Negotiation Process for Medicare Part D Drugs

/ Negotiation Process for Medicare Part D Drugs The Inflation Reduction Act (IRA), also known as P.L. 1 17-169, established the Medicare Drug Price Negotiation Program. The program authorizes the Secretary of Health and Human Services (Secretary) to negotiate prices for certain high expenditure single-source chemical drugs and biological products under Medicare Part B or Part D. For the first two years (2026 and 2027), the program applies only to Part D drugs; the negotiation process for those drugs is described below. Implementation Timeline 2023 2024 2025 2026 New prices take effect 2027 2028 2029 Secretary selected first 10 Part D drugs 15+ Part D drugs selected New prices take effect 15+ Part B or D drugs will be selected New prices take effect 20+ Part B or D drugs will be selected New prices take effect Drug Selection Process To be selected, a drug must be a covered drug under Medicare Part D. Qualifying single-source drugs (QSSDs) are prescription drugs and biological products that have been approved and marketed for 7 years, if a chemical drug, and 1 1 years, if a biological product. Certain Covered Part D drugs are excluded from the definition of QSSD. O Low-spend drugs Plasma-derived products O Certain categories of orphan drugs Negotiation Process Centers for Medicare & Medicaid Services (CMS) ranks drugs according to their annual Part D expenditures. Previously selected drugs with established MFP's and certain drugs manufactured by small biotech companies (for price years 2026-2028) are removed during this ranking process. The top 50 drugs are negotiation-eligible drugs. 10 The top 10 (or 15 to 20) negotiation- eligible drugs will be the selected drugs subject to negotiation. Selection may be delayed for certain biological products if there isa high likelihood that a biosimilar may enter the market. During the negotiation period, as specified in statute, the Secretary uses both federal and manufacturer-submitted data to examine research and development (R&D) costs as well as production and distribution costs for the selected drug, the drug's revenue and sales volume, and any federal financial support for its development, as well as information on existing and pending patents and therapeutic alternatives. The Maximum Fair Price (MFP) is subject to a statutory ceiling. Some drugs may be subject to a renegotiation process in subsequent years. The products of manufacturers who do not participate in the negotiation or fail to effectuate CMS's final MFP offer will not be eligible for coverage under Part D or federal funding under the Medicaid program. CMS analysis of drug-related data and stakeholder discussions determine their starting point MFP offer. Application of MFP CMS makes offer to manufacturer. Manufacturer accepts and negotiations end, or Manufacturer does not accept. CMS and manufacturer engage in up to 3 negotiation meetings. CMS may accept counteroffer from manufacturer. Manufacturers of selected drugs must provide access to the MFP to Medicare beneficiaries enrolled in a Part D plan and to pharmacies and other dispensing entities. Part D plans are required to include selected drugs on their formularies, and a Part D plan's negotiated payment for each selected drug must not exceed the MFP plus a dispensing fee. A beneficiary's payment for the drug, either in the deductible phase or through coinsurance, must be based on that negotiated payment. Rx Pharmacy purchases drug from wholesaler at price that may exceed MFP. Rx Medicare Part D beneficiary is prescribed a selected drug and prescription is sent to pharmacy. Manufacturer pays refund to pharmacy if pharmacy's acquisition cost exceeded the MFP. Rx Part D plan approves prescription claim. Rx Pharmacy submits transaction data to drug manufacturer. Rx Beneficiary fills prescription at pharmacy and makes any required deductible or coinsurance payment. Part D plan pays pharmacy any remaining portion of negotiated price plus dispensing fee. Sources: SSA S 1191-1198 (42 U.S.C.SSI 320f—1320f-7); Centers for Medicare and Medicaid Medicare Drug Price Negotiation Program: Draft Guidance, Implementation of Sections 1 1 91 — 1 198 of the Social Security Act for Initial Price Applicability Year 2028 and Manufacturer Effectuation of the Maximum Fair Price in 2026, 2027, and 2028 (May. 12, 2025), https://w%w.cms.gov/files/documenMpay-2028-draft-guidance.pdf; For more information, see CRS Report R47872, Medicare Drug Price Negotiation Under the Inflation Reduction Act: Industry Responses and Potential Effects, by Kevin J. Hickey, Laura A. Wreschnig, and Hannah-Alise Rogers (2023). Information as of December 11, 2025. Prepared by Laura Wreschnig, Analyst in Health Care Financing and Brion Long, Visual —CRS Information Specialist