For the first time, Medicare will have the ability to negotiate prices of certain drugs thanks to the Inflation Reduction Act signed into law in 2022. The Centers for Medicare and Medicaid Services has already announced which drugs it will target for the price negotiation program starting in 2026, but now the agency has also issued an initial guidance detailing the requirements and parameters of the program.
The guidance includes requests for public comment as well as key components of the program. Medicare plans to use its new authority to negotiate lower prices for selected high-cost drugs.
“Drug price negotiation is a critical piece of how this historic law improves the Medicare program,” CMS Administrator Chiquita Brooks-LaSure said in a statement. “By considering factors such as clinical benefit and unmet medical need, drug price negotiation intends to increase access to innovative treatments for people with Medicare.”
According to CMS, the negotiations will focus on key questions such as the benefit of the selected drug, the extent to which it fulfills an unmet medical need and its impact on Medicare beneficiaries. Medicare has never previously had the power to negotiate with drug companies for prices. CMS will release the first wave of drugs it plans to target for price negotiations September 1, starting with 10 drugs. CMS and the Department of Health and Human Services will announce the negotiated prices of those 10 drugs a year later, in September 2024, with the prices going into effect Jan. 1, 2026.
“Negotiation is a powerful tool that will drive drug companies to innovate to stay competitive, fostering the development of new therapies and delivery methods for the treatments people need,” said Meena Seshamani, MD, PhD, CMS deputy administrator and director of the Center for Medicare. “This initial guidance is the next step in the extensive engagement CMS has had to date with interested parties, and we look forward to continuing to receive comment on key policy areas and engage with the public as we implement the Negotiation Program.”
Beyond the first 10 drugs in the program, CMS will select up to 15 more Part D drugs for price negotiations for 2027, as well as up to 15 more Part B or Part D drugs for 2028, and up to 20 more Part B or Part D drugs for each year after that, as outlined in the Inflation Reduction Act.
See the full guidance here.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."