Trump administration proposes rule to cut Medicare drug prices by $1.1 billion
proposed Medicare – The Trump administration has proposed a Medicare rule that would change how hospitals participating in the 340B program are reimbursed for discounted outpatient drugs, estimating $1.1 billion in savings next year and up to $20 billion over 10 years. Hospital a
For patients on Medicare, the cost of a prescription drug can hinge on an invisible line item: what a hospital gets reimbursed when it administers an outpatient medicine. This week, the Trump administration is seeking to redraw that line.
On Thursday. the administration proposed a new rule designed to stop hospitals from charging markups on discounted drugs for Medicare patients enrolled under Medicare Part B. The Centers for Medicare & Medicaid Services says the change could save consumers $1.1 billion next year. based on its estimates obtained by The Associated Press.
The proposal would apply to hospitals that serve low-income patients under the 340B program. That program allows qualifying hospitals to buy outpatient prescription drugs at discounted prices. In many cases. those hospitals can then bill insurers at rates that exceed the discounted acquisition costs—keeping the difference and driving up costs for patients.
Under the proposed rule, CMS would alter the reimbursement formula for hospitals participating in 340B, aiming to cut costs for Medicare patients.
The political timing is hard to ignore. The Republican administration has been pressing, during an election year, to show it is tackling affordability for U.S. families as rising healthcare costs strain household budgets and the government alike. While the administration says it has taken steps that will save money on medical treatment. it remains unclear how much savings might actually materialize across a healthcare system known for its complexity.
Hospital leaders argue the administration’s math has a human cost. The American Hospital Association said the proposed rule would compound the financial pressures its members face.
“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 group’s senior vice president for public policy analysis and development, said.
The administration’s estimate points to direct relief. CMS estimates that the average older adult with Medicare Part B coverage who is administered one of these drugs would save $800 a year in co-payments. Across everyone with that coverage, that would total $1.1 billion in savings next year.
The potential savings grow if the rule holds over time. A White House official. who requested anonymity to discuss the rule before the official announcement. said savings over 10 years could total about $20 billion. That official also said the proposed rule was not previewed for hospital groups before its release.
In the proposal, the administration illustrated the reimbursement gap with a concrete example: the prostate cancer drug Lupron Depot. Under the 340B program, hospitals can acquire a dose for roughly $700. Yet Medicare reimbursement for administering it can reach about $4,000, with an additional $1,000 from the patient co-payment.
The draft rule would cut by roughly 40% the amount hospitals could be paid through Medicare programs for that discounted-drug administration. If approved, the rule would take effect at the start of next year.
The fight over 340B is not new, and it has been shaped by courtroom outcomes as much as politics. In 2018. during President Donald Trump’s first term. his administration tried to enact a similar type of rule to reduce Medicare payments to hospitals. In 2022, the Supreme Court ruled that the government could not provide a separate reimbursement plan for 340B hospitals.
In a different approach. the president signed an executive order in April 2025 to survey how much hospitals spend to buy drugs. The result of that survey led to the proposed rule. The administration would cap Medicare reimbursement for participating hospitals at the average sales prices. minus 33.4%—reflecting that the hospitals acquired the drugs at discounted prices.
Taken together, the proposal sets up a direct collision between two priorities: lowering what Medicare beneficiaries pay, and protecting the revenue streams hospitals rely on to keep 340B-supported services running.
For now, the rule is only a proposal. But for hospitals built around 340B volume and for patients counting co-payments. Thursday’s filing put a countdown on the debate—one the government estimates could quickly translate into lower drug costs. and the hospital industry fears could translate into pressure where care is delivered.
Trump administration Medicare drug prices 340B program Centers for Medicare & Medicaid Services CMS rule reimbursement formula Lupron Depot co-payments American Hospital Association Ashley Thompson Supreme Court healthcare affordability