Why It Matters
Medicare prescription drug plans, manufacturers whose drugs are selected for price negotiations and Medicare beneficiaries face new requirements as the Department of Health and Human Services finalizes regulations for the Medicare Drug Price Negotiation Program.
The rules take effect Dec. 5 and establish binding regulations beginning with the 2029 price applicability year, replacing the guidance-based framework used for 2026 through 2028. The Centers for Medicare & Medicaid Services (CMS) says it selected 10 drugs for 2026, 15 for 2027 and 15 for 2028, with up to 20 drugs to be selected annually beginning in 2029.
Citing the Inflation Reduction Act of 2022, CMS states: "Without regulatory implementation of the Negotiation Program, the Medicare program cannot comply with Federal law, reduce prescription drug costs for beneficiaries, or achieve cost savings provided under statute."
The Big Picture
CMS said its guidance for 2026 through 2028 remains applicable for those years and that the regulations largely codify existing policies with limited changes. CMS reported many commenters raised concerns about the program's potential effects on pharmaceutical innovation and drug development. The agency responded that drugs generally become eligible only after at least seven years have elapsed since FDA approval, or 11 years since licensure for biologics, and that it believes the program will improve affordability without restricting innovation.
CMS says it received approximately 11,330 timely comment letters on the proposal. Commenters included pharmaceutical manufacturers and trade associations, patient advocacy groups, pharmacies, health plans and pharmacy benefit managers.
- Plan payments: Currently, 42 CFR § 423.100 defines the negotiated price for covered Part D drugs without explicitly capping it at the maximum fair price for selected drugs. The new language requires that the negotiated price for a selected drug "must not exceed the maximum fair price" plus applicable dispensing fees. It also adds sales tax and vaccine administration fees to the definition.
- Formularies: Current § 423.120 does not explicitly require coverage of selected drugs. New provisions require Part D plan sponsors, beginning with 2026 and continuing in subsequent years, to include each selected drug for which a maximum fair price is in effect. Sponsors may still remove selected drugs if they comply with existing formulary removal and notice requirements.
- Drugmakers: The rule establishes new provisions in Part 429, including a deadline for manufacturers to sign Negotiation Program Agreements. Manufacturers may request termination by attesting that they will not seek another agreement or coverage under the Manufacturer Discount Program through the end of the applicable price period.
- Combination drugs: Under previous policy, a fixed-combination drug and a new formulation were treated as separate candidates. The rule aggregates them when the new formulation adds a component that enables an alternative route of administration. CMS says the change is intended to prevent manufacturers from using new formulations to avoid or delay negotiated prices.
Broader Context
On combination drugs, some commenters argued that generic or biosimilar competition for an original product could cause both versions to leave the program even if the new formulation faced no generic competition. CMS responded that it considered statutory requirements, program integrity risks, and the provision's narrow scope, concluding that its qualitative benefits outweigh uncertain long-term forgone savings.
Many commenters urged CMS to eliminate the statutory ceiling when it falls below the temporary floor applicable to certain small biotechnology drugs. CMS disagreed, saying that doing so would fail to give effect to all statutory provisions, and finalized a modified stepwise approach for 2029 and 2030.
CMS estimates, based on 2025 experience data, that negotiated prices would reduce allowed costs by 11.3% for drugs selected for 2026 and 18.2% for drugs selected for 2027.
The Bottom Line
CMS says it waived the usual 60-day delay in the effective date because the statutory Feb. 1 deadline for publishing the selected drug list requires approximately seven weeks to review biosimilar manufacturers' delay requests. Under the new regulations, manufacturers of selected drugs must sign their Negotiation Program Agreements by 11:59 p.m. Pacific Standard Time on Feb. 28 following publication of the selected drug list.
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