Health Law Daily Wrap Up, PHARMACEUTICAL NEWS: Medicare Part D beneficiaries will see lower prescription drug prices starting in 2026, (Aug 15, 2024)

By Melanie Hirschfelder, J.D.

Negotiations between CMS and drug companies resulted in agreements to reduce prices for ten of the most expensive and frequently dispensed medications.

People with Medicare Part D prescription drug coverage will see an aggregate $1.5 billion in yearly savings starting in 2026, when a negotiated price reduction for many popular medications goes into effect, CMS announced. The negotiations were part of the Biden Administration’s Inflation Reduction Act of 2022 (P.L. 117-169) (Act), which made a number of improvements to Medicare, including the lowering of certain drug costs.

According to a fact sheet on the Medicare Drug Price Negotiation Program, this was the first time CMS negotiated with private pharmaceutical companies over drug costs. All 10 drugs selected for the first cycle of negotiations resulted in agreements to lower prices for individuals who have Medicare Part D prescription drug coverage. The 10 drugs include those used to treat conditions such as heart disease, diabetes, and cancer, and the new prices will go into effect beginning January 1, 2026.

Cost savings for Medicare will be significant, announced CMS. The first 10 selected drugs accounted for $56.2 billion in total Medicare spending, or about 20 percent of total Part D gross spending in 2023. Estimates from the Congressional Budget Office predict about $100 billion savings over 10 years from drug negotiations, and a $3.7 billion savings in the first year alone. In addition to savings from negotiations with drug companies, the Act includes other cost-saving measures, such as the first ever cap on out-of-pocket drug costs for people with Medicare.

After the negotiated prices become effective, participating drug companies are required to ensure the negotiated price is made available to eligible individuals and to the pharmacies, mail-order services, and other entities that dispense the selected drug to such individuals. CMS anticipates selecting up to 15 more drugs covered under Part D for the second round of negotiations for 2027 by February 1, 2025. It will then select up to 20 more Part B or Part D drugs for each year after that, as required by the Act.

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