Trump administration proposes a rule it says could save Medicare
patients $1.1 billion on drugs
[July 03, 2026]
By JOSH BOAK
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.
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,” said Ashley Thompson, the group's senior
vice president for public policy analysis and development.
There is the risk that hospital systems could see their revenues
decrease, which could have consequences in the communities they serve.
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.
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Bottles of medications sit on shelves at the Stormont Vail Retail
Pharmacy in Topeka, Kan., Tuesday, June 2, 2026. (AP Photo/John
Hanna)
 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.
___
Associated Press writer Ali Swenson in New York contributed to this
report.
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