Washington officials released a proposal on Thursday that would alter how certain hospitals bill Medicare for outpatient drugs purchased at steep discounts. The change targets markups that currently allow facilities to retain the difference between acquisition costs and reimbursement rates. If finalized, the adjustment is projected to reduce patient expenses by $1.1 billion in the coming year.
How the 340B Program Works Today
The 340B program permits hospitals that treat many low-income patients to purchase prescription drugs at reduced prices. In practice, those same facilities often submit claims to Medicare at much higher rates, keeping the spread as revenue. This arrangement has persisted for years and contributes to elevated costs passed along to beneficiaries through copayments. The structure was originally intended to stretch limited federal resources so providers could serve more patients. Over time, however, it has drawn scrutiny from both hospital advocates and drug manufacturers. Each side has pressed lawmakers to preserve or revise the benefit.
What the New Rule Would Change
Under the proposal from the Centers for Medicare & Medicaid Services, reimbursement for 340B hospitals would shift to a formula based on average sales prices minus 33.4 percent. The adjustment would apply only to facilities participating in the discounted-drug program. Officials estimate the change would lower payments by roughly 40 percent compared with current levels. A concrete illustration appears in the draft rule. Hospitals can acquire a dose of the prostate cancer drug Lupron Depot for about $700 under 340B pricing. Medicare currently reimburses roughly $4,000 for administration, with patients adding another $1,000 in copayments. The proposed cap would narrow that gap significantly.
Projected Patient Savings
The agency calculates that the average Medicare Part B beneficiary who receives one of these drugs would pay $800 less per year in copayments. Across the covered population, that reduction totals the $1.1 billion figure cited for next year. Over a decade, cumulative savings could reach approximately $20 billion, according to administration estimates. The timing aligns with broader administration efforts to demonstrate action on household healthcare costs. An executive order issued in April 2025 directed a survey of hospital drug acquisition expenses, and the resulting data informed the current proposal. The rule, if approved, would take effect at the start of next year.
Stakeholder Concerns and Past Legal History
Hospital systems have warned that reduced revenue could affect services and staffing in the communities they serve. The program has long been contested in lobbying battles between providers and pharmaceutical companies. Any revenue drop would arrive at a moment when many facilities already face financial pressures. This is not the first attempt to impose similar limits. During the prior Trump term, an earlier version of the policy was blocked after the Supreme Court ruled in 2022 that the government could not create a separate reimbursement track solely for 340B hospitals. The current draft seeks to address that legal obstacle through a revised formula.
- Targets markups on 340B discounted drugs
- Projected $1.1 billion in patient savings next year
- $800 average annual copayment reduction per beneficiary
- Potential $20 billion over ten years
- Would apply starting January of next year
The proposal reflects ongoing tension between controlling federal and patient spending and preserving resources for safety-net providers. Its ultimate effect will depend on how hospitals respond and whether the rule withstands any legal challenges that may follow.
AI Disclaimer: This article was created with the assistance of AI tools and reviewed by a human editor.