Draft:Medicare Drug Price Negotiation Program

• Comment: This looks to be an AI assisted draft, though the top half appears to have been rewritten. ChrysGalley (talk) 09:57, 28 May 2026 (UTC)

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The Medicare Drug Price Negotiation Program is a United States federal program, administered by the Centers for Medicare & Medicaid Services (CMS), that negotiates lower prices for selected high-cost prescription drugs covered under Medicare Part B and Part D. It was created by the 2022 Inflation Reduction Act.

The Inflation Reduction Act repealed a longstanding prohibition, originally enacted in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, on Medicare's negotiating prescription drug prices. The first negotiated prices, termed "maximum fair prices" (MFPs), took effect on January 1, 2026 for 10 Part D drugs. Prices for an additional 15 drugs, including Ozempic and Wegovy, will take effect in 2027, with 15 further drugs to follow in 2028. From 2029 onward, 20 drugs are to be added each year.

In July 2025, the One Big Beautiful Bill Act expanded the program's orphan drug exclusion to cover drugs with multiple rare-disease designations, delaying or removing future-round candidates such as Keytruda and Opdivo.

The program has been the subject of more than a dozen federal lawsuits by drug companies and industry groups. On May 18, 2026, the Supreme Court of the United States denied certiorari in the first wave of petitions, leaving the program in effect; several lower-court cases remain pending.

History

Medicare Part D, the outpatient prescription drug benefit, was created by the 2003 Medicare Modernization Act. That law barred the Secretary of Health and Human Services from interfering in drug price negotiations between manufacturers, pharmacies, and plan sponsors, a provision commonly called the "non-interference clause".

Over the next two decades, repeated attempts to repeal this restriction failed. The Medicare Prescription Drug Price Negotiation Act was passed by the House of Representatives in 2007 but never became law. In 2021, the Build Back Better Act included similar negotiation proposals, but the bill stalled in the Senate.

In 2022, a scaled-back version of negotiation, the Medicare Drug Price Negotiation Program, was included in the final version of the Inflation Reduction Act, which President Joe Biden signed into law on August 16, 2022 after a tie-breaking vote in the United States Senate by Vice President Kamala Harris.

Framework

Drug eligibility

To be eligible, a drug must be a single-source brand-name or biological product covered under Medicare Part B or Part D, with no marketed generic or biosimilar competitor. In addition:

• Small-molecule drugs must have been FDA-approved for at least 7 years.
• Biological products must have been FDA-licensed for at least 11 years.

This four-year disparity has been termed the "pill penalty" by the pharmaceutical industry, which has argued that the shorter window for small molecules discourages investment in oral drug development. A 2025 KFF analysis estimated that lengthening the small-molecule window to 11 years would have made ineligible 13 of the 25 drugs selected in the first two cycles, accounting for roughly two-thirds of associated Medicare Part D spending.

Certain categories are excluded, including drugs with annual Medicare spending below $200 million (indexed for inflation), drugs eligible for the "small biotech exception", orphan drugs meeting specified criteria, and plasma-derived products. Once selected, a drug remains subject to a negotiated MFP indefinitely unless it loses single-source status or is removed under the program's renegotiation provisions.

Manufacturer participation

Manufacturer participation in the Negotiation Program is nominally voluntary. A manufacturer that declines to participate must either pay an excise tax that begins at 65% of U.S. sales of the selected drug and rises by 10% each quarter to a maximum of 95%, or withdraw all of its products from coverage under Medicare and Medicaid. In court, the federal government has consistently characterized this arrangement as voluntary, and federal courts have accepted that characterization in rejecting constitutional challenges to the program.

Drugs selected per cycle

The statute prescribes a phased expansion of the program, organized by Initial Price Applicability Year (IPAY), the year a cycle's negotiated prices take effect:

Initial Price Applicability Year (IPAY)	Drugs selected	Scope
2026	10	Part D only
2027	15	Part D only
2028	15	Part B and Part D
2029 and thereafter	20 per year	Part B and Part D

2025 amendments

The Trump administration's One Big Beautiful Bill Act (OBBBA), enacted in July 2025, narrowed the pool of drugs the Negotiation Program covers. The original orphan-drug exclusion applied only to drugs approved for a single rare-disease indication; OBBBA expanded it to cover any drug with one or more orphan designations so long as the drug has no non-orphan FDA approvals. The act also restarted the eligibility clock for orphan drugs, providing that the 7- or 11-year countdown begins only when a drug first receives an approval for a non-orphan indication.

The Congressional Budget Office (CBO) estimated that the changes would reduce federal savings by approximately $8.8 billion over 2025-2034.

Negotiation process

For each cycle, CMS publishes a list of drugs, and participating manufacturers then submit data on each selected drug, including:

• Research and development costs and any prior federal support for research and development;
• Costs of production and distribution;
• Pending and approved patent applications and marketing-exclusivity periods;
• United States sales and revenue data.

CMS also accepts submissions from the public, patient organizations, providers, and competing manufacturers regarding the drug's clinical benefit, the extent to which it represents a therapeutic advance, and the extent to which it addresses unmet need.

