Amid repeated industry challenges in court, the Centers for Medicare and Medicaid Services (CMS) is locking in the drug price negotiation framework established under the Biden-era Inflation Reduction Act (IRA).
In turn, the process by which CMS selects certain high-cost Medicare Part B or Part D drugs and negotiates lower prices with manufacturers will continue through 2029 and beyond. The rule codifies and expands previously established policies through guidelines for the initial period 2026-2028.
The final rule is expected to take effect Dec. 5, CMS said in a fact sheet accompanying Thursday’s announcement. By February 1 of next year, CMS will select up to 20 drugs covered by Medicare Part B or Part D for price negotiations taking effect in 2029, with the option to also select drugs included in previous rounds of renegotiation.
This next group of drugs will constitute the fourth round of price negotiations, with negotiated prices taking effect in 2029. CMS asserted that the rule gives patients and drug manufacturers “a clear path forward as the agency builds on the results of the program and continues to negotiate prices for high-cost drugs.”
The first rounds of price negotiations have already included a slew of high-profile brands, including Novo’s semaglutide franchise Wegovy and Ozempic, and cancer drugs like Bristol Myers Squibb’s Pomalyst, Pfizer’s Ibrance and AstraZeneca’s Calquence.
Meanwhile, the final tranche of drugs selected earlier this year for negotiations, whose new prices would take effect in 2028, includes notable entrants like Gilead’s HIV treatment Biktarvy, AbbVie’s Botox and Eli Lilly’s diabetes drug Trulicity, to name a few.
Beyond codifying the framework for price negotiations in 2029 and subsequent years, CMS has also taken steps to refine several elements of the program.
Namely, the rule finalizes a policy on how CMS classifies certain fixed-combination drugs, aiming to address “potential program integrity issues” that could encourage drugmakers to evade negotiated prices by steering patients toward new product formulations.
The rule also includes a provision establishing a temporary “small biotech floor” that prevents CMS from making or accepting a counteroffer below a specified floor price for certain eligible small biotech drugs in 2029 and 2030. It also codifies two policies related to Medicare Part D intended to ensure plan coverage of drugs with a maximum fair price in effect and to limit the prices plans pay to pharmacies and other dispensing entities.
The IRA and the Medicare price negotiations it empowered have been frequent targets of the biopharmaceutical industry, which has widely asserted that the policy is unconstitutional and that price negotiations are not as voluntary as advertised. But attempts by major drugmakers and powerful trade organizations like the Pharmaceutical Research and Manufacturers of America (PhRMA) to obstruct Medicare price negotiations have repeatedly failed.
Meanwhile, the U.S. government has taken a separate, more recent initiative to curb the high cost of prescription drugs by building on President Donald Trump’s “most favored nation” (MFN) strategy.
“President Trump has asked us to reduce drug costs for Americans using every tool at our disposal,” CMS Administrator Mehmet Oz, MD, said in a statement announcing the new rule. “This rule provides additional tools to help CMS negotiate better deals, achieve greater savings for taxpayers and beneficiaries, and improve health outcomes for seniors who rely on the Medicare prescription drug program.”
The MFN system, for its part, has at times resulted in controversial agreements with more than two dozen drugmakers, typically involving commitments to price new drugs in line with prices in high-income comparator countries and to offer MFN prices on some existing drugs through Medicaid.
Through these agreements, which also included investment commitments in the United States, drugmakers were able to obtain temporary exemptions from threatened tariffs on pharmaceutical imports imposed by the Trump administration.
As this week’s midterm elections approach, several big pharmaceutical company executives have indicated they expect little immediate change in their thinking on MFN. Still, the lack of transparency surrounding the deals has already caught the attention of Democratic lawmakers. With Democrats expected to control both houses of Congress starting in January, the party may soon make more of an effort to uncover the details of these deals.
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