On June 12, 2025, Vermont Governor Phil Scott signed into law two major healthcare reform bills — H.266 and S.126 — marking a coordinated legislative effort to curb healthcare spending and enhance regulatory oversight in the state. The bills take aim at escalating hospital costs and drug pricing, while laying the groundwork for broader delivery system transformation.
Background
Vermont continues to struggle with rising healthcare costs, particularly in the commercial sector, where some health providers allegedly charge prices significantly above Medicare benchmarks. With H.266 and S.126, lawmakers have taken steps to rein in these costs through both immediate pricing constraints and long-term system redesign. Together, the laws signal the state’s most aggressive healthcare policy shift in over a decade.
H.266 – Capping Hospital Charges for Outpatient Prescription Drugs
Signed on June 11, 2025, H.266 targets the high cost of hospital-administered outpatient drugs—such as chemotherapy and specialty infusions—by placing a cap on how much hospitals can charge for these treatments. Key provisions include:
- 340B Program Safeguards: The law establishes strong protections for 340B-covered entities (i.e., entities participating or authorized to participate in the federal 340B drug pricing program) and their contract pharmacies. It prohibits drug manufacturers and their agents from denying, restricting, or interfering with the delivery of 340B drugs to contract pharmacies, except as expressly permitted by federal law. The statute also bars manufacturers from requiring claims or utilization data as a condition of access unless mandated by the U.S. Department of Health and Human Services. Additionally, manufacturers must provide 340B pricing as an upfront discount, not in the form of a rebate. Violations of these provisions may be enforced through a private right of action.
- Annual Reporting: Hospitals participating in the federal 340B drug pricing program must submit detailed annual reports to the Green Mountain Care Board (GMCB), in a form and manner prescribed by the Board. These reports must outline how 340B savings are used to support patient care and community health efforts, and must include—but are not limited to—information on the aggregate acquisition cost of all 340B drugs and the aggregate payments received by the hospital for those drugs.
- Outpatient Drug Cap: Beginning in January 2026, Vermont hospitals—excluding unaffiliated critical access hospitals—will be subject to limits on what they may charge for prescription drugs administered in outpatient or office settings. For any drug that a hospital billed at more than 120% of the Average Sales Price (ASP), as calculated by CMS, as of April 1, 2025, the hospital may not submit claims to health insurers exceeding 120% of the current ASP. For drugs billed at or below 120% of the ASP as of that date, hospitals may not increase the percentage markup beyond the level charged on April 1, 2025. Hospitals must update ASP-based pricing twice annually. Hospitals are expressly prohibited from engaging in cost-shifting—meaning they may not raise prices for other prescription drugs, procedures, tests, imaging, or any other healthcare goods or services—in an attempt to offset revenue losses resulting from the outpatient drug pricing limits described above.
S.126 – A Blueprint for Health Care System Reform
Signed on June 12, 2025, S.126 lays out a long-term plan for reshaping how Vermont regulates, pays for, and delivers healthcare, particularly in the hospital sector. Among its most notable features:
- Reference-Based Pricing (RBP): GMCB is directed to establish reference-based pricing that sets the maximum amounts hospitals may accept as full payment for items and services provided in Vermont. These prices must be based on Medicare reimbursement or another appropriate benchmark, with adjustments permitted to ensure predictability and account for local cost drivers. GMCB must begin implementation no later than hospital fiscal year 2027 and review prices annually thereafter as part of the hospital budget process. GMCB may also extend reference-based pricing to non-hospital services, such as primary care, to enhance access and align with statewide delivery goals. Importantly, the Board is prohibited from applying these prices to Medicare or Medicaid patients.
- Global Hospital Budgets: The law directs GMCB to evaluate the feasibility of implementing global hospital budgets in Vermont. By February 15, 2026, the Board must report to the legislature on its definition of “global hospital budgets,” the potential timeline for adopting such a model, and the anticipated advantages and disadvantages.
- Statewide Health Care Delivery Plan: Vermont agencies are required to work with a newly created Health Care Delivery Advisory Committee and a Primary Health Care Steering Committee to develop a statewide delivery plan by 2028, with triennial updates thereafter.
- Expanded Oversight of Hospital Networks: S.126 expands GMCB’s oversight authority, including the power to investigate hospital and hospital network financial operations—such as executive compensation—and to evaluate whether network structures align with the public interest and statewide healthcare reform goals. GMCB is also authorized to require more detailed financial disclosures and to standardize hospital budget submissions as part of the annual budget review process.
Key Takeaway
The passage of H.266 and S.126 represents a comprehensive approach to tackling Vermont’s healthcare cost crisis. H.266 delivers short-term savings by directly targeting high drug markups, while S.126 builds a regulatory architecture designed to achieve long-term cost containment and quality improvement through reference pricing, global budgets, and systemwide planning. Though the reforms are expected to reduce premiums and promote more sustainable spending, Vermont’s hospitals have warned of financial strain and potential service cutbacks. Implementation will be closely watched by policymakers and payors across the country as other states look for blueprints to reform commercial health care spending and drive value-based care adoption.
