Trump Administration Proposes Rule to Block Hospital Markups on Discounted Medicare Drugs, Projecting $1.1 Billion in Savings

Jul 2, 2026

The Trump administration proposes a rule to block hospitals from charging markups on discounted Medicare drugs under the 340B program, projecting $1.1 billion in patient savings next year. The Centers for Medicare & Medicaid Services plans to cap reimbursements at average sales price minus 33.4%, cutting payments to participating hospitals by 40%. While the administration highlights individual savings of $800 annually, the American Hospital Association warns the cuts will threaten essential services.

340B hospital reimbursement rule proposal

▪The proposed reimbursement formula is based on a survey of hospital drug acquisition costs ordered by President Donald Trump in an April 2025 executive order.
▪The Trump administration proposed a rule on July 2, 2026, to block hospitals from charging markups on discounted drugs provided to Medicare patients.
▪If approved, the proposed Medicare reimbursement rule would take effect at the beginning of 2027.
▪The Centers for Medicare & Medicaid Services proposed capping Medicare reimbursement for 340B hospitals at the Average Sales Price minus 33.4%.
▪The proposed formula would reduce Medicare payments to participating 340B hospitals by approximately 40% compared to current reimbursement levels.

Projected Medicare beneficiary savings

▪An individual Medicare Part B beneficiary receiving these drugs would save an average of about $800 annually in co-payments under the proposed rule.
▪The administration cited the prostate cancer drug Lupron Depot, which 340B hospitals can buy for $700 but currently receive $4,000 in Medicare reimbursement and $1,000 in patient co-payments.
▪The Trump administration estimates the proposed rule would save Medicare beneficiaries a total of $1.1 billion next year.
▪Total savings for Medicare patients could reach approximately $20 billion over 10 years if the proposed rule remains in effect.

340B Drug Pricing Program background

▪The federal 340B Drug Pricing Program, created in 1992, requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to eligible healthcare providers.
▪In 2018, the Trump administration attempted to implement a similar rule, but the Supreme Court ruled in 2022 that the government lacked authority to establish a separate reimbursement plan for 340B hospitals.
▪The 340B program was designed to help hospitals serving low-income and uninsured patients stretch federal resources and expand access to care.

Hospital industry opposition

▪The American Hospital Association warned that the proposed rule would compound financial pressures on hospitals and undermine their ability to maintain essential services.
▪Hospitals argue that revenue generated through the 340B program helps fund critical care for low-income, uninsured, and rural patients.