WASHINGTON — The Trump administration unveiled a proposed new regulation Thursday designed to prevent hospitals from profiting off discounted medications when billing Medicare patients. If enacted, officials say the rule could save consumers an estimated $1.1 billion in the coming year, according to figures obtained by the Associated Press ahead of the official announcement.
The proposal centers on the 340B program, a federal initiative that allows hospitals serving low-income patients to purchase outpatient prescription drugs at significantly reduced prices. However, under current rules, those same hospitals are often permitted to bill insurers — including Medicare — at rates far above what they paid for the drugs, pocketing the difference and driving up costs for patients.
To address this, the Centers for Medicare and Medicaid Services is proposing a new formula that would limit how much hospitals in the 340B program can be reimbursed through Medicare. The administration says the change is part of a broader effort to ease the financial burden of healthcare costs on American families.
The Republican administration has been working to demonstrate during an election year that it is taking meaningful action on affordability. However, experts note that the complexity of the U.S. healthcare system makes it difficult to predict how much of the projected savings will actually reach consumers.
According to a White House official who spoke on condition of anonymity ahead of the formal announcement, the projected savings over a decade could reach approximately $20 billion. The official also noted that hospital groups were not given advance notice of the proposed rule before its release.
To illustrate how the current system works, the administration pointed to the prostate cancer drug Lupron Depot as an example in a policy draft. Under the 340B program, a hospital can acquire a single dose of the drug for roughly $700. Yet that same hospital can receive around $4,000 in Medicare reimbursement for administering it, plus an additional $1,000 in co-payments from the patient.
The proposed rule would reduce the reimbursement amount hospitals in the program can receive through Medicare by approximately 40%. Specifically, it would cap reimbursement at the drug’s average sales price minus 33.4%, reflecting the discounted rate at which hospitals acquired the medications. If approved, the rule would take effect at the start of next year.
On average, an older adult enrolled in Medicare Part B who receives one of these drugs would save about $800 per year in out-of-pocket co-payments under the new structure, according to agency estimates.
This is not the first time the administration has attempted such a change. During President Donald Trump’s first term in 2018, his administration pursued a similar rule to reduce Medicare reimbursements to 340B hospitals. That effort was ultimately blocked when the Supreme Court ruled in 2022 that the government lacked the authority to implement a separate reimbursement structure for those hospitals.
The current push stems from an executive order the president signed in April 2025, which directed a survey of what hospitals actually pay to acquire drugs. The findings from that survey formed the basis for this new proposed rule.
There are potential downsides to the proposal. If hospital revenues decline as a result, facilities — particularly those in underserved communities — could face pressure to reduce services or cut jobs. The 340B program has long been a flashpoint between hospitals and pharmaceutical companies, with both sides lobbying lawmakers to protect or reshape the benefit in their favor.
