The Trump administration is floating a proposal to establish a permanent framework for Medicare drug price negotiations.
The Centers for Medicare and Medicaid Services said a permanent framework would create "a more transparent and sustainable process for lowering drug costs for millions of Medicare beneficiaries" while providing drug manufacturers more certainty.
The proposal includes policies for negotiating and renegotiating high-cost, single-source drugs beginning with initial price applicability year 2029, CMS said in a press release issued Friday. The price negotiation program was established under the Inflation Reduction Act.
“This proposed rule lowers drug prices for seniors and ensures continued savings,” said CMS Administrator Mehmet Oz, M.D., in a statement. “We are moving from annual updates to a permanent, predictable framework. This approach puts patients first, strengthens Medicare and protects the innovation pipeline that delivers future cures.”
CMS will select up to 20 additional negotiation-eligible drugs covered under Part D and/or payable under Part B for what will be a fourth cycle of negotiations in 2029 as well as future cycles. As required by law, the negotiation program must also transition from being implemented through guidance to being codified in regulations as a durable, long-term framework, CMS said.
The rule also proposes a narrow modification of the policy used to identify qualifying single source drugs to address potential program integrity concerns posed by certain new formulations.
In addition to codifying the existing program, CMS is proposing to implement the Temporary Floor for Small Biotech Drugs, as required by law, which limits CMS from offering or agreeing to a counteroffer for a maximum fair price (MFP) for small biotech drugs below the floor for certain eligible drugs during initial price applicability years 2029 and 2030.
The proposed rule also would codify two policies affecting the Medicare Part D benefit; one related to formulary inclusion of selected drugs and the definition of “negotiated price.”
The Inflation Reduction Act introduced the drug price negotiation under the Biden administration. CMS has negotiated prices for 25 high-expenditure drugs during the program’s first two years, and agency officials assert that it has generated significant savings for Medicare and beneficiaries.
The first batch of IRA-enabled Medicare price cuts went into effect at the start of the year.
“The program is already delivering real savings,” Chris Klomp, Director of Medicare and Chief Counselor of the U.S. Department of Health and Human Services, said in a statement. “This rule builds on that foundation by establishing clear, consistent rules of the road—giving patients, plans, pharmacies, and drug manufacturers the certainty they need as we continue to drive down costs.”
The pharmaceutical industry has wagered a public campaign against the IRA price negotiations, likening the system to government price controls rather than genuine negotiations given the harsh penalties for noncompliance, but, so far, the industry hasn't been able to meaningfully resist the IRA measures, Fierce Pharma reported.