(INDIANA CAPTIAL CHRONICLE) — Indiana officials are shaking things up with a federal drug discount program they claim is being misused by some hospitals to make profits. A new rule proposed for July 1 aims to cut part of the 340B drug discount program, but it won’t affect many clinics serving low-income residents.
The 340B program helps hospitals and health clinics that treat a lot of uninsured or low-income patients buy outpatient drugs at a discount. They can then bill insurance for the full price and use the savings to fund charity care and essential services.
FSSA Secretary Mitch Roob insists that the program wasn’t meant to boost hospital profits. He called for a rule change in February to stop Medicaid from reimbursing drugs bought through 340B. Instead, the Office of Medicaid Policy and Planning wants to seek manufacturer rebates through the Medicaid Drug Rebate Program.
Pushback leads to exemption
Due to pushback from various stakeholders, the FSSA has now decided to exempt federally-qualified health clinics from the rule. Indiana Medicaid Director Audrey Frenzel emphasized that this carve-out will ensure low-income Hoosiers have access to affordable medications.
“This decision reflects Gov. Mike Braun’s commitment to providing high-quality care that families can afford,” she said. The Governor aims for every taxpayer dollar to be spent wisely while supporting essential community clinics.
One notable example is the Jane Pauley Community Health Center in Indianapolis. Christy Davis, the pharmacy director, highlighted how savings from the program help fund food pantries and provide timely medications to patients who might face long waits otherwise. “Without this exemption, we’d likely have to cut services,” Davis said.
Currently, many clinic patients are on managed Medicaid plans. Davis emphasized that the exemption is crucial for the clinic’s operations and for those who rely on their services. “It will make a huge difference in the lives of millions across the state,” she added.
Impact on hospitals
However, the exemption doesn’t extend to Indiana hospitals. Concerns have been raised about the impact of stopping 340B reimbursements for Medicaid. Indiana Hospital Association President Scott B. Tittle pointed out that the proposal was inserted into a budget bill without public discussion and could limit care access for vulnerable patients.
Supporters of the 340B program argue that it doesn’t use taxpayer money, as the savings come from pharmaceutical companies. But Roob argues that Indiana Medicaid heavily depends on drug rebate revenue, which is lost when claims go through 340B. He claims hospitals often bill Medicaid far above their acquisition costs, directly affecting taxpayers.
Worryingly, the Indiana Hospital Association warns that dropping 340B reimbursement could lead to reduced access to care, especially amid rising drug prices. An analysis by the Institute for Clinical and Economic Review found a 51% increase in drug prices from 2022 to 2024, even after discounts were applied.
While Tittle acknowledges the exemption for clinics, he urges the state to reconsider the overall impacts of the new proposal. “Shifting these funds away from providers jeopardizes access to care for vulnerable Hoosiers and could raise costs across the healthcare system,” he warned.
In simple terms, some experts note that funding strategies should focus on ensuring that all communities receive the care they need, especially as healthcare costs continue to rise.
This story was published May 1, 2026, by Indiana Capital Chronicle.
