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The federal Medicare Drug Price Negotiation Program was created by the Inflation Reduction Act of 2026 to allow the Department of Health and Human Services to bargain directly with drug makers for certain high-cost medicines covered under Medicare Part B and Part D. CMS completed two negotiation rounds and moved into a third cycle; this brief was updated in March 2026 to reflect results from the second round and the list of drugs chosen in early 2026. The program is intended to lower what Medicare and beneficiaries pay for a subset of single-source brand drugs and biologics that account for a large share of spending.
The negotiation effort unfolds each year on a statutory timetable and combines spending data, regulatory rules, and targeted exclusions. CMS selects drugs after identifying qualifying products and ranking them by total Medicare expenditures. Over time the number of drugs with negotiated prices will grow, and 2028 marks the first year CMS will negotiate physician-administered medicines under Part B. Guidance from CMS clarifies how offers are set, what factors are weighed, and how market events like generic or biosimilar entry affect negotiated prices.
Who and what qualify for negotiation
Not every drug is eligible. To be a qualifying single source drug, a product must be a brand-name small molecule or biologic without therapeutically equivalent generics or biosimilars marketed on a bona fide basis, and it must be past a statutory market-age threshold: at least 7 years for small molecules or 11 years for biologics as of the published selection list. For the 2028 cycle, that means FDA approval on or before February 1, 2019 for small molecules and licensure on or before February 1, 2015 for biologics. CMS uses FDA reference sources, claims, and pricing data to determine whether alternatives are truly available.
Common exclusions and special rules
The law excludes several categories from negotiation: orphan drugs meeting specific criteria, low-spending drugs below an inflation-adjusted threshold (originally $200 million, about $207 million for 2027), plasma-derived products, and certain small biotech products for 2026–2028. CMS treats fixed combination products as distinct from single-ingredient versions when counting spending. These exclusions shape the pool of candidates and create administrative rules to prevent manufacturers from gaming the system.
Changes from the 2026 reconciliation law
The 2026 reconciliation law expanded the orphan exclusion by making drugs designated for multiple rare diseases ineligible for negotiation and by pausing the market-age clock for drugs that later gain non-orphan approvals. That change delayed selection of expensive oncology biologics such as Keytruda and Opdivo, which had been orphan-only for a period and later gained broader approvals. According to CBO estimates, the expanded orphan exclusion will raise federal costs by about $8.8 billion over the coming decade and raise out-of-pocket spending for beneficiaries using those medicines.
Selection, timeline, and the negotiation process
Each negotiation cycle starts with CMS identifying qualifying products and ranking them by total Medicare spending using a 12-month snapshot of data. For the 2028 negotiation, CMS used spending from November 1, 2026 through October 31, 2026 to rank eligible Part B and Part D drugs. The agency selects drugs from the top-ranked lists (top 50 in each program) and removes drugs already negotiated in prior rounds. Beginning in 2027 CMS may add up to 20 drugs per year to the negotiation list, so the roster of negotiated products accumulates.
How prices are set and negotiated
CMS determines an initial offer by examining prices of therapeutic alternatives, clinical benefit evidence, and manufacturer-specific financial and utilization data. The statute also defines a ceiling based on existing price benchmarks that limits the negotiated amount Medicare will pay. Negotiations proceed over several months with multiple offer exchanges. If a generic or biosimilar reaches market, the negotiated price availability for the original product can change, and CMS has rules to address these transitions.
Recent selections, estimated savings, and impacts
CMS implemented negotiated prices for the first 10 Part D drugs on January 1, 2026. The second round included 15 Part D drugs—among them the GLP-1s Ozempic and Wegovy—with negotiated prices effective January 1, 2027. In January 2026 CMS announced an additional 15 Part B and Part D drugs to be implemented January 1, 2028; those 15 drugs together had $27 billion in gross Medicare spending between November 2026 and October 2026 and were used by about 1.8 million Medicare beneficiaries during that period.
Savings estimates and beneficiary effects
CMS has estimated significant savings from negotiated prices. For the first 10 Part D drugs, CMS calculated that Medicare would have saved about $6 billion in 2026 if those negotiated prices had applied then, a net reduction of roughly 22%, and that beneficiaries would save about $1.5 billion once those prices took effect in 2026. For the second set of 15 Part D drugs, CMS estimated $12 billion in savings relative to 2026 net prices (about 44% net savings), with beneficiary savings around $685 million when prices apply in 2027. Altogether, the 40 products selected to date represented about 36% of Medicare drug spending in 2026—$125 billion of $350 billion in gross Part B and Part D spending.
Practical effects vary by plan design, utilization patterns, and whether therapeutic alternatives exist. CMS’s rules allow manufacturers and stakeholders to understand the mechanics of selection and renegotiation, but market developments, legislative changes, and biosimilar entry will continue to influence both federal spending and beneficiary costs.