The Department of Health and Human Services (HHS) has implemented a sweeping reorganization that includes laying off 10,000 employees, with the overall workforce expected to decline by approximately 20,000 positions—a 20% reduction in total staff. The cuts, which took effect on April 2, impact multiple agencies under the HHS umbrella, including the Food and Drug Administration (FDA), Centers for Medicare & Medicaid Services (CMS), and the Health Resources and Services Administration (HRSA).
The restructuring has prompted immediate concerns from healthcare stakeholders, pharmaceutical companies, and legislators about potential disruptions to critical healthcare programs and regulatory functions. HHS Secretary Robert F. Kennedy Jr. has been invited to testify before the Senate Committee on Health, Education, Labor & Pensions on April 10 to discuss the reorganization and address mounting questions.
Impact on 340B Drug Pricing Program
Among the most significant changes, HRSA—which has administered the 340B drug pricing program since its inception in 1992 through its Office of Pharmacy Affairs—will be merged with four smaller agencies to create a new entity called the Administration for a Healthy America (AHA). This consolidation has created uncertainty regarding the future administration of the 340B program, which provides discounted medications to safety-net healthcare providers.
Industry analysts suggest the reorganization may significantly impact investments and transactions in the biotech and pharmaceutical sectors as stakeholders assess the implications for drug pricing programs, regulatory approvals, and healthcare policy implementation.
Broader Healthcare Implications
The FDA workforce reduction is already affecting medical device review and approval processes, potentially delaying access to new technologies for diagnostics, treatments, and procedures. Physicians in specialties heavily reliant on device innovation—such as cardiology, neurology, and surgery—may face significant challenges in adopting cutting-edge technologies.
For healthcare providers, the restructuring could translate to longer processing times for Medicare reimbursements, slower policy updates, and administrative inefficiencies. Experts warn that reduced personnel could lead to gaps in regulatory enforcement and delayed responses to emerging health threats.
Drug Pricing and Medicare Negotiations
The reorganization comes at a critical time for drug pricing initiatives. CMS recently announced that all manufacturers of the second group of 15 drugs selected for Medicare price negotiations under the Inflation Reduction Act (IRA) have agreed to participate in the negotiation process, despite ongoing legal challenges from pharmaceutical companies.
Dr. Mehmet Oz, recently confirmed as the head of CMS, has indicated he will explore "every single way we can reduce drug prices" when questioned about his commitment to the Medicare drug price negotiation program. During his confirmation hearing, Dr. Oz noted that international reference pricing is one potential approach to reducing drug costs, aligning with President Trump's directive to lower prices for both government programs and beneficiaries.
State-Level 340B Developments
Meanwhile, several states have recently adopted or introduced legislation to protect 340B contract pharmacy arrangements, including Colorado, Idaho, Kansas, Maine, Massachusetts, New Mexico, North Carolina, North Dakota, Oklahoma, Utah, Vermont, and Virginia. These laws generally prohibit drug manufacturers from restricting contract pharmacy access, with some requiring 340B pricing to be available at the time of sale rather than as a rebate.
Arkansas has taken enforcement action under its 2021 340B contract pharmacy law, ordering at least one manufacturer to restore access to 340B drugs at all contract pharmacy "delivery locations" in the state.
Looking Forward
The extensive restructuring at HHS represents one of the most significant changes to the department in recent history. Healthcare providers, pharmaceutical companies, and patient advocacy groups are closely monitoring developments to understand how these changes will affect healthcare delivery, drug pricing, and regulatory oversight.
Industry experts recommend that healthcare organizations stay vigilant about potential billing issues, policy changes, and patient access challenges that may result from the restructuring. For pharmaceutical companies, the reorganization adds another layer of complexity to an already evolving regulatory landscape shaped by the IRA, state-level drug pricing initiatives, and ongoing legal challenges.