The statute caps the MFP at a percentage of the drug's non-federal average manufacturer price, scaled by years on market: 75% for drugs 9-12 years past approval, 65% for drugs 12-16 years past approval, and 40% for drugs more than 16 years past approval. The negotiated price may be lower than these caps.

Implementation cycles

First cycle (IPAY 2026)

On August 29, 2023, CMS announced the first 10 Part D drugs selected for negotiation, drawn from the highest-expenditure drugs that met the statutory criteria. All 10 manufacturers signed agreements to participate. CMS announced final negotiated prices on August 15, 2024 and the resulting MFPs took effect on January 1, 2026.

Drug	Manufacturer	Common indications	Discount from 2023 list price
Eliquis	Bristol Myers Squibb / Pfizer	Blood clots	56%
Jardiance	Boehringer Ingelheim / Eli Lilly	Type 2 diabetes; heart failure	66%
Xarelto	Johnson & Johnson	Blood clots	62%
Januvia	Merck	Type 2 diabetes	79%
Farxiga	AstraZeneca	Type 2 diabetes; heart failure; chronic kidney disease	68%
Entresto	Novartis	Heart failure	53%
Enbrel	Amgen	Rheumatoid arthritis; psoriasis	67%
Imbruvica	AbbVie / Johnson & Johnson	Blood cancers	38%
Stelara	Johnson & Johnson	Psoriasis; Crohn's disease	66%
Fiasp / NovoLog	Novo Nordisk	Diabetes (insulin)	76%

Afterwards, the Department of Health and Human Services projected savings of approximately $6 billion to Medicare in 2026 and $1.5 billion in out-of-pocket savings to beneficiaries. An independent analysis published in the New England Journal of Medicine cautioned that net savings, measured against confidential rebates already negotiated by Part D plan sponsors, may be smaller than the HHS figure suggests.

Second cycle (IPAY 2027)

On January 17, 2025, CMS announced 15 Part D drugs for the second cycle, with negotiations conducted in 2025 and prices effective January 1, 2027. Among the selected drugs were the semaglutide products Ozempic, Wegovy, and Rybelsus (Novo Nordisk), treated as a single product because they share an active ingredient.

CMS announced final MFPs on November 25, 2025.

Drug	Manufacturer	Common indications	Discount from 2024 list price
Ozempic / Wegovy / Rybelsus	Novo Nordisk	Type 2 diabetes; obesity	71%
Trelegy Ellipta	GSK	Asthma; chronic obstructive pulmonary disease	73%
Xtandi	Astellas / Pfizer	Prostate cancer	48%
Pomalyst	Bristol Myers Squibb	Multiple myeloma	60%
Ofev	Boehringer Ingelheim	Pulmonary fibrosis	50%
Ibrance	Pfizer	Breast cancer	50%
Linzess	AbbVie / Ironwood	Irritable bowel syndrome with constipation	75%
Calquence	AstraZeneca	Blood cancers	40%
Austedo / Austedo XR	Teva	Tardive dyskinesia; Huntington's disease chorea	38%
Breo Ellipta	GSK	Asthma; chronic obstructive pulmonary disease	83%
Tradjenta	Boehringer Ingelheim	Type 2 diabetes	83%
Xifaxan	Salix	Irritable bowel syndrome; hepatic encephalopathy	63%
Vraylar	AbbVie	Schizophrenia; bipolar disorder; major depressive disorder	44%
Janumet / Janumet XR	Merck	Type 2 diabetes	85%
Otezla	Amgen	Psoriasis; psoriatic arthritis	65%

CMS estimated annual Part D savings of approximately $12 billion and $685 million in beneficiary out-of-pocket savings in 2027. A 2026 analysis in the New England Journal of Medicine projected that the second cycle would generate larger net savings than the first.

Third cycle (IPAY 2028)

On January 27, 2026, CMS announced 15 drugs for the third cycle, the first to include Part B (clinician-administered) drugs, together with one drug selected for the program's first renegotiation. The selections were drawn from a published list of the top 50 negotiation-eligible drugs ranked by combined Part B and Part D spending. Of the 15 selected drugs, 10 were Part D drugs and 5 were Part B drugs.

All 15 manufacturers signed participation agreements by the February 28, 2026 statutory deadline, as announced by CMS on March 13, 2026. Negotiations are scheduled to occur through 2026, with MFPs to be published by November 30, 2026 and to take effect January 1, 2028. The 15 selected drugs accounted for approximately $27 billion in combined Part B and Part D spending in the 12 months ending October 31, 2025, or about 6% of total Medicare drug spending.

