Trump’s Medicare Drug Rule Could Save Patients $1.1 Billion - But Hospitals Say There’s a Catch

Lower drug costs could be coming for some Medicare patients, but the savings may not be as straightforward as they sound.

The Trump administration is proposing a new rule that would limit how much hospitals can charge for certain discounted medications, a move that could save patients about $1.1 billion next year, which may matter for households trying to save money on bills.

What the new rule would change

The proposal targets hospitals participating in the federal 340B program, which allows certain providers, typically those serving low-income communities, to purchase outpatient drugs at steep discounts.

Under the current system, hospitals can buy these drugs at reduced prices while still receiving Medicare reimbursement based on higher payment rates. Because Medicare Part B coinsurance is tied to those reimbursement amounts, patients often pay more out of pocket as well.

The proposal would also change how those reimbursements are calculated. Specifically, the Centers for Medicare & Medicaid Services (CMS) would cap payments for these drugs at the average sales price minus 33.4%.

That would reduce Medicare reimbursement, bringing payments closer to the discounted prices hospitals generally pay through the 340B program.

Where the savings come from

For patients, the biggest impact would show up in co-pays, with CMS estimating that the average Medicare Part B enrollee receiving one of these drugs could save around $800 per year in out-of-pocket costs. Across all affected patients, that adds up to about $1.1 billion in annual savings.

Over a longer period, the numbers grow even larger. Administration officials estimate the rule could reduce costs by roughly $20 billion over 10 years. Those savings are driven by one key shift: reducing the markup hospitals can charge on drugs they acquired at discounted prices.

How the system works today

A closer look at one drug helps explain the issue. According to the administration, hospitals participating in the 340B program can purchase a dose of the prostate cancer drug Lupron Depot for roughly $700.

But under the current system, they may receive about $4,000 from Medicare for administering that same drug, plus an additional $1,000 from patient co-payments.

That creates a significant margin, one that critics say leads to higher costs for both patients and the broader health care system. The proposed rule would cut those payments by roughly 40%, narrowing that gap.

Why hospitals are pushing back

Hospitals say the situation is not as simple as it looks on paper. The American Hospital Association has warned that reducing reimbursement could put additional financial pressure on facilities already dealing with rising costs and staffing challenges.

"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.

Hospitals argue that the extra revenue generated through the program helps fund care for uninsured and low-income patients, as well as support services that might not otherwise be financially viable.

A long-running battle over 340B

The 340B program has been at the center of a years-long debate between hospitals, drugmakers, and policymakers.

Originally created to help providers stretch limited resources, the program has grown significantly over time. Critics argue it has expanded beyond its original purpose, while supporters say it remains a critical funding tool for vulnerable populations.

This is not the first time the federal government has tried to change how payments work. During Trump's first term, the administration introduced a similar policy to cut Medicare reimbursements for 340B hospitals.

But in 2022, the Supreme Court ruled that the government could not impose different payment rates without proper data collection. That ruling forced the policy to be reversed.

Why this proposal is different

The current proposal is built on new data. In April 2025, Trump signed an executive order directing agencies to study how much hospitals actually pay for drugs. That survey provided the foundation for the updated reimbursement formula.

By tying payments more closely to average sales prices, the administration is attempting to address the legal issues that derailed the earlier effort. Still, the complexity of the health care system means the final impact is uncertain.

What this means for patients

For Medicare patients, the potential savings are clear, at least in theory. Lower reimbursement rates could translate into lower co-pays for certain treatments, particularly for high-cost drugs administered in hospital settings.

But the actual savings may vary depending on how hospitals respond. If providers cut back on services, shift costs elsewhere, or adjust billing practices, the overall financial impact could be less predictable.

Why the savings may not be straightforward

One of the biggest uncertainties is how hospitals will adapt. Reducing a major revenue source could lead to changes in how care is delivered or how other services are priced.

That's why some experts caution that while the rule is designed to lower costs, the real-world effects may be more complex than the headline numbers suggest.

The rule is still a proposal and has not been finalized. If approved, it would take effect at the start of next year. But it is likely to face strong opposition from hospital groups and could also encounter legal challenges, as previous attempts have.

Bottom line

The Trump administration says its proposed Medicare drug rule could save patients $1.1 billion next year by limiting hospital markups on discounted medications. If finalized, the proposal could lower out-of-pocket costs for many Medicare patients receiving high-cost outpatient drugs, which may help those trying to lower their financial stress.

But because hospitals rely on 340B revenue to fund a range of services, the ultimate impact will depend on whether lower drug costs outweigh any changes hospitals make in response to reduced reimbursements.