The Trump administration is proposing a new regulation aimed at preventing hospitals from imposing markups on discounted drugs for Medicare patients, potentially saving consumers $1.1 billion next year.
This rule targets hospitals serving low-income individuals through the 340B program, which allows them to purchase outpatient prescription drugs at reduced prices. Currently, many hospitals bill insurers at rates exceeding these discounted costs, retaining the difference and driving up patient expenses.
The Centers for Medicare & Medicaid Services (CMS) would revise the reimbursement formula for hospitals participating in the program, specifically to reduce costs for patients.
The Republican administration has emphasized its commitment to addressing healthcare affordability for American families, as rising medical costs continue to strain household and government finances.
While the administration has introduced several measures it claims will generate savings, the ultimate impact remains uncertain given the intricate nature of the U.S. healthcare system.
However, there is a risk that hospital systems could experience revenue declines, potentially affecting the services they offer and the jobs they provide within their communities.
The 340B program was originally conceived to help healthcare providers extend limited federal resources to serve more patients. Yet, it has long been central to a lobbying battle between hospitals and pharmaceutical companies, each seeking to influence lawmakers.
CMS estimates that an average older adult with Medicare Part B coverage receiving one of these drugs could save $800 annually in co-payments. This individual saving contributes to the total projected $1.1 billion for all beneficiaries under this coverage.
Over a decade, these savings could accumulate to approximately $20 billion, according to a White House official who spoke anonymously ahead of the official announcement. The official noted that hospital groups were not given a preview of the proposed rule before its release.
A policy draft from the administration highlighted the prostate cancer drug Lupron Depot as an example of the current system. Hospitals in the 340B program can acquire a dose for about $700, but then receive roughly $4,000 in Medicare reimbursement for administering it, plus an additional $1,000 from the patient’s co-payment.
The new rule would reduce the amount hospitals in the discounted drug program could be paid through Medicare by approximately 40%. If approved, the regulation would take effect at the beginning of next year.
In 2018, during President Donald Trump’s first term, his administration attempted to implement a similar rule to cut Medicare payments to hospitals. However, the Supreme Court ruled in 2022 that the government lacked the authority to establish a separate reimbursement plan for 340B hospitals.
An executive order signed by the president in April 2025 surveyed hospital drug purchasing costs. This survey informed the proposed rule, capping Medicare reimbursement for participating hospitals at the average sales price, minus 33.4%. The reduction is justified by hospitals acquiring drugs at discounted prices.