Medicare now negotiates drug prices. Under the Inflation Reduction Act, the Centers for Medicare & Medicaid Services (CMS) completed its first round of negotiations in August 2024, and the resulting lower prices for 10 widely used Part D drugs took effect on January 1, 2026. A second round of negotiated prices, covering 15 more drugs including Ozempic and Wegovy, is set to take effect January 1, 2027.
If you’ve been searching “does Medicare negotiate drug prices,” here’s where things stand today, how the process works, and what it means for your prescription costs.
What Is Medicare Drug Price Negotiation?
Medicare drug price negotiation is a program created under the Inflation Reduction Act that lets the federal government negotiate directly with drug manufacturers to lower the cost of certain high-spend prescription medicines for Medicare beneficiaries. Before this law, Medicare was barred from negotiating drug prices at all — a restriction that had been in place since 2003.
CMS refers to the negotiated prices as Maximum Fair Prices (MFPs).
How the CMS Negotiation Process Works
The negotiation process follows a structured, multi-step timeline set out in the law:
- CMS selects a batch of high-spending Part D (and eventually Part B) drugs with no generic or biosimilar competition.
- CMS and each manufacturer exchange price offers, including at least one manufacturer counteroffer.
- The two sides hold one to three negotiation meetings, in person or virtually.
- CMS finalizes a Maximum Fair Price for each drug, weighing factors like clinical benefit and unmet medical need.
- Manufacturers that don’t participate face a significant excise tax.
Round One: Results and Savings (Effective 2026)
CMS selected the first 10 Part D drugs for negotiation in 2023 and completed talks by the August 1, 2024 deadline. The agreed-upon Maximum Fair Prices took effect January 1, 2026, and included medications such as Eliquis, Enbrel, Entresto, Farxiga, Jardiance, and Xarelto.
Key results from the first round:
- Negotiated prices came in 38% to 79% lower than 2023 list prices, depending on the drug.
- CMS estimates the new prices will save Medicare roughly $6 billion in the first year, and deliver about $1.5 billion in aggregate out-of-pocket savings for beneficiaries.
- More than 3.4 million Medicare enrollees used at least one of the 10 newly negotiated drugs.
Round Two: 15 More Drugs Coming in 2027
In January 2025, CMS announced the second batch of Part D drugs selected for negotiation, with prices taking effect January 1, 2027. This round includes some of the most widely used medications in Medicare, such as:
- Ozempic, Rybelsus, and Wegovy (diabetes and weight management)
- Trelegy Ellipta and Breo Ellipta (asthma/COPD)
- Xtandi, Pomalyst, and Ibrance (cancer)
- Janumet, Tradjenta, and Linzess
CMS projects $12 billion in net savings (about 44%) on this second group of drugs, translating to an estimated $685 million in beneficiary out-of-pocket savings once the prices take effect.
Looking ahead, the law calls for CMS to select up to 15 more Part D drugs for 2028, and to begin including Part B drugs — with up to 20 additional drugs selected each year after that.
Inflation Rebates: A Separate but Related Protection
Alongside direct price negotiation, the Inflation Reduction Act also requires drug manufacturers to pay rebates when they raise prices faster than inflation. In 2023, CMS identified 27 drugs — including AbbVie’s Humira and Gilead’s CAR-T therapy Yescarta — subject to these inflation penalties, with some Part B beneficiaries seeing savings of $2 to $390 per average dose depending on the medication.
What This Means for Medicare Beneficiaries in Florida
Florida has one of the largest Medicare populations in the country, so lower prices on commonly prescribed drugs for diabetes, heart failure, blood clots, and arthritis can have an outsized impact for retirees across the state, including here in Southwest Florida. If you take one of the newly negotiated medications, it’s worth reviewing your Part D plan’s formulary and cost-sharing for 2026 and 2027 to make sure you’re getting the benefit of the new pricing, and factoring these savings into your broader retirement healthcare budget.
Frequently Asked Questions
Does Medicare negotiate drug prices?
Yes. Since the Inflation Reduction Act passed, CMS has completed two rounds of negotiations. The first round’s prices took effect January 1, 2026, and the second round’s prices take effect January 1, 2027.
Which drugs were included in the first round of Medicare drug price negotiation?
The first round covered 10 Part D drugs, including Eliquis, Jardiance, Farxiga, Entresto, and Enbrel, with negotiated prices 38% to 79% below 2023 list prices.
What drugs are in the second round of Medicare drug price negotiation?
The second round includes 15 Part D drugs, such as Ozempic, Wegovy, Rybelsus, Trelegy Ellipta, and Xtandi, with negotiated prices effective January 1, 2027.
How much will Medicare beneficiaries save from drug price negotiation?
CMS estimates about $1.5 billion in aggregate out-of-pocket savings from the first round in 2026, and an additional $685 million from the second round starting in 2027.
When will Medicare start negotiating Part B drug prices?
Part B drugs join the negotiation program starting with prices effective in 2028, alongside additional Part D drugs.
This article is for informational purposes only and does not constitute medical, insurance, or financial advice. Consult a licensed Medicare advisor or your plan provider regarding your specific prescription drug coverage.
