The Trump administration proposed a new rule Thursday aimed at preventing hospitals from marking up discounted drugs for Medicare patients, saying the change could save consumers $1.1 billion next year, according to estimates obtained by the Associated Press.
Rule Targets Hospital Drug Markups
The rule would apply to hospitals that serve low-income patients under the 340B program, which allows eligible hospitals to purchase outpatient prescription drugs at discounted prices, notes AP in its report.
Hospitals can often bill Medicare at rates above what they paid for those drugs, keeping the difference. Patients can also face higher co-payments because their share of the bill is based on Medicare’s reimbursement rate rather than the hospital’s purchase price.
Under the proposal, the Centers for Medicare & Medicaid Services would change the formula by which hospitals in the program can receive payments for certain drugs. The administration says the goal is to bring payments closer to what hospitals actually pay.
The move comes as Trump seeks to show he is tackling affordability during an election year, especially as health care costs strain families and federal spending. The administration has promoted a broader drug-pricing push, including Trump’s April 2025 executive order targeting Medicare costs and drug-pricing transparency.
Hospitals Warn Essential Services Could Suffer
Hospitals warned the rule could cut deeply into revenue. “These proposals will undermine the ability of hospitals to maintain essential services and protect affordable access to care for those who depend on the 340B program,” Ashley Thompson, the American Hospital Association’s senior vice president for public policy analysis and development, said in a statement to AP.
The 340B program was created to help providers stretch limited federal resources and serve more patients. But it has become a long-running lobbying fight between hospitals and drugmakers, with each side accusing the other of gaming the system.
The administration estimates that the average older adult with Medicare Part B who receives one of these drugs would save about $800 a year in co-payments.
A White House official told AP the savings could reach about $20 billion over 10 years.
Proposal Revives Earlier Trump Payment Fight
In a draft, the administration cited Lupron Depot, a prostate cancer drug. It said 340B hospitals can buy a dose for about $700 but receive roughly $4,000 from Medicare and another $1,000 from the patient.
The rule would cut Medicare payments to affected hospitals by about 40%, capping reimbursement at the average sales price minus 33.4%. If finalized, it would take effect next year.
Trump tried a similar policy in 2018, but the Supreme Court ruled in 2022 that the government could not impose a separate 340B reimbursement plan without proper acquisition-cost data.
The new proposal follows a hospital drug-cost survey ordered after Trump’s 2025 executive order. It also lands as the administration keeps pressing its wider prescription-cost agenda, including TrumpRx and drugmaker pricing deals.
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