Against a backdrop of 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 under which CMS selects certain high-spend Medicare Part B or Part D drugs and negotiates lower prices with manufacturers will carry on into 2029 and beyond. The rule codifies and expands policies previously established through guidance for the initial 2026-28 period.
The final rule is slated to go into effect Dec. 5, CMS said in a fact sheet accompanying Thursday’s announcement. By Feb. 1 of next year, CMS will select up to 20 drugs covered under Medicare Part B or Part D for price negotiations taking effect in 2029, with the potential to also select medicines included in previous rounds for renegotiation.
That upcoming group of drugs will make up the fourth cycle of pricing negotiations, with negotiated prices taking effect in 2029. CMS asserted that the rule gives both patients and drugmakers “a clear path forward as the agency builds on the program’s results and continues negotiating prices for high-cost drugs.”
The initial rounds of price negotiations have already included a slew of prominent brands, including Novo's semaglutide franchise of Wegovy and Ozempic and cancer meds like Bristol Myers Squibb’s Pomalyst, Pfizer’s Ibrance and AstraZeneca’s Calquence.
Meanwhile, the latest tranche of drugs selected earlier this year for negotiation, whose new prices would go into effect in 2028, includes notable entrants like Gilead’s HIV treatment Biktarvy, AbbVie’s Botox and Eli Lilly’s diabetes drug Trulicity, to name just a few.
Beyond codifying the framework for price negotiations in 2029 and subsequent years, CMS has also taken steps to fine-tune several elements of the program.
Namely, the rule finalizes a policy on how CMS classifies certain fixed-combination drugs, with the aim of addressing “potential program integrity concerns” 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 offering or accepting a counteroffer below a specified price floor 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 medicines with a maximum fair price in effect and limit the prices plans pay pharmacies and other dispensing entities.
The IRA and the Medicare price negotiations it empowered have been frequent targets of the biopharma industry, which has broadly alleged that the policy is unconstitutional and that the pricing talks aren’t as voluntary as advertised. But attempts by major drugmakers and powerful trade organizations like the Pharmaceutical Research and Manufacturers of America (PhRMA) to push back on Medicare price negotiations have repeatedly stalled out.
In the interim, the U.S. government has made a separate and more recent push to rein in high prescription drug costs by leaning on President Donald Trump’s “most favored nation” (MFN) strategy.
“President Trump directed us to lower drug costs for Americans using every tool at our disposal,” CMS Administrator Mehmet Oz, M.D., 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.”
MFN, for its part, has yielded at times, controversial deals with more than two dozen drugmakers, generally involving commitments to price new medicines in line with prices in high-income comparator countries and offer MFN pricing on certain existing drugs through Medicaid.
Through those deals, which have also included investment commitments in the U.S., drugmakers have been able to secure temporary exemptions from the Trump administration’s threatened pharmaceutical import tariffs.
Around this week’s midterm elections, several Big Pharma executives have signaled that they expect little immediate change to their thinking around MFN. Nevertheless, the lack of transparency surrounding the deals has already drawn scrutiny from Democratic lawmakers. With Democrats set to control both chambers of Congress beginning in January, the party may soon press harder to uncover the details of those agreements.