Indiana healthcare providers are bracing for a potential shift in Medicaid reimbursement policies that could significantly impact access to care for low-income residents. The state’s Family and Social Services Administration (FSSA) is considering a plan to discontinue Medicaid reimbursement for drugs purchased through the 340B drug pricing program, a move that could strip millions of dollars from the state’s healthcare safety net. The proposed change, first posted in February, has sparked concern among hospitals and clinics that rely on the program to provide affordable medications and services.
The 340B program allows certain clinics and hospitals to purchase outpatient prescription drugs at reduced prices from pharmaceutical companies. These providers, often serving vulnerable populations, can then bill Medicaid at the full price of the drug, reinvesting the savings into care for uninsured patients, facility costs, or other essential services. Under the FSSA’s proposed plan, the state would instead claim those drug rebates for itself, potentially freeing up approximately $63 million annually for the state’s Medicaid budget.
Concerns Over Funding and Patient Care
The potential loss of 340B savings has raised alarms among healthcare providers across Indiana. Alan Witchey, President and CEO of the Damien Center, Indiana’s largest HIV service organization, estimates his organization would lose around $5 million annually if the change goes into effect. “By doing this, they will reverse that, and there will be less options for Hoosiers to get their medications, less options for Hoosiers to get medical care, and it will likely lead to far more people accessing emergency care,” Witchey said. The Damien Center utilizes the 340B program to provide medications at reduced or no cost to its patients.
HealthNet, which operates 10 health centers statewide, anticipates a $3 million annual loss. René Kougal, president and CEO of HealthNet, expressed concern that the proposed change is part of a broader trend of reduced funding for services supporting low-income Hoosiers, particularly as the state also considers changes to Medicaid eligibility that could leave over 100,000 people without coverage. “If both of those supports weaken at the same time, it creates real financial instability for safety net providers,” Kougal stated.
State Justification and Lawmaker Questions
FSSA Secretary Mitch Roob, speaking before the state budget committee last December, voiced concerns about how healthcare organizations are utilizing the savings generated through the 340B program. “We have no idea how those dollars are used at all,” Roob said, adding, “We also lose out on the rebate.” This isn’t the first time questions have been raised about the investment of 340B savings. last year, lawmakers considered legislation that would have restricted reimbursements on drugs priced higher than what providers actually paid for them.
During the budget committee discussion, Senator Chris Garten (R-Charlestown) questioned whether eliminating access to the 340B program could inadvertently harm clinics and hospitals that are effectively using the funds, potentially increasing costs for the state. “If we don’t know what services are provided with these dollars, then how can we say it’s cheaper?” Garten asked. Representative Ed Delaney (D-Indianapolis) further inquired whether the change could jeopardize the financial viability of hospitals and clinics relying on the program, to which Roob responded that any hospital facing closure due to the loss of 340B pricing was likely already financially unstable.
Understanding the 340B Program
The 340B program, established in 1992, was initially designed to aid hospitals serving a high proportion of low-income patients afford medications. Over time, the program expanded to include other types of healthcare providers, such as federally qualified health centers and critical access hospitals. The Health Resources and Services Administration (HRSA) oversees the program at the federal level, ensuring compliance and providing guidance to participating entities.
The program’s impact extends beyond simply lowering drug costs. The savings generated allow providers to expand services, offer free or reduced-cost care, and invest in community health initiatives. For organizations like the Damien Center, the 340B program is crucial for providing comprehensive HIV care, including medications, counseling, and support services.
As of March 19, 2026, a spokesperson for the FSSA has not responded to requests for comment regarding the proposed changes. The public can submit written comments on the plan, with the changes slated to take effect on July 1, 2026.
Disclaimer: This article provides information for general knowledge and informational purposes only, and does not constitute medical or financial advice.
The future of Medicaid drug reimbursements in Indiana remains uncertain. The next step in the process is the review of public comments, after which the FSSA will make a final decision. Readers are encouraged to share their thoughts and engage in constructive dialogue about this important issue.
