Medicare to pay ASP minus 28 percent for separately payable 340B-acquired drugs at non-exempt hospitals from January 1, 2027 (pass-through drugs, vaccines and non-opioid pain relief drugs excluded); every separately paid OPPS drug line must carry modifier JG, TB or ND

Background

From January 1, 2018 through September 27, 2022, CMS generally paid ASP minus 22.5 percent for certain separately payable drugs acquired through the 340B Program; on June 15, 2022, the Supreme Court held that because HHS had not previously conducted a survey of hospitals' acquisition costs, CMS could not vary the payment rates for outpatient prescription drugs by hospital group. CMS paid 340B-acquired drugs at the statutory default rate (generally ASP plus 6 percent) for CY 2023 through CY 2026, and surveyed hospital drug acquisition costs from January 1 through April 7, 2026.

Who this affects

All hospitals paid under the OPPS, including excepted and non-excepted off-campus provider-based departments, for separately payable drugs. Payment cut applies to 340B covered entity hospitals; rural SCHs, children's hospitals and PPS-exempt cancer hospitals are exempt from the cut and report the informational modifier TB on separately payable drugs bought with a 340B discount (ND on drugs not acquired under 340B). Critical Access Hospitals (CAHs) and Rural Emergency Hospitals (REHs) are outside the OPPS.

Why it matters

This is a claim-level compliance duty for every OPPS hospital, not only 340B participants: non-340B hospitals must append ND to separately paid drug lines from January 1, 2027. Inference: 340B hospitals need line-level split-billing data (340B versus non-340B purchase) in the pharmacy and billing systems by January 1, 2027. Inference: modifier errors could produce overpayments (missing JG) or claim edits; inference: 340B hospitals face a large drug revenue cut partly offset by the 7.50 percent non-drug increase, while non-340B hospitals gain. The rule also amends 42 CFR 427.303(b)(1)(iv) so successor 340B modifiers are used to exclude 340B units from Part B inflation rebates.

Required actions

• From January 1, 2027, report modifier JG on the same claim line as the drug HCPCS code for 340B-acquired separately payable drugs to which the payment reduction applies (non-exempt OPPS hospitals; the reduction does not reach pass-through drugs, vaccines or non-opioid pain relief drugs with status indicator K1)
• From January 1, 2027, report modifier TB as the rule's final modifier table directs: the summary lists it for 340B-acquired drugs at rural SCHs, children's hospitals and PPS-exempt cancer hospitals and for pass-through and non-opioid pain relief drugs, and the detailed discussion ties TB to drugs bought with a 340B discount
• From January 1, 2027, report modifier ND for all separately paid drugs not acquired through the 340B Program (all OPPS hospitals, including excepted and non-excepted off-campus PBDs)

Implementation playbook

1. Confirm the hospital's status under the 340B payment policy (subject to the reduction, or an exempt rural sole community hospital, children's hospital or PPS-exempt cancer hospital), which together with the drug's own status (pass-through, for example) decides between modifiers JG and TB. Owner: Reimbursement. Due: 2026-11-30.
2. Build and test the claim-line modifier logic so that every separately paid drug line carries JG, TB or ND, using the rule's final modifier table. Owner: Revenue Cycle, Pharmacy and IT. Due: testing complete 2026-12-15; live for dates of service from 2027-01-01 (the rule's date).
3. Reconcile 340B accumulator and split-billing data so that 340B-acquired drugs are identified correctly at the claim line. Owner: Pharmacy 340B program. Due: 2026-12-15.
4. Model the effect of ASP minus 28 percent on 340B drug revenue against the estimated 7.50 percent increase to non-drug payments, and update the 2027 budget. Owner: Finance. Due: 2026-12-15.
5. Check for CMS claims instructions implementing the modifiers. Owner: Compliance. Due: 2026-12-01, then weekly through January 2027.

Not established

Final modifier table (Table 75 successor) is an image and was not retrieved; modifier descriptors for ND are known only from the placeholder description. Litigation risk not assessed (no court source retrieved). Non-excepted PBD budget neutrality statement is from the proposal text that was finalized as proposed. CMS guidance or a transmittal implementing the modifiers was not searched.

Sources

• Federal Register, CMS-1850-FC
• CMS press release
• CMS fact sheet