Medicare Drug Price Negotiation Insights and Implications

The Kaiser Family Foundation (KFF) provides comprehensive research and analysis on healthcare policy, notably the Medicare Drug Price Negotiation Program. This program, mandated by the Inflation Reduction Act of 2022, authorizes the Secretary of Health and Human Services to negotiate prices for specific high-cost drugs covered by Medicare.

As of the third negotiation cycle, the Centers for Medicare & Medicaid Services (CMS) has completed two rounds of drug price negotiations. On January 1, 2026, reduced prices were implemented for the initial group of 10 Medicare Part D drugs. The second set, consisting of 15 drugs, will have negotiated prices taking effect in 2027, with CMS announcing an additional set of 15 drugs in January 2026 for reductions scheduled in 2028.

Spending on the 40 drugs subject to negotiation comprised over a third of total Medicare spending on Part B and Part D drugs in 2024, amounting to $125 billion of $350 billion. According to CMS, the negotiations have resulted in substantial cost savings, with projected net savings of billions of dollars for Medicare based on the new prices compared to existing net prices paid by Part D plans. CMS anticipates that the first two rounds of negotiations will yield significant savings for Medicare beneficiaries when the prices take effect.

Moving into 2026, CMS selected 15 notable drugs covered under Medicare Part B and Part D for negotiation, with reduced prices starting on January 1, 2028. These drugs address significant conditions such as type 2 diabetes, HIV, asthma, and cancer. The previous year, these drugs accounted for $27 billion in gross spending by Medicare, serving 1.8 million beneficiaries. CMS aims to continue expanding the list by selecting up to 20 additional drugs annually for negotiation.

Eligibility for drug price negotiations requires that drugs be single-source without generic or biosimilar equivalents and have a considerable period post-FDA approval. To qualify for negotiation in 2028, a drug must have been FDA-approved by February 1, 2019, for small molecules, or licensed by February 1, 2015, for biologics. Legislative changes, such as those in the 2025 reconciliation law, have impacted the inclusion timeline of high-expenditure orphan drugs, delaying the inclusion of drugs like Keytruda and Opdivo in Medicare negotiations.

For 2028, CMS identified drugs for negotiation from the highest expenditure lists in Parts B and D, selecting 15 from the top-ranked based on total Medicare spend within a given year. CMS considers certain conditions where previously selected drugs might be eligible for renegotiation, especially if circumstances affecting pricing or drug status change. The negotiation timeline requires CMS to announce selected drugs by February 1, with finalized negotiated prices by November 30, involving discussions with manufacturers on therapeutic alternatives and clinical benefits, but avoiding discriminatory comparative research.