Drug	Manufacturer	Common indications
Trulicity	Eli Lilly	Type 2 diabetes
Biktarvy	Gilead	HIV
Orencia	Bristol Myers Squibb	Rheumatoid arthritis; psoriatic arthritis
Cosentyx	Novartis	Plaque psoriasis; psoriatic arthritis
Erleada	Johnson & Johnson	Prostate cancer
Kisqali	Novartis	Breast cancer
Entyvio	Takeda	Crohn's disease; ulcerative colitis
Verzenio	Eli Lilly	Breast cancer
Botox	AbbVie	Chronic migraine; overactive bladder; spasticity
Lenvima	Eisai	Thyroid, endometrial, liver, and kidney cancers
Xolair	Genentech / Novartis	Asthma; chronic urticaria
Rexulti	Otsuka / Lundbeck	Major depressive disorder; schizophrenia; agitation in Alzheimer's disease
Xeljanz / Xeljanz XR	Pfizer	Rheumatoid arthritis; psoriatic arthritis; ulcerative colitis
Anoro Ellipta	GSK	Chronic obstructive pulmonary disease
Cimzia	UCB	Rheumatoid arthritis; psoriatic arthritis; Crohn's disease

In addition to the 15 newly selected drugs, CMS designated Tradjenta (Boehringer Ingelheim), originally selected for IPAY 2027, for the program's first renegotiation. The renegotiated MFP will take effect alongside the third-cycle prices on January 1, 2028.

Legal challenges

Beginning in mid-2023, manufacturers and industry groups filed a series of lawsuits challenging the constitutionality of the program. The principal arguments were that the program amounts to an uncompensated taking in violation of the Fifth Amendment; that it compels speech in violation of the First Amendment by requiring manufacturers to characterize the agreed price as a "maximum fair price"; that the associated excise tax constitutes an excessive fine; and that the statute delegates legislative authority to the executive branch.

Plaintiffs included Merck, Bristol Myers Squibb, Johnson & Johnson (Janssen Pharmaceuticals), AstraZeneca, Novartis, Boehringer Ingelheim, Novo Nordisk, Teva Pharmaceuticals, the Pharmaceutical Research and Manufacturers of America (PhRMA), the National Infusion Center Association, the Global Colon Cancer Association, and the United States Chamber of Commerce.

The second Donald Trump administration continued to administer and defend the Negotiation Program in court.

District court rulings

Federal district courts uniformly ruled in favor of the federal government. In AstraZeneca Pharmaceuticals LP v. Becerra (D. Del. March 1, 2024), the court held that drug manufacturers have no protected property interest under the Due Process Clause in selling drugs to Medicare beneficiaries at a price higher than the government is willing to pay. In Bristol Myers Squibb Co. v. Becerra and the consolidated Janssen Pharmaceuticals Inc. v. Becerra (D.N.J. April 29, 2024), Judge Zahid N. Quraishi dismissed the takings claims because the program does not require the sale of any drug, and dismissed the compelled-speech claims on the ground that any restriction on the manufacturers' speech was "merely incidental" and that the program created "public relations problems not constitutional problems".

Similar rulings followed in cases brought by Novo Nordisk, Boehringer Ingelheim, Novartis, and the Chamber of Commerce. The Western District of Texas initially dismissed the PhRMA-led suit for improper venue; the Fifth Circuit reversed, and on remand the district court ruled for the government.

Appellate decisions

On May 8, 2025, the Third Circuit became the first appellate court to rule on the merits, affirming the government's position in the AstraZeneca case and holding that the manufacturer had failed to articulate a protected property interest in selling Part B and Part D drugs at market rates. The same three-judge panel subsequently affirmed in the Bristol Myers Squibb and Janssen cases (September 4, 2025), Novartis (September 11, 2025), and Novo Nordisk. The Second Circuit affirmed in the Boehringer Ingelheim case on August 7, 2025, reaching the same conclusion on the property-interest question. The Sixth Circuit affirmed dismissal of the Chamber of Commerce suit on standing grounds in August 2025.

Supreme Court

On May 18, 2026, the Supreme Court denied certiorari in consolidated petitions filed by Novo Nordisk, AstraZeneca, Janssen Pharmaceuticals, Bristol Myers Squibb, Novartis, and Boehringer Ingelheim, leaving the lower-court rulings in place. The Court did not give a reason for the denials, and several lower-court cases remain pending.

Effects and reception

The Congressional Budget Office estimated in 2022 that the drug-pricing provisions of the IRA, of which the Negotiation Program is the largest single component, would reduce the federal budget deficit by approximately $237 billion over the 2022-2031 period, with the Negotiation Program alone contributing roughly $98.5 billion. The 40 drug products selected across the first three cycles accounted for approximately $125 billion of total Medicare drug spending in 2024, or more than one-third of all Part B and Part D drug spending.

Pharmaceutical manufacturers and industry groups have argued that the program reduces incentives for research and development, particularly for small-molecule drugs that face the shorter 7-year eligibility threshold. A 2024 analysis in Nature Biotechnology projected that the program's effect on research-and-development investment would be small and largely confined to marginally profitable drug development. Subsequent work has documented declines in industry-sponsored post-approval clinical trials for small-molecule oncology drugs relative to biologics following the IRA's passage.

A December 2025 report from the AARP Public Policy Institute projected that average enrollee cost-sharing across the first 10 selected drugs would fall by approximately 50% in 2026 among Part D plans in five states.

See also

• Prescription drug prices in the United States