Indiana Reverses Course on 340B, Securing Health Center Lifeline

INDIANAPOLIS, IN – April 23, 2026 – In a significant policy reversal, Governor Mike Braun has exempted Indiana's Federally Qualified Health Centers (FQHCs) from proposed Medicaid changes that threatened to strip millions of dollars from the state's healthcare safety net. The decision, announced today, was met with immediate praise from healthcare advocates who had warned the move would have been catastrophic for vulnerable patients across the state.

The Indiana Primary Health Care Association (IPHCA), which represents the state's network of community health centers, lauded the decision as a critical victory for Hoosiers who depend on FQHCs for primary care, dental services, behavioral health, and affordable prescriptions.

"We are deeply grateful to Governor Braun for his leadership and for recognizing the critical role community health centers play in Indiana's healthcare system," said Ben Harvey, CEO of the IPHCA. "This decision demonstrates a clear commitment to protecting care for the patients and communities that rely on health centers every day."

The Battle Over 340B Savings

At the heart of the issue is the federal 340B Drug Pricing Program, a complex but vital mechanism for the nation's healthcare safety net. Established in 1992, the program requires pharmaceutical companies to sell outpatient drugs to FQHCs and other eligible providers at a significant discount. These health centers serve a high number of uninsured and low-income individuals.

Crucially, the program allows these centers to use the savings—the difference between the deeply discounted purchase price and the reimbursement rate from insurers like Medicaid—to fund patient care. These are not profits; by law, the savings must be reinvested to expand services, cover operating costs, and reduce the cost of medication for patients.

For Indiana's FQHCs, these funds support a wide array of services that are often poorly reimbursed or not covered at all, including transportation to appointments, translation services, and chronic disease management programs. The savings are the financial backbone that allows these centers to fulfill their mission of providing care to all, regardless of their ability to pay.

Earlier this year, the Indiana Family and Social Services Administration (FSSA) proposed a major change to the state's Medicaid plan. The amendment sought to eliminate the ability of FQHCs to retain these 340B savings on claims for patients covered by Medicaid managed care, effective July 1, 2026. State officials argued the move would save the Medicaid program an estimated $63 million annually by allowing the state to collect drug manufacturer rebates instead.

Averting a 'Devastating' Blow

Healthcare providers across Indiana immediately sounded the alarm, describing the potential impact of the FSSA's proposal in stark terms. They argued that while the state might see savings on a balance sheet, the human cost would be immense.

Organizations like the Damien Center, Indiana's largest HIV service organization, projected annual losses of over $5 million. Statewide, the cuts would have stripped tens of millions of dollars from the very clinics serving the state's most medically underserved communities, both rural and urban.

Leaders warned of a cascade of negative consequences: the potential closure of clinic sites, a reduction in operating hours, staff layoffs, and the elimination of essential behavioral and dental health services. The move would have destabilized a fragile healthcare ecosystem, shifting a greater burden onto emergency rooms and increasing uncompensated care costs for the entire system.

The exemption granted by Governor Braun effectively averts this scenario. It provides financial stability for the FQHCs, ensuring they can continue their work without the threat of a sudden and severe funding cliff. The decision preserves the capacity of these centers to provide affordable medications and comprehensive care to hundreds of thousands of Hoosiers.

The Power of Grassroots Advocacy

Governor Braun's reversal was not made in a vacuum. It was the direct result of what the IPHCA called "extraordinary grassroots advocacy from every corner of Indiana."

Following the FSSA's proposal, a broad coalition of health center leaders, board members, clinicians, and patients mobilized to voice their opposition. They engaged in a concerted effort to educate policymakers and the public on the critical importance of the 340B program.

During a public comment period that closed in late March, the FSSA was flooded with testimonials detailing how the cuts would harm real people. Advocacy groups like the IPHCA and the Indiana Rural Health Association provided toolkits and resources, empowering community members to contact the governor's office and their state legislators.

This unified front successfully elevated the issue, framing it not as a technical budget maneuver but as a fundamental threat to healthcare access. Members of the Indiana General Assembly reinforced these concerns, advocating for the health centers that serve their districts.

"The strength of the response from across Indiana made clear just how much community health centers matter," Harvey noted. "We are thankful to the many advocates, local leaders, and legislators who helped lift up this issue and ensure that the voice of Indiana's health center community was heard."

A Calculated Decision for Hoosier Health

Governor Braun's decision reflects a careful balancing of fiscal concerns with his administration's stated goals of improving healthcare access and quality. While his administration has maintained a strong focus on driving down healthcare costs and increasing transparency—even launching a review of the 340B program's use by hospitals last year—the powerful case made by FQHC advocates proved persuasive.

The argument that the proposed change would primarily benefit the federal government—as Indiana would have had to share over 60 percent of new rebate dollars with Washington—while draining a vital, locally reinvested resource, was particularly compelling. The exemption for FQHCs aligns with the governor's objective to support local providers and expand care in rural and underserved areas, where these health centers are often the only option.

By hearing the concerns and engaging with stakeholders, the administration ultimately chose to protect a proven model of community-based care. The IPHCA and its members have expressed their commitment to continue this collaboration, stating they are ready to work with the Braun administration on patient-centered solutions that support healthier communities across the state.