CMS Outlines Medicare Drug Price Negotiation Program for 2026

On March 15, 2023, CMS released initial guidance detailing the requirements and parameters on key elements of the new Medicare Drug Price Negotiation Program for 2026, which is the first year that negotiated prices will apply under the Inflation Reduction Act of 2022. The Inflation Reduction Act authorizes Medicare to directly negotiate drug prices for certain high expenditure, single source Medicare Part B or Part D drugs, meaning only those drugs for which there is no generic or biosimilar competition. The initial guidance explains how Medicare intends to use its new authority to negotiate with drug companies for lower prices on selected high-cost drugs.

More on Process

The negotiation process will focus on key questions, such as the selected drug’s clinical benefit, the extent to which it fulfills an unmet medical need, and its impact on people who rely on Medicare. In the initial guidance, CMS details the requirements and procedures for implementing the new Medicare Drug Price Negotiation Program for the first set of negotiations, which will occur during 2023 and 2024 and result in prices effective in 2026. Among other things, the initial guidance details how CMS intends to identify selected drugs, consider factors in negotiation, conduct the negotiation process, and establish the requirements for manufacturers of selected drugs.

In particular, the initial guidance describes how CMS intends to implement the Medicare Drug Negotiation Program for initial price applicability year 2026. It also specifies the requirements that will be applicable to manufacturers of Medicare Part D drugs that are selected for negotiation and the procedures that may be applicable to manufacturers of Medicare Part D drugs, Medicare Part D plans, and providers and suppliers that furnish Medicare Part D drugs.

The guidance was released the same day Medicare announced 27 drugs that manufacturers would pay penalties for after raising prices faster than the rate of inflation. CMS has released information for the April 1 to June 30, 2023 quarter, providing HCPCS codes and inflation-adjusted coinsurance percentages for each drug Part B rebatable drug that CMS has identified. CMS will post payment information each quarter for separately payable Part B drugs, and the drugs impacted by a coinsurance adjustment may change quarterly.

CMS states that people with Medicare and Medicare Advantage who use these drugs may, depending on other health insurance coverage they may have, pay a reduced amount for their coinsurance during this specific quarter. Further, CMS states that for April 1 to June 30, 2023, people with Medicare may experience coinsurance amounts that are lower than what they would have paid before the new law was enacted by as much as $2 to $390 per average dose.

By September 1, 2023, CMS will publish the first 10 Medicare Part D drugs selected for initial price applicability year 2026 under the Medicare Drug Price Negotiation Program. The negotiated maximum fair prices for these drugs will be published by September 1, 2024, and prices will be in effect starting January 1, 2026. In future years, CMS will select for negotiation up to 15 more Part D drugs for 2027, up to 15 more Part B or Part D drugs for 2028, and up to 20 more Part B or Part D drugs for each year after that, as outlined in the Inflation Reduction Act.

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