Medicare started setting drug prices instead of paying them

Until this year, Medicare didn't set drug prices — it paid whatever price emerged from the private negotiation between a manufacturer and the pharmacy-benefit managers standing between them.▸ The Inflation Reduction Act of 2022 changed that for a small, high-spending slice of the drug list. Under the Medicare Drug Price Negotiation Program, CMS now picks the highest-cost drugs that face no generic or biosimilar competition, sends the manufacturer an offer, and negotiates — with the statute, not the market, setting the floor for how low that price can go. The first ten "maximum fair prices" took effect January 1, 2026. A second round of fifteen follows on January 1, 2027. A third round, reaching into Part B for the first time, was already selected in January 2026.

A drug qualifies for negotiation if it's among the highest-spending drugs under Medicare Part D or Part B, has been on the market for years without generic or biosimilar competition, and isn't shielded by one of the statute's carve-outs (small-biotech and orphan-drug exceptions among them).▸ For the first cycle, CMS sent each of ten manufacturers a written initial offer on February 1, 2024, with a justification tied to the drug's clinical benefit, existing federal support for its development, and its production cost. Manufacturers had 30 days to counter. Three negotiation meetings followed over the spring and summer. Five drugs settled inside those meetings; for the other five, CMS issued a final offer that manufacturers could accept or reject — and every one accepted, per CMS's account of the negotiation. No manufacturer has yet refused to participate; the law backs a refusal with an excise tax that can reach 95% of the drug's U.S. sales.

The cuts range from Januvia's diabetes pill falling 79%, from $527 to $113 for a 30-day supply, down to Imbruvica, a blood-cancer drug, falling a comparatively modest 38% — but from a list price of $14,934 a month, so the dollar savings per patient are still the largest of the ten.▸ Across all ten drugs, CMS estimates that if the negotiated prices had applied throughout 2023, Medicare would have spent $6 billion less — 22% below what it actually paid net of rebates — and people with Part D coverage would save an estimated $1.5 billion in out-of-pocket costs now that the prices are live.

Money and reach don't move together.▸ The cheapest, highest-volume drugs on the list carry the smallest negotiated prices but touch the most people; the costliest carry the opposite.

Eliquis, a blood thinner, was dispensed to 3.9 million Part D enrollees in 2023 — almost a quarter of everyone who used any of the ten drugs — at a list price of $521 a month, now $231.▸ Imbruvica sits at the other end: just 17,000 enrollees, but a $9,319 negotiated price even after the cut. In total, 8.8 million of the 54 million people enrolled in Part D — about one in six — used at least one of these ten drugs in 2023, spending $56.2 billion gross, or roughly a fifth of all Part D drug spending that year, on just ten products.

The second cycle is larger and lands next.▸ Fifteen more drugs — including the GLP-1 franchise Ozempic, Rybelsus, and Wegovy, which alone accounted for $15.2 billion in 2024 Part D spending and reached 2.28 million enrollees — get negotiated prices effective January 1, 2027. CMS's negotiated-price fact sheet for that round puts the GLP-1 discount at 71%, from $959 to $274 for a 30-day supply, and projects the fifteen-drug round would have saved Medicare $12 billion had it applied in 2024 — 44% of net spending on those drugs, and a bigger aggregate cut than round one. A third round, selected on January 27, 2026 for prices effective in 2028, breaks new ground by pulling in the first drugs paid under Part B rather than Part D — including the diabetes drug Trulicity and the HIV drug Biktarvy. Those fifteen drugs accounted for $27.0 billion in combined Part B and Part D spending and reached 1,777,000 Medicare enrollees in the year ending October 2025 — about 6% of total Part B and D drug spending. By 2028, three cycles of negotiation will together reach 40 drugs, which the Kaiser Family Foundation estimates account for more than a third of total Medicare Part D drug spending.

All 2026 and 2027 figures are CMS estimates of what the negotiated prices would have saved had they applied to a prior full calendar year (2023 for round one, 2024 for round two); actual savings depend on 2026 and 2027 utilization and are not yet final. Round three figures describe expenditure and enrollment used to select the drugs, not savings, since those prices have not yet been negotiated.