CMS announces negotiated Medicare Part D drug prices, looks to blunt a potential spike in premiums (updated)

Note: This article was updated Oct. 2 with news about 2025 projected Part D premiums. See the update below.

CMS announced the first set of negotiated drug prices under the Inflation Reduction Act (IRA) and recently moved to head off a significant premium increase that’s projected to arise due to provisions in the 2022 law.

The sprawling legislation gave Medicare authority to negotiate prices for selected drugs. The first group of 10 Part D drugs was announced a year ago, with prices announced Thursday and set to take effect Jan. 1, 2026.

In a fact sheet, CMS said 8.8 million people used the 10 drugs in 2023, and the savings are estimated to amount to $6 billion, including $1.5 billion in out-of-pocket costs.

“CMS negotiated in good faith consistent with the requirements of the law on behalf of people with Medicare and the Medicare program,” the fact sheet states. “Throughout the negotiation process, the CMS team took into account the factors outlined in the law in negotiating these prices, which supports the need for innovation and drug development with better prices for people with Medicare and the Medicare program.”

Pricing specifics

Drugs were ineligible for negotiation if they had not been on the market for seven years (11 years for biologics). Excluded from consideration were certain orphan drugs, low-spend drugs, plasma-derived products, small biotech drugs, and biologics with a high short-term likelihood that a biosimilar will enter the market.

From there, drugs were ranked based on Part D gross covered costs. The top 10 made the list.

Negotiations began in February with CMS sending an initial offer, the manufacturers responding by early March and three negotiation meetings per manufacturer taking place. CMS stressed that information submitted by the companies, including manufacturing cost data, was considered.

Negotiated prices also apply in upcoming years, subject to an inflation adjustment. The 10 drugs will be joined by others, including 15 more in 2027, 15 in 2028 and 20 in 2029, for a total of 60 drugs. Part B drugs are eligible for the list starting in 2028.

The negotiated maximum fair prices for 2026, as applicable to a 30-day supply, are:

Drug	Company	Condition	Negotiated Price	2023 List Price	Discount
Januvia	Merck	Diabetes	$113	$527	79%
Fiasp, NovoLog	Novo Nordisk	Diabetes	$119	$495	76%
Farxiga	AstraZeneca	Diabetes, heart failure, CKD	$178	$556	68%
Enbrel	Immunex	Rheumatoid arthritis, psoriasis	$2,355	$7,106	67%
Jardiance	Boehringer	Diabetes, heart failure, CKD	$197	$573	66%
Stelara	Janssen	Psoriasis, Crohn’s disease, colitis	$4,695	$13,836	66%
Xarelto	Janssen	Prevention and treatment of blood clots	$197	$517	62%
Eliquis	Bristol Myers Squibb	Prevention and treatment of blood clots	$231	$521	56%
Entresto	Novartis	Heart failure	$295	$628	53%
Imbruvica	Pharmacyclics	Blood cancers	$9,319	$14,934	38%

A contentious law

Although CMS said participation by drug companies is voluntary, that description essentially refers to the fact that the companies can terminate their Medicare and Medicaid participation if they prefer not to negotiate. Most of the affected companies have filed lawsuits since the IRA provisions were announced, arguing that the legislation is unconstitutional because, among other reasons, it departs from “more than a century of precedent” by acting as a price-setting mechanism, according to a written argument by Novo Nordisk.

Among the decisions issued thus far, the U.S. District Court of New Jersey ruled against joint plaintiffs Bristol Myers Squibb and Janssen and, in a separate case, against Novo Nordisk. Likewise, the District Court of Connecticut ruled against Boehringer, and the District Court of Delaware issued a decision against AstraZeneca.

Each plaintiff has appealed or announced its intention to do so.

Benefits and concerns for beneficiaries

The IRA has implemented various other provisions to try to address drug costs, including:

• Requiring manufacturers to pay rebates to Medicare if certain drug prices exceed the rate of inflation
• Capping out-of-pocket costs for insulin at $35 per month in Medicare
• Providing vaccination at no cost to Part D and Medicaid beneficiaries for any adult vaccine recommended by the CDC’s Advisory Committee on Immunization Practices
• Capping Part D out-of-pocket costs at $2,000 per year

The out-of-pocket limit is bringing unintended consequences in that insurers appear set to raise some premiums to cover the costs being shifted away from patients and toward health plans. For 2025, average monthly bids by Part D plans to CMS skyrocketed to $179.45 from $68.24 in 2024 and $34.71 in 2023, according to a bid announcement.

Base premiums rose by barely $2 thanks to an IRA clause that restricts annual increases. Calculations released by CMS in the bid announcement show premiums would have been about $19 higher without that provision. But enrollees in Part D prescription drug plans (PDPs) could be looking at a significant jump when those premiums are announced in September.

In anticipation, the bid announcement also described a stabilization program designed to mitigate the increase. As part of the program, which is voluntary for insurers and available through 2027, monthly PDP premiums will be reduced by up to $15, and the year-over-year increase in total Part D premiums for individuals will be limited to $35.

PDPs will stand to benefit through risk-corridor changes that would cut their loss exposure in half and increase the federal government’s share of losses beyond the threshold.

A political lightning rod

Republicans in Congress have said the stabilization program, which CMS estimates could cost up to $5 billion per year depending on insurer participation, represents regulatory overreach. This month, three House committee leaders wrote to the Government Accountability Office requesting an expedited review of the program.

The IRA’s “restructuring of Part D has arguably undermined competitive dynamics and constrained seniors’ choices,” they wrote. “That said, the policies advanced through the recently announced demonstration would simply shift costs from plan sponsors and enrollees to taxpayers, obscuring the law’s impacts without addressing their underlying drivers.”

The IRA received no Republican votes in securing passage through Congress, and members have sought to repeal the law’s authority for Medicare to negotiate drug prices, along with other provisions such as the rebates and the Part D out-of-pocket limit. Democrats have drafted bills to build on the Act, such as by expanding negotiated drug prices to commercially insured patients.

Oct. 2 updates

CMS announced Sept. 27 that premiums for the Part D prescription drug program, along with those for Medicare Advantage, will remain stable in 2025.

Average total Part D premiums are set to drop by $7.45, to $46.50, excluding the 14 million beneficiaries whose premiums are waived through the Low-Income Subsidy Program. The Part D stand-alone premium is projected to fall by $1.63, to $40. When factoring in MA rebates, the estimated 2025 premium will be $13.50 for MA beneficiaries with prescription drug coverage, down by $2.06 year-over-year.

CMS credited the voluntary Part D stabilization program (see the description in the original article above) for keeping stand-alone Part D premiums from spiking, saying the program “provides additional premium stabilization to address variation in plans’ bids in the stand-alone Part D market, with the goal of improving the efficiency and economy of the Part D program as changes to the design of the Part D benefit are implemented.”

Most health plans agreed to participate in the stabilization program. About 99% of Medicare enrollees with stand-alone Part D plans in 2024 are participating, CMS said.

However, a key metric to watch is how the supply of drug plans potentially changes with the restriction on premium increases, even though plans stand to benefit from the stabilization program via risk-corridor adjustments.

CMS noted that the $2,000 out-of-pocket cap on annual prescription drug costs begins next year, as does a new option that allows out-of-pocket Part D costs to be paid in monthly installments.

In Medicare Advantage, the monthly plan premium is projected to decrease from $18.23 to $17. CMS projects a slight increase in the allotment of rebate dollars.

Medicare open enrollment is set to begin Oct. 15 and run through Dec. 7.