New Regulations Aim to Lower Drug Costs for Medicare Patients
WASHINGTON – On Thursday, the Trump administration presented new regulations intended to stop hospitals from adding markups on discounted drug prices for Medicare patients. Estimates suggest this could save consumers around $1.1 billion in the coming year, according to information from The Associated Press.
This rule specifically targets hospitals that care for low-income patients through the 340B program. This program allows such hospitals to buy outpatient prescription drugs at reduced rates. However, many hospitals still charge insurance companies more than their purchasing costs, allowing them to pocket the difference. This practice leads to higher expenses for patients.
The proposed regulations involve changes by the Centers for Medicare and Medicaid Services to how they calculate reimbursements for participating hospitals, with the goal of cutting costs for patients.
The Republican administration seems to be taking steps to highlight its commitment to making healthcare more affordable, especially in an election year. Rising healthcare costs are increasingly burdening both families and the government. While the administration claims it is working to lower these costs, the intricate nature of the healthcare system makes it hard to predict the real savings.
In response, the American Hospital Association expressed concerns that these proposed rules could intensify the financial strains on hospitals.
Ashley Thompson, a senior vice president at the association, remarked, “These proposals would undermine hospitals’ ability to maintain essential services and protect access to affordable care for those who rely on the 340B program.”
This change poses a risk of diminishing hospital revenues, which could negatively affect the communities they serve. Originally, the 340B program was designed to help healthcare providers maximize limited federal resources to better assist more patients. Yet, it has long been a subject of lobbying between hospitals and pharmaceutical companies, with both sides vying for legislative support regarding its benefits.
The agency predicts that an average Medicare Part B beneficiary receiving such drugs could save about $800 annually in out-of-pocket expenses. This translates to a potential total savings of $1.1 billion for all beneficiaries under the insurance plan.
Over a decade, these savings could reach approximately $20 billion, as noted by a White House official who preferred to remain anonymous before the official rule release. Interestingly, this proposed rule wasn’t shared with hospital groups before its announcement.
In illustrating the current system, the draft regulations mentioned the prostate cancer medication Lupron Depot. Hospitals under the 340B program can procure doses for around $700, yet receive about $4,000 in Medicare reimbursement for those doses. Additionally, patients may face roughly $1,000 in copayments.
The new rule seeks to cut the reimbursement rates for hospitals involved in drug discount programs by roughly 40%. If approved, this new regulation could come into effect early next year.
During President Trump’s first term in 2018, an attempt was made to implement a similar rule to reduce Medicare payments to hospitals; however, the Supreme Court ruled in 2022 that the government couldn’t create separate reimbursement policies for 340B hospitals.
Later, in April 2025, the president signed an executive order to investigate hospital expenditures on drug purchases, which ultimately contributed to the proposed rule targeting a reimbursement limit of 33.4% below average selling prices for these hospitals. This results from the fact that hospitals acquire drugs at discounted rates.
