The Trump administration proposed a new rule Thursday aimed at stopping hospitals from overcharging Medicare patients for discounted drugs, saying the change could save consumers $1.1 billion next year, according to estimates obtained by the Associated Press.
Here's the deal: Some hospitals that serve low-income patients can buy outpatient prescription drugs at steep discounts through a federal program called 340B. But they often bill Medicare at much higher rates, pocketing the difference. And patients? They get stuck with higher co-pays because their share is based on Medicare's reimbursement rate, not what the hospital actually paid.
The proposed rule from the Centers for Medicare & Medicaid Services would change how hospitals in the 340B program get paid for certain drugs. The goal, the administration says, is to align payments more closely with what hospitals actually spend.
This move comes as Trump tries to show he's tackling affordability in an election year, with health care costs squeezing families and federal budgets. The administration has been pushing a broader drug-pricing agenda, including Trump's April 2025 executive order targeting Medicare costs and drug-pricing transparency.
Hospitals Warn Essential Services Could Suffer
Hospitals aren't happy. They say the rule would slash revenue they rely on. "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, told AP.
The 340B program was created to help providers stretch limited federal resources and serve more patients. But it's become a long-running lobbying war between hospitals and drugmakers, each side accusing the other of gaming the system.
The administration estimates that the average older adult with Medicare Part B who gets one of these drugs would save about $800 a year in co-payments. A White House official told AP the total savings could reach about $20 billion over 10 years.
Proposal Revives Earlier Trump Payment Fight
To illustrate the markup, 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 couldn't impose a separate 340B reimbursement plan without proper acquisition-cost data. This time, the administration says it has that data, thanks to a hospital drug-cost survey ordered after Trump’s 2025 executive order.
The proposal lands as the administration keeps pressing its wider prescription-cost agenda, including TrumpRx and drugmaker pricing deals. Whether it survives legal challenges remains to be seen, but for now, it's a clear signal that the White House is serious about reining in hospital drug markups.
