How Medicare drug price negotiation works

Apixaban, a blood thinner, was dispensed to about 3.9 million people with Medicare Part D coverage in 2023, and its list price for a 30-day supply that year was $521. Since Jan. 1, 2026, Medicare has paid a negotiated price of $231 for that month's supply, according to the fact sheet CMS published on the first round of negotiations².

Apixaban is one of 10 drugs in the first cycle of the Medicare Drug Price Negotiation Program, created by the Inflation Reduction Act, signed Aug. 16, 2022⁹. Fifteen more drugs get negotiated prices on Jan. 1, 2027. A third group of 15, the first to include drugs given in doctors' offices under Part B, is in the final stretch now. CMS must publish any agreed prices by Nov. 30, 2026.

Only older brand-name drugs that still have no generic or biosimilar competitor are eligible, and the law ends a drug's selection once that competition arrives. That clause has already put five drugs on CMS's removal schedule. This explainer covers how drugs are chosen, what the first prices were, how the program is moving into Part B and how generic entry ends eligibility.

How a drug is selected

Federal law, codified at 42 U.S.C. 1320f-1⁸, sets how many drugs CMS must pick each cycle: 10 Part D drugs for 2026, 15 Part D drugs for 2027, 15 drugs from Part B or Part D for 2028, and 20 a year from 2029 on. CMS then works through a list of steps that its January 2026 fact sheet⁴ lays out.

A drug must first be a "qualifying single source drug," meaning at least seven years have passed since FDA approval of a small-molecule drug (11 years for a biologic) and no generic or biosimilar is marketed. CMS removes certain orphan drugs, low-spend drugs and plasma-derived products, and the 2025 law CMS refers to as the "Working Families Tax Cuts" legislation (P.L. 119-21) changed the orphan drug exclusion. From what remains, CMS ranks up to 50 Part B drugs and 50 Part D drugs by total Medicare spending and selects the top of the list, skipping some drugs made by small biotech companies and biologics likely to face a biosimilar soon.

CMS describes manufacturer participation as voluntary. For the third cycle, CMS announced on March 13, 2026⁵ that the makers of all 15 selected drugs had signed agreements to negotiate.

The first negotiated prices

CMS sent initial offers on Feb. 1, 2024, held three negotiation meetings with each company, and reached agreement on all 10 drugs before the negotiation period ended on Aug. 1, 2024. In five cases CMS made a final written offer that the company accepted. The table shows the results by active ingredient, with CMS's 2023 list prices (wholesale acquisition cost) for comparison.

List price is a poor yardstick on its own because Part D plans already received confidential rebates. CMS's estimate nets those out. Had the negotiated prices applied in 2023, the agency said, Medicare would have spent about $6 billion less on these drugs, or 22 percent less net of rebates, and enrollees would save an estimated $1.5 billion in out-of-pocket costs in 2026. The 10 drugs accounted for $56.2 billion in gross Part D costs in 2023, about one fifth of the total.

Pharmacies do not see a new low price from wholesalers. In the setup CMS describes, a pharmacy buys the drug through normal channels, the plan pays it based on the negotiated price, and the manufacturer sends a refund to cover the gap. CMS's final guidance of Sept. 30, 2025⁶ requires the manufacturer to send that payment within 14 days after the Medicare Transaction Facilitator confirms the claim, the same window Part D plans have under prompt-pay rules. Our explainer on how pharmacies get paid covers the ordinary claim flow.

The second round, in effect January 2027

CMS's second cycle covered 15 Part D drugs selected on Jan. 17, 2025, including the semaglutide products used for diabetes and weight, two inhalers for asthma and COPD, and several cancer drugs. The negotiation period ended Nov. 1, 2025, with agreement on all 15. According to CMS's November 2025 fact sheet³, the drugs accounted for $42.5 billion in 2024 gross Part D costs. CMS estimated the prices would have cut 2024 net spending by $12 billion, or about 44 percent, and by about $8.5 billion, or 36 percent, if Coverage Gap Discount Program spending is included. It projected $685 million in enrollee out-of-pocket savings in 2027. Semaglutide's negotiated 30-day price is $274, against a 2024 list price of $959.

For how these prices sit inside the redesigned Part D benefit, with its 2026 out-of-pocket cap of $2,100, see our piece on Part D changes in 2025, 2026 and 2027 and our broader look at the Inflation Reduction Act and generics.

The third round and the move into Part B

On Jan. 27, 2026, CMS named 15 drugs for prices starting in 2028, chosen from both Part B and Part D for the first time. Over the 12 months that ended Oct. 31, 2025, they accounted for $27.0 billion in Medicare spending, about 6 percent of combined Part B and Part D drug spending, and about 1,777,000 people used them, CMS said⁴. The list includes dulaglutide, an HIV combination tablet, several biologics for autoimmune disease and a botulinum toxin product. CMS also chose linagliptin, a 2027 drug, for renegotiation.

CMS's deadline for initial offers was June 1, 2026, and the negotiation period closed Nov. 1. For a Part B drug, a negotiated price also changes how doctors are paid. Starting in 2028, the Part B payment limit for a selected drug is 106 percent of the negotiated price instead of 106 percent of average sales price, according to CMS's overview of Part B payment limits⁷.

How generics and biosimilars end eligibility

Under section 1192(c) of the Social Security Act⁸, a drug stays selected until the first year that begins at least nine months after CMS determines that a generic (approved under an ANDA) or a biosimilar referencing it has been approved and is marketed. CMS reviews whether the competitor is in bona fide marketing, looking at sales data and at whether license deals limit supply, as described in its 2028 guidance⁶.

A deselection table on CMS's program page¹, last updated Nov. 2, 2026, shows how fast this has worked.

Four of the first 10 drugs will have had a negotiated price for a single year. Tofacitinib, picked for the third cycle, shows the other timing rule. Because CMS found a marketed generic before the negotiation period ended, the guidance says the drug stays on the list through 2028 but no negotiated price applies and it is not replaced.

The law's bet is that competition takes over where negotiation stops. How far prices fall depends largely on how many makers enter, a pattern we trace in why generic prices fall as competitors enter. The timing of those entries depends on patent litigation and FDA review, covered in our guides to Paragraph IV certifications and FDA's first generics, and on our generic approvals tracker.

What to watch

CMS has until Nov. 30, 2026 to publish the third-cycle prices, and until March 1, 2027 to publish its explanations of them. Those prices take effect Jan. 1, 2028. Selection for the fourth cycle, the first with 20 drugs, comes next under the statute's schedule.