Trump administration proposes a rule it says could save Medicare patients $1.1 billion on drugs

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WASHINGTON (AP) — The Trump administration is proposing a new rule on Thursday to keep hospitals from charging markups on discounted drugs for Medicare patients and says that could save consumers $1.1 billion next year, according to estimates obtained by The Associated Press.

The rule would apply to hospitals that serve low-income patients under what is known as the 340B program, which lets hospitals buy outpatient prescription drugs at discounted prices. But in many cases, hospitals can bill insurers at rates that exceed those costs, allowing hospitals to keep the difference and resulting in higher costs to patients.

Under the proposed rule, the Centers for Medicare & Medicaid Services would change the formula for what hospitals participating in the program can get reimbursed, in an effort to cut costs for patients.

The Republican administration has sought to show during an election year that it is tackling the challenges of affordability for U.S. families at a time when rising healthcare costs are driving financial strains for households and the government alike. While the administration has taken several steps it says will save money on medical treatment, it is unclear how much savings might ultimately materialize based on the complexity of the country's healthcare system.

There is the risk that hospital systems could see their revenues decrease, which could have consequences in the communities they serve in terms of the services they offer and jobs they provide. The 340B program was initially designed as a way for healthcare providers to stretch scarce federal resources to better serve more patients. But it has long been at the center of a lobbying battle between hospitals and pharmaceutical companies, with each side attempting to enlist lawmakers in maintaining or changing the benefit.

The agency 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. That would work out to a total savings of $1.1 billion for everyone with that coverage.

The savings over 10 years could total about $20 billion, according to a White House official who requested anonymity to discuss the rule before the official announcement. The official said the proposed rule was not previewed for hospital groups before the release.

In a policy draft of the rule, the administration gave a specific example of how the current system works for the prostate cancer drug Lupron Depot. Hospitals under the 340B program can acquire a dose for roughly $700, but they can receive about $4,000 in Medicare reimbursement for administering it and an additional $1,000 from the patient co-payment.

The proposed rule would cut by roughly 40% that amount that hospitals in the discounted drug program could be paid through Medicare programs. If approved, the rule would go into effect at the start of next year.

In 2018 during President Donald Trump's first term, his administration tried to enact this same type of rule to reduce Medicare payments to hospitals. But the Supreme Court ruled in 2022 that the government could not provide a separate reimbursement plan for 340B hospitals.

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, which would cap Medicare reimbursement for participating hospitals at the average sales prices, minus 33.4%. The reason why the average reimbursement rate would be cut is because the hospitals acquired the drugs at discounted prices.

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Associated Press writer Ali Swenson in New York contributed to this report.