As many have heard by now, on Thursday, August 15, 2024, the Centers for Medicare & Medicaid Services (CMS) released prices for the first 10 prescription drugs selected for negotiations with manufacturers under the Medicare Drug Price Negotiation Program (Price Negotiation Program) of the Inflation Reduction Act of 2022 (IRA) (select drugs). As explained in a previous alert, the Price Negotiation Program allows CMS to directly negotiate drug prices for certain high-cost, single-source Medicare Part B and Part D drugs on an increasing scale (more details on the Price Negotiation Program can be found here). CMS announced the ten selected Part D drugs for the first price application year of 2026 in August 2023.
In January 2024, CMS and the manufacturers of the 10 selected Part D drugs began the price negotiation program, with negotiations completed earlier this month. In setting the new rebate prices, CMS considered information provided by manufacturers, including research and development costs, previous federal financial support, unit costs for production and distribution, and market/revenue/sales data.
As a result, CMS arrived at the following prices for the 10 selected Part D drugs, valid from 1 January 2026:
Negotiated prices range from 38% to 79% off list prices for 30-day supplies. In a press release, CMS said Medicare would have saved an estimated $6 billion, or about 22%, on the 10 selected drugs when the new prices were implemented last year.
What happens next?
- CMS has until March 2025 to publish a statement of negotiated prices for each selected drug, which will take effect on January 1, 2026.
- By February 2025, CMS will select up to 15 additional Part D drugs for negotiations for 2027. Drug manufacturers have until the end of that month to decide whether to participate in the price negotiation program.
- After the second round of price negotiations, CMS may negotiate prices for 15 more drugs that will take effect in 2028 and then for 20 more drugs that will take effect in 2029.
What actions should you take now?
Due to the Price Negotiation Program and expected changes in drug prices over the next few years, health plans are encouraged to closely review the financial terms of their pharmaceutical benefit management (PBM) contracts to determine whether the renegotiated drug prices for 2025 trigger certain rights or actions under the contracts (e.g., reservation of rights, exceptional events, reasonable adjustment, changes in law, etc.) that would allow the PBM or health plan to adjust drug prices or financial guarantees beginning in 2025.
As CMS continues to negotiate new drug prices under the Price Negotiation Program, health plans should anticipate the impact of these price fluctuations during the term of a current (or future) agreement and determine the method and process to be used to evaluate the impact of these changes.
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