Medicare Drug Price Negotiation
What is Medicare drug price negotiation?
Last reviewed: · Big Sioux Benefits Data Desk
It is a program created by the Inflation Reduction Act of 2022 that, for the first time, lets Medicare directly negotiate the prices of certain high-expenditure drugs that have no generic or biosimilar competition (CMS). CMS selected ten Part D drugs for the first cycle, negotiated with each manufacturer, and reached agreement on all ten. Those prices, which the statute calls maximum fair prices, took effect January 1, 2026.
The qualifier: negotiation sets the price of the drug. It does not set your copay, it does not require any plan to cover a particular drug, and it does not remove prior authorization or step therapy. Those remain plan decisions. What it changes is the price your plan and Medicare pay, which lowers the base your cost sharing is calculated from if your plan charges coinsurance, and may change nothing visible to you if your plan charges a flat copay.
How the first cycle worked
| Date | Step |
|---|---|
| October 2, 2023 | Manufacturers and the public submitted data on the selected drugs |
| February 1, 2024 | CMS sent an initial offer, with justification, for each drug |
| By March 2, 2024 | Each manufacturer responded with a counteroffer |
| Spring and summer 2024 | Three negotiation meetings per drug |
| July 15, 2024 | CMS sent final offers where no agreement had been reached |
| August 1, 2024 | Negotiation period ended with agreement on all ten drugs |
| January 1, 2026 | Negotiated prices took effect |
Participation is voluntary for manufacturers, and all ten participated. CMS reports that for five of the drugs an agreement was reached during a negotiation meeting, with CMS accepting a manufacturer counteroffer in four of those cases, while for the other five CMS sent a written final offer that the manufacturer accepted. The actual prices are in which drugs have negotiated prices in 2026.
Sources
- CMS — Medicare Drug Price Negotiation Program: Negotiated Prices for Initial Price Applicability Year 2026 — prices effective January 1, 2026; accessed 2026-08-21
- CMS — Selected Drugs and Negotiated Prices — accessed 2026-08-21
Related questions
Does Medicare negotiate the price of every drug?
No. The law limits selection to high-expenditure, single-source drugs without generic or biosimilar competition, and it phases in a limited number per cycle: ten for 2026, fifteen for 2027, and fifteen more for 2028. Most drugs are not in the program and are priced as they were before.
Do drug companies have to participate?
Participation is voluntary in the statutory sense, though declining carries significant consequences for a manufacturer's other Medicare and Medicaid business. All ten manufacturers in the first cycle participated and reached agreement with CMS.
Drug costs turn on your specific prescriptions, so the arithmetic is worth doing once, properly: book a free, no-pressure conversation, see your county's South Dakota plan lineup, or browse all answers. SHIINE, the state's free counseling program, is at 1-800-536-8197 and sells nothing.
Big Sioux Benefits is a licensed insurance agency, not affiliated with or endorsed by the U.S. government or the federal Medicare program. We do not offer every plan available in your area. Contact Medicare.gov, 1-800-MEDICARE, or SHIINE (South Dakota's SHIP) for all of your options.