The Centers for Medicare & Medicaid Services (CMS) has just announced the prices that the federal government negotiated for 15 high-cost drugs covered by Part D, Medicare’s prescription drug benefit program, including the popular diabetes and obesity drugs Ozempic and Wegovy. This brings to a close the second round of Medicare’s Drug Price Negotiation Program, which was created by the Inflation Reduction Act of 2022 under the Biden administration. These negotiated prices will take effect in Medicare in January 2027.
Based on a months-long negotiation process between CMS and the manufacturers of these 15 drugs, the final negotiated prices altogether represent savings of 44% on net spending that Medicare would otherwise have incurred if these prices had been in effect in 2024, according to CMS. This is larger than the 22% reduction in net Medicare spending that would have been achieved in 2023 based on negotiated prices for the 10 Part D drugs in the first round of negotiation, but the list of drugs selected for the second round of negotiation includes several cancer medications that likely had relatively low rebates and high net prices to begin with. (Actual drug-specific rebates are not publicly available, but according to MedPAC, rebates for cancer drugs in Medicare Part D were less than 10% in 2023, compared to 25% across all drug classes.) This would give the government more room to negotiate lower prices because the starting point was likely much higher than the ceiling allowed under the law.
With this release about Medicare’s negotiated drug prices, the Trump administration is adding to a string of recent announcements about its efforts to lower prescription drug prices, following recent White House announcements about voluntary deals negotiated with Pfizer, Astra Zeneca, EMD Serono, and Novo Nordisk and Eli Lilly related to most-favored-nation (MFN) pricing for some of their medications. Notably, the $274 Medicare negotiated price under the IRA for Novo Nordisk’s semaglutide (branded as Ozempic, Wegovy, and Mounjaro) is somewhat higher than the $245 Medicare price that was announced as part of the recent Trump administration deal. It’s unclear how those two prices will interact.
By continuing implementation of the IRA’s drug price negotiation program, the Trump administration is building on a program created by the Biden administration to bring about lower drug prices in Medicare – a process described in law with detailed and lengthy implementation guidelines, which stands in contrast to the newer, non-binding MFN agreements touted by President Trump.
The third round of Medicare drug price negotiation will kick off in early 2026, when the next 15 high-cost drugs selected for negotiation are due to be announced by February 1. Although there is no certainty about which drugs will be on that list, there are a couple of drugs that were expected to be selected based on meeting the criteria for selection but are now off the table for 2026 due to changes in the One Big Beautiful Bill Act that allow more drugs to be delayed for selection or excluded from negotiation entirely. Under these changes, the cancer drugs Keytruda and Opdivo, with Medicare spending of $5.6 billion and $2.0 billion in 2023, respectively, will likely be delayed from selection for negotiation for at least a year.
While Republicans in Congress have largely opposed the IRA and Medicare drug price negotiation, President Trump appears to be embracing it. With this latest announcement, the Trump administration can take credit for delivering lower drug prices in Medicare, while Democrats can take credit for creating the Medicare drug price negotiation program in the first place.