Trump administration proposes new Medicare rule to lower prescription drug costs | Today’s news
The Trump administration proposed a rule on Thursday (July 2) aimed at preventing hospitals from charging large surcharges for discounted prescription drugs given to Medicare patients, which it said could save beneficiaries an estimated $1.1 billion next year.
The proposal issued by the Centers for Medicare & Medicaid Services (CMS) targets hospitals participating in the federal 340B Drug Pricing Program, which allows eligible hospitals serving low-income patients to purchase outpatient prescription drugs at deeply discounted prices.
What is the proposed rule?
The rule targets hospitals that participate in the 340B Drug Pricing Program, a federal program that allows hospitals serving low-income and vulnerable patients to purchase outpatient prescription drugs at deeply discounted prices.
Currently, these hospitals can buy drugs at deep discounts, but they are often reimbursed by Medicare at much higher rates, allowing them to keep the difference. These higher reimbursement amounts also result in patient co-payments, which increases their out-of-pocket costs.
Under the proposed rule, CMS would reduce Medicare reimbursements for these hospitals to reflect the lower prices they pay for the drugs.
How would reimbursements change?
The proposal would limit Medicare reimbursement for 340 billion hospitals to:
Average selling price (ASP) minus 33.4%.
According to the White House, it would reduce Medicare payments to participating hospitals by roughly 40% compared to current reimbursement levels.
The administration said the formula is based on a survey ordered by President Donald Trump through an executive order signed in April 2025 that examined how much hospitals actually pay to buy prescription drugs.
How much could patients save?
The Trump administration estimates:
Medicare Part B beneficiaries who receive these drugs would save an average of about $800 a year on co-pays.
The total savings for Medicare patients would reach $1.1 billion next year.
If the rule remains in place, they could save up to $20 billion over 10 years.
The proposal is part of a broader effort by the administration to lower health care costs and demonstrate progress on affordability.
Why is the administration making the change?
The White House argues that the current reimbursement system allows some hospitals to generate significant profits by buying discounted drugs while receiving much higher Medicare payments.
Officials say aligning reimbursements more closely with hospital acquisition costs will reduce spending for Medicare beneficiaries without affecting access to drugs.
An example cited by the administration
The proposed rule highlights the prostate cancer drug Lupron Depot as an example.
A hospital participating in the 340B program can purchase one dose for approximately $700.
Medicare currently reimburses a hospital about $4,000 for administering the drug.
Based on this reimbursement, the patient may also pay a co-pay of approximately $1,000.
The administration says the proposed formula would significantly lower those reimbursement levels and lower patient costs.
What is the 340B program?
The 340B Drug Pricing Program, created in 1992, requires drug manufacturers participating in the Medicaid program to sell outpatient drugs at discounted prices to eligible hospitals and health care providers.
The program was intended to help hospitals serving low-income and uninsured patients stretch limited federal health care resources and expand access to care.
Over time, however, it has become one of the most controversial areas of American health policy.
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Why are hospitals against the proposal?
Hospital groups say revenue generated through the 340B program helps fund essential services, especially in rural and underserved communities.
The American Hospital Association has warned that cuts to Medicare reimbursements would put additional financial pressure on hospitals.
Ashley Thompson, the association’s senior vice president for public policy analysis and development, said the proposal would undermine hospitals’ ability to maintain critical services and maintain affordable access to care for at-risk patients.
The hospital says the reduced reimbursement could ultimately affect the health services available in the communities it serves.
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