For decades, Medicare was prohibited by law from negotiating directly with pharmaceutical companies on drug prices. That changed with the Inflation Reduction Act (IRA) of 2022, which gave Medicare the authority to negotiate prices on selected high-cost medications for the first time. The results of the first round of negotiations are now in effect, and additional drugs are being added. Here is what this means for you as a Medicare beneficiary.
How the Negotiation Program Works
The IRA established the Medicare Drug Price Negotiation Program, which allows the Centers for Medicare & Medicaid Services (CMS) to negotiate maximum fair prices for certain prescription drugs covered under Part D (and eventually Part B).
The process follows a structured timeline:
- CMS selects drugs based on specific criteria, including total Medicare spending, length of time on the market, and lack of generic or biosimilar competition
- Negotiations take place between CMS and the drug manufacturers over a defined period
- Maximum fair prices are established and published, representing the most that Medicare and its beneficiaries will pay for those drugs
- Negotiated prices take effect in the plan year following the conclusion of negotiations
The program started with 10 Part D drugs selected in 2023, with negotiated prices taking effect on January 1, 2026. A second batch of 15 additional drugs was selected in 2025 for prices that will take effect in 2027.
Which Drugs Have Negotiated Prices
The first group of drugs subject to negotiated pricing represents some of the most widely used and expensive medications in the Medicare program. These 10 drugs account for a substantial share of total Part D spending and are taken by millions of beneficiaries. They span several therapeutic areas:
- Blood thinners used to prevent stroke and blood clots
- Diabetes medications, including both insulin products and non-insulin drugs for type 2 diabetes
- Heart failure treatments that have become standard care for managing this chronic condition
- Autoimmune disease therapies used for conditions such as Crohn's disease and psoriasis
- Cancer treatments, including oral medications for certain blood cancers
The negotiated prices represent significant discounts compared to what Medicare was previously paying — in some cases, reductions of 40% to 79% off the prior list prices. These are not small adjustments; for high-cost specialty drugs, the savings per beneficiary can amount to thousands of dollars per year.
How Savings Reach You as a Beneficiary
The negotiated prices benefit you in several direct ways:
- Lower cost-sharing: When the price Medicare pays for a drug decreases, your copayment or coinsurance for that drug also drops. If you were paying 25% coinsurance on a drug that cost $500 per month, and the negotiated price brings it down to $300, your coinsurance drops from $125 to $75.
- Slower progression toward the out-of-pocket cap: With lower drug prices, it takes longer to accumulate spending toward your $2,100 annual out-of-pocket maximum. This means you may spend less overall before reaching the cap.
- Reduced Part D premiums over time: When Medicare spends less on drugs overall, Part D plan costs decrease. These savings can flow through to beneficiaries in the form of lower or more stable premiums, though individual plan pricing depends on many factors.
- Less IRMAA exposure: For higher-income beneficiaries, lower Part D costs across the system may contribute to slower premium growth, potentially keeping some people below IRMAA surcharge thresholds longer.
It is worth noting that the negotiated prices are maximum prices. Your actual cost may be even lower if your Part D plan has negotiated its own rebates or discounts with the manufacturer, or if you qualify for the Extra Help (Low-Income Subsidy) program.
Timeline for Additional Drugs
The program expands over time according to a schedule set by the IRA:
- 2026: Negotiated prices take effect for the first 10 Part D drugs
- 2027: Negotiated prices take effect for an additional 15 Part D drugs (selected in 2025)
- 2028: Negotiated prices take effect for another 15 drugs, which may include both Part D and Part B drugs (physician-administered medications such as infusions)
- 2029 and beyond: Up to 20 additional drugs will be selected for negotiation each year
As the program matures, the number of drugs with negotiated prices will grow steadily. CMS has indicated it will prioritize drugs with the highest total Medicare spending, drugs that have been on the market for an extended period without generic competition, and medications that represent a significant financial burden for beneficiaries.
Drugs are eligible for selection if they have been approved by the FDA for at least seven years (for traditional drugs) or 11 years (for biologics) and do not yet have generic or biosimilar competitors. This means newly launched drugs and those with existing generic alternatives are excluded.
Broader Impact on Part D Costs
Beyond the direct savings on negotiated drugs, the program is expected to have ripple effects across the Part D landscape:
- Competitive pressure on other manufacturers: When Medicare successfully negotiates lower prices on selected drugs, manufacturers of competing products may lower their prices voluntarily to remain competitive on plan formularies.
- Formulary changes: Part D plans may adjust their formularies in response to negotiated prices, potentially giving preferred status to negotiated drugs. This could mean lower copays or fewer prior authorization requirements for those medications.
- Plan design shifts: As the overall cost of the Part D benefit changes, plans may restructure their tiers, copays, and premiums. Some plans may offer more generous coverage on negotiated drugs as a way to attract enrollees.
- Stabilized premiums: The Congressional Budget Office has projected that the negotiation program, combined with other IRA provisions, will reduce federal spending on Part D over the next decade. Some of those savings should translate into slower premium growth for beneficiaries.
What This Means for Your Drug Coverage
If you take one of the drugs subject to negotiated pricing, you should notice lower out-of-pocket costs at the pharmacy starting in the year the negotiated price takes effect. You do not need to take any action — the lower prices are automatically applied through your Part D plan.
However, there are steps you can take to maximize your savings:
- Review your plan's formulary each year during Open Enrollment. A negotiated drug may move to a more favorable tier on some plans but not others.
- Compare plans using Medicare Plan Finder. Enter your specific medications to see which plan offers the lowest total cost, including premiums and out-of-pocket expenses.
- Ask your doctor about negotiated drugs. If you are taking a medication in the same therapeutic class as a negotiated drug, switching to the negotiated product could save you money.
- Check your eligibility for Extra Help. If you have limited income and resources, the Low-Income Subsidy program can reduce your Part D costs even further, on top of any negotiated price savings.
Looking Ahead
Medicare drug price negotiation is still in its early stages, but its impact is already significant. As the program adds more drugs each year, the cumulative effect on beneficiary costs and Medicare spending will grow. For the millions of people who depend on expensive medications to manage chronic conditions, this program represents a substantial shift in how prescription drug pricing works within Medicare — one that puts real dollars back in your pocket.