Medicare Lists First 10 Drug Price Negotiation Targets

What You Need to Know

The Medicare Part D drug program has not been able to bargain for lower drug prices.
For 2026, Congress will let Medicare try negotiating for lower prices for 10 drugs.
The first negotiation list could have a big effect on clients at risk for developing blood clots.

Medicare managers have kicked off what could be at least two years of conflict over what some popular drugs could cost the Medicare Part D prescription drug program in 2026.

The program posted a list of the first 10 drugs that will be the target of the new price negotiation process created by the Inflation Reduction Act of 2022.

For Medicare program managers, the process could lead to desperately needed cost savings.

For your clients, the negotiation process could lead to unpredictable effects on the net cost of some drugs and the availability of drugs — even if your clients aren’t using the drugs on the negotiations target list, and even if they aren’t on Medicare.

What It Means

All kinds of clients, including retirement planning clients and investment strategy clients, may be thinking more about risk-related topics that may feel as if they’re outside your current scope, such as homeowners’ insurance bills and prescription drug costs.

The History

Medicare is a federal program that provides health coverage for 66 million Americans ages 65 or older or who have a disability, are getting kidney dialysis or need a kidney transplant.

The Medicare Part D program came to life in 2006 and now pays for drugs for 29 million people, or 56% of Medicare enrollees. Medicare accounted for $127 billion of the $397 billion the United States spent on prescription drugs in 2022, according to actuaries with the Centers for Medicare & Medicaid Services, the federal agency that runs Medicare.

In the past, because some members of Congress were worried about the huge size of Medicare, federal law kept Medicare from bargaining for better prices with drug manufacturers.

The New Drug Price Negotiation Program

The Inflation Reduction Act of 2022 is supposed to let Medicare managers bargain for lower drug prices.

Because of provisions in the act and the implementing regulations, CMS will start by bargaining for better prices for just 10 drugs, with the prices first directly affecting Medicare Part D drug plans in 2026.

CMS hopes to provide “an initial offer of a maximum fair price” for a selected drug by Feb. 1, 2024; complete negotiations by Aug. 1, 2024; and publish the maximum fair prices Sept. 1, 2024.

The negotiations for Eliquis could have the most dramatic effects: Medicare Part D plans paid $16.5 billion over a year for 3.7 million patients to use the drug to prevent or treat blood clots.

The list also includes popular diabetes drugs such as Jardiance, Januvia and Farxiga.

For a list of the 10 drugs that could be part of the first round of negotiations, see the table below.

Medicare now spends a total of about $50 billion per year on the 10 drugs on the list.

Implications

Here are five possible effects of the new Medicare drug price negotiation program.