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
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