Trump Administration proposes new Medicare rule to lower prescription drug costs
The Trump administration on Thursday (July 2) proposed a rule aimed at preventing hospitals from charging large markups on discounted prescription drugs provided to Medicare
The Trump administration on Thursday (July 2) proposed a rule aimed at preventing hospitals from charging large markups on discounted prescription drugs provided to Medicare patients, a move it says 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 significantly discounted prices. What is the proposed rule? The rule targets hospitals participating in the 340B Drug Pricing Program, a federal program that allows hospitals serving low-income and vulnerable patients to purchase outpatient prescription drugs at heavily discounted prices. Currently, these hospitals can buy drugs at steep discounts but are often reimbursed by Medicare at much higher rates, allowing them to keep the difference. Patients' co-payments are also based on these higher reimbursement amounts, increasing 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 cap Medicare reimbursement for 340B hospitals at Average Sales Price (ASP) minus 33.4%. According to the White House, this would reduce Medicare payments to participating hospitals by roughly 40% compared with 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, which examined how much hospitals actually pay to acquire prescription drugs. How much could patients save? The Trump administration estimates Medicare Part B beneficiaries receiving these drugs would save an average of about $800 a year in co-payments. Total savings for Medicare patients would reach $1.1 billion next year. Savings could total around $20 billion over 10 years if the rule remains in effect. The proposal is part of the administration's broader effort to reduce healthcare 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 purchasing discounted drugs while receiving much higher Medicare payments. Officials say aligning reimbursements more closely with hospitals' acquisition costs will lower expenses for Medicare beneficiaries without affecting access to medicines. Example cited by the administration The proposed rule highlights the prostate cancer drug Lupron Depot as an example. According to CMS A hospital participating in the 340B program can purchase one dose for about $700. Medicare currently reimburses the hospital around $4,000 for administering the drug. The patient may also pay roughly $1,000 in co-payments based on that reimbursement. The administration says the proposed formula would significantly reduce these reimbursement levels, lowering patient costs. What is the 340B program? Created in 1992, the 340B Drug Pricing Program requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to eligible hospitals and healthcare providers.
The BriefWire