Medicare Drug Negotiations Officially Underway

On February 1, the U.S. Department of Health and Human Services (HHS) sent initial offers to manufacturers of the first 10 Part D drugs subject to price negotiation under the Inflation Reduction Act (IRA), a significant implementation milestone.

As announced in August, HHS selected these medications based on criteria outlined in the IRA, such as high Medicare spending and lack of competition. The resulting list includes drugs that millions of Medicare beneficiaries rely on to treat conditions such as cancer, diabetes, blood clots, heart failure, autoimmune conditions, and chronic kidney disease.

HHS estimates that in 2022, Medicare paid $46.4 billion for the 10 selected drugs, up from $20 billion in 2018, and that Part D enrollees paid $3.4 billion out of pocket. While the exact savings realized by the IRA’s negotiation program will depend on the final prices, lower costs are expected system wide. The Congressional Budget Office (CBO) anticipates negotiation will save Medicare $98.5 billion over the coming decade as well as reduce expenses for beneficiaries and taxpayers. By lowering drug prices and increasing affordability, CBO projects the changes will help people with Medicare adhere to their treatment plans, improving health outcomes and reducing the need for more costly interventions.

The negotiations will continue over the next several months. HHS plans to publish the final prices this fall, and they will take effect in 2026. Additional medications will be selected for negotiation in future years, allowing the number of drugs with negotiated prices to accumulate over time.

Importantly, other IRA policies that are or will soon be in effect further bolster beneficiary health care access and affordability. Several key revisions took effect in 2023, such as the $35 limit per monthly insulin prescription, the availability of no-cost Part D vaccines, and reduced coinsurance on certain Part B drugs. This year, even more people with Medicare will see relief. In January, the IRA’s Part D structural changes began to take shape—the law eliminated enrollee expenses in the Part D catastrophic coverage phase, essentially holding out-of-pocket costs to roughly $3,250 in 2024. It also expanded the full Part D Low Income Subsidy (LIS), also known as Extra Help, to people with incomes at or below 150% of poverty. And in 2025, the law will cap Part D drug costs at $2,000 (indexed annually for inflation) and allow enrollees to pay those expenses in monthly installments, promoting financial security and peace of mind.

Medicare Rights welcomes these long-sought modernizations. Collectively, the IRA’s drug pricing provisions will lower costs and strengthen coverage for millions of older adults and people with disabilities. We look forward to a timely implementation process, and to building upon the IRA’s historic reforms.

For More Information

To learn more about the IRA and ways to lower drug costs, visit the recently launched HHS IRA resource hub LowerDrugCosts.gov. According to HHS, this new website is intended to be a “one-stop-shop for information related to the drug pricing provisions of the Inflation Reduction Act and the implementation process, and resources for Medicare enrollees and other interested parties.”