Trump administration proposed a rule Thursday that would reduce how much some hospitals can collect from Medicare for discounted drugs, a change officials said could save patients $1.1 billion next year.
The proposal applied to hospitals serving low-income patients through the 340B program, which allows providers to buy outpatient prescription drugs at reduced prices. In some cases, hospitals now bill insurers at rates above those costs and keep the difference, increasing patients’ out-of-pocket costs.
Under the draft rule, the Centers for Medicare & Medicaid Services would change reimbursement for hospitals in the program. A White House official, who spoke on condition of anonymity before the announcement, said the change could save about $20 billion over 10 years.
The agency estimated that a Medicare Part B enrollee who receives one of the affected drugs would save about $800 a year in co-payments.
In the draft, the administration cited Lupron Depot, a prostate cancer drug, as an example. Hospitals in the 340B program can buy a dose for about $700, but can receive roughly $4,000 in Medicare reimbursement for administering it, plus about $1,000 from a patient co-payment.
The proposed rule would cap Medicare reimbursement for participating hospitals at the average sales price, minus 33.4%, a reduction of about 40%, according to the administration. If approved, it would take effect at the start of next year.
The 340B program was created to help providers stretch federal resources to serve more patients, but it has long been disputed by hospitals and drugmakers.
In 2018, during Trump’s first term, his administration tried to make a similar cut in Medicare payments to hospitals. The Supreme Court ruled in 2022 that the government could not set a separate reimbursement plan for 340B hospitals.
Trump signed an executive order in April 2025 directing a survey of how much hospitals pay to buy drugs. The administration said the proposed rule was based on that survey.