Last year, the Inflation Reduction Act gave Medicare the power to negotiate drug prices that have the highest spending. The Centers for Medicare & Medicaid Services just announced the first 10 drugs selected for the program.
According to the Inflation Reduction Act of 2022, Medicare can start negotiating the prices of certain drugs directly with manufacturers, with new prices going into effect in 2026. The Medicare Drug Price Negotiation Program aims to help control rising drug costs and make prescriptions more affordable for Medicare beneficiaries.
Keep reading to see which drugs may be cheaper for your clients post-negotiations.
Which Drugs Can CMS Negotiate Prices for?
The first 10 drugs covered under Medicare Part D selected for negotiation by CMS include common prescriptions. They are:
Drugs with Prices Being Negotiated by Medicare for 2026
Source: WhiteHouse.gov
CMS must follow certain parameters when selecting drugs for the price negotiation program. Drugs eligible for negotiation must be:
- Brand-name drugs or biologics
- Part of the 50 negotiation-eligible drugs with the highest total Medicare Part D spending
- Part of the 50 negotiation-eligible drugs with the highest total Medicare Part B spending
Drugs that do not qualify for negotiation include:
- Drugs that have a generic or biosimilar available
- Drugs less than nine years (small-molecular drugs) or 13 years (biologics) from FDA approval or licensure date
- Certain “small biotech drugs” (from 2026 to 2028)
- Drugs that amount to less than $200 million of Medicare spending in 2021
- Drugs with an orphan designation as their only FDA approval
Why These Prescriptions Were Selected
All 10 drugs fall within the parameters of the Medicare Drug Price Negotiation Program. The costs for these 10 drugs amounted to $50.5 billion, or about 20 percent of the total Part D gross covered prescription drug costs between June 1, 2022 and May 31, 2023. These drugs impacted millions of Americans and cost the Part D beneficiaries taking them a total of $3.4 billion in out-of-pocket costs in 2022.
President Joe Biden released in a statement that the drugs selected “are among the most common and costly prescriptions that treat everything from heart failure, blood clots, diabetes, arthritis, Crohn’s disease — and more.”
These drugs impacted millions of Americans and cost the Part D beneficiaries taking them a total of $3.4 billion in out-of-pocket costs in 2022.
When Will Medicare Drug Price Negotiation Savings Go into Effect?
Although CMS just announced the first 10 drugs up for negotiation, your clients won’t see the direct benefit for a few years. Negotiations will occur during 2023 and 2024, with new prices going into effect at the beginning of 2026.
CMS has detailed a timeline that will span until August 1, 2024, when the negotiation period closes. This gives drug companies all of 2025 to prepare for the change. The negotiation process will take time as it considers many factors, including the drug’s clinical benefit, the extent to which it fulfills a medical need, its impact on Medicare beneficiaries, and costs associated with research, development, production, and distribution.
Negotiations will occur during 2023 and 2024, with new prices going into effect at the beginning of 2026.
Do Manufacturers Have to Participate in the Medicare Drug Price Negotiation Program?
No, drug manufactures are not required to participate in the Medicare Drug Price Negotiation Program, but those that choose not to partake will be subject to a high tax on sales. Once a drug’s price has been negotiated, manufacturers will be able to accept the deal or withdraw from the Medicare and Medicaid programs.
What’s Next?
CMS will continue to announce more selected drugs for negotiation in the following years. The Inflation Reduction Act outlines a gradual implementation of the program, from 2026 through 2029. Besides the already selected drugs for 2026, Medicare will begin negotiating 15 new Part D drugs for 2027, 15 Part B or D drugs for 2028, and 20 Part B or D drugs for 2029 and every year thereafter.
These changes won’t really affect you or your clients until the 2025 AEP, when you’ll need to research and keep an eye out for how negotiated drugs show up in plan formularies. If you know that some of your clients take these more expensive drugs, perhaps make a note in their files for the future. Until then, hang tight and stay up to date with CMS as they select and announce new negotiable drugs in the following years. Follow us here on the Ritter blog, and we’ll keep you informed.
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