting off 340B pricing through contract pharmacies.
State-Level Legislation Updates
Vermont Governor Phil Scott recently signed legislation strengthening protections for covered entities accessing 340B pricing for drugs dispensed through contract pharmacies. The law prohibits drug manufacturers or their third-party agents from denying or restricting the acquisition or delivery of 340B drugs to Vermont covered entities or their contract pharmacies within the state. It also bars manufacturers from requiring claims data as a condition for providing 340B drugs. At the same time, however, the legislation mandates that Vermont hospitals publicly report annual 340B data, including aggregated acquisition costs for 340B drugs dispensed or administered, payments received for these drugs, and details on how 340B savings are used to fund community health services, such as improving access to care that would be unsustainable without 340B revenue. This additional reporting requirement for hospitals is intended to promote transparency and accountability, pushing 340B entities to demonstrate their value to stakeholders, while aiming to strengthen community support and deflect scrutiny over program use.
Additionally, Oregon Governor Tina Kotek signed a similar law to protect a covered entities’ access to 340B pricing for drugs dispensed at contract pharmacies. This legislation prevents drug manufacturers from denying or limiting 340B drug acquisition or delivery for Oregon covered entities or their in-state contract pharmacies. It also prohibits manufacturers from requiring covered entities to submit claims or utilization data to access 340B pricing. Importantly, the Oregon Board of Pharmacy is able to impose fines of up to $5,000 per violation per day on non-compliant drug manufacturers, providing a robust mechanism to deter restrictive practices.
These state-level victories offer much-needed protection against manufacturer restrictions, but they address only part of the picture. Even the strongest contract pharmacy safeguards can’t protect hospitals from broader policy shifts that threaten the patient volumes on which 340B eligibility depends. At the federal level, changes to Medicaid funding and enrollment criteria have the potential to restrict access to care in ways that state statutes cannot fully prevent.
Federal-Level Medicaid Cuts
On July 4, 2025, President Trump signed the reconciliation package, formerly known as the “One Big Beautiful Bill Act”, into law (Public Law No: 119‑21), which contains health care provisions that significantly change the Medicaid program and the Affordable Care Act (ACA). For example, the new law significantly cut Medicaid funding. Medicaid cuts pose a significant threat to the 340B Drug Pricing Program eligibility for hospitals, particularly disproportionate share hospitals (DSHs), which depend on specific Medicaid and Medicare patient thresholds to qualify. The 340B program enables eligible hospitals to purchase outpatient drugs at significant discounts, generating savings to support care for low-income and uninsured patients. DSHs must maintain a disproportionate share adjustment percentage (DSAP) above a threshold, calculated based on their share of Medicaid and low-income Medicare patients. Medicaid cuts will likely directly reduce the number of Medicaid patient days or encounters included in the DSAP calculation, thereby pushing hospitals below the eligibility thresholds and endangering their 340B status. For rural and safety-net hospitals with limited budgets, even modest Medicaid reductions can have severe consequences, as these facilities often serve a high volume of Medicaid patients.
The DSAP formula, which incorporates inpatient days for Medicaid-eligible patients and low-income Medicare patients with supplemental security income (SSI), is also directly impacted by Medicaid cuts. To illustrate, if states tighten Medicaid income eligibility, eliminate optional benefits, or reduce provider payments, hospitals may experience fewer Medicaid patients or billable days, lowering their DSAP. Reductions in Medicaid DSH payments, distinct from the 340B program but vital for similar facilities, could further strain hospital finances, making the potential loss of 340B savings even more devastating.
This matter further demonstrates the importance of monitoring state Medicaid policy changes and advocating for protections that preserve patient volumes and optimizing DSAP calculations by ensuring accurate reporting of Medicaid and SSI-eligible patient days, as hospitals must stay vigilant about federal and state policy shifts to safeguard their 340B status.
How Frier Levitt Can Help
Frier Levitt has decades of experience guiding clients through the complexities of the 340B program. Whether assistance is needed in understanding new state and federal regulations, compliance audits, or litigation against manufacturer restrictions, we provide tailored solutions to protect your organization’s interests. If you have questions or need to ensure your 340B operations are compliant with state and federal requirements, or need help addressing eligibility challenges, contact us to speak to an attorney.
