WASHINGTON (AP) — The Trump administration proposed Thursday a new rule aimed at preventing hospitals from applying markups to discounted medications for Medicare patients and argues that it could save consumers $1.1 billion next year, according to estimates provided to The Associated Press.
The rule would apply to hospitals serving low-income patients under what is known as the 340B program, which allows hospitals to acquire prescribed medications for ambulatory patients at discounted prices. But in many cases, hospitals can bill insurers at rates above those costs, enabling them to pocket the difference and resulting in higher costs for patients.
Under the proposed rule, the Centers for Medicare and Medicaid Services would adjust the formula used to determine reimbursement for hospitals participating in the program, in an effort to lower costs for patients.
The Republican administration has been seeking, in an election year, to show that it is addressing affordability challenges for American families at a moment when rising healthcare costs are straining households and the federal budget. While the administration has pursued several measures that it says will save money on medical treatments, it remains unclear how much savings will actually materialize given the complexity of the U.S. health system.
There is a risk that hospital systems could see their revenues shrink, which could affect the services they offer and the jobs they provide in the communities they serve.
The agency estimates that the average Medicare Part B beneficiary who is administered one of these drugs would save about $800 a year in copayments. That would translate into roughly $1.1 billion in savings across all people with that coverage.
Savings over ten years could total around $20 billion, according to a White House official who spoke on condition of anonymity about the rule before its formal release.
In a policy draft, the administration offered a concrete example of how the current system works with the prostate cancer drug Lupron Depot. Hospitals under the 340B program can acquire a dose for about $700, but can receive nearly $4,000 in Medicare reimbursement for administering it and an additional $1,000 from the patient copay.
The proposed rule would trim by roughly 40 percent the amount that hospitals participating in the discounted-drug program could bill through Medicare programs.
If approved, the rule would take effect at the start of next year.
The Trump administration had sought to push this same type of rule in 2018, during its first term, to curb Medicare payments to hospitals. But the Supreme Court ruled in 2022 that the government could not offer a separate reimbursement plan for 340B hospitals.
The president signed an executive order in April 2025 to evaluate how much hospitals spend purchasing medications. The results of that review led to the proposed rule, which would limit Medicare reimbursements for participating hospitals to the average sales price, minus 33.4%. The rationale for reducing the average reimbursement rate is that hospitals bought the drugs at discounted prices.
