Why drug prices change in January

Between January 2022 and January 2023, list prices went up for 4,264 drug products and down for 1,599, according to an October 2023 analysis¹ by the Office of the Assistant Secretary for Planning and Evaluation at HHS. The authors noted that most price changes take effect on Jan. 1, and that in every year from 2016 to 2022 the largest number of increases came in January, with July second.

January is also when insurance plan years, and their deductibles, reset. For Medicare drug coverage in 2027, the standard deductible rises to $700 from $615 and the annual out-of-pocket threshold to $2,400 from $2,100, according to CMS's 2027 rate announcement⁹.

So the first weeks of a year bring two kinds of change at once, one in what manufacturers charge and one in how much of the bill a patient carries. For common generics, federal pharmacy cost data analyzed by GxRadar show little sign of a January jump.

What the federal list-price data show

ASPE's brief measured wholesale acquisition cost, the manufacturer's list price before discounts and rebates, for each 11-digit national drug code. Its main figures for the year to January 2023 are below.

Percentages and dollars point in opposite directions. Multiple-source drugs, the category that includes generics, had larger percentage increases but far smaller dollar increases, because they start from low prices. All 16 drugs on ASPE's list¹ of the year's largest percentage increases were multiple-source products, and all but three had 2022 package list prices under $10. The report also found that over 2021 to 2023, an average of 61 percent of increases were below the 12-month inflation rate, reversing 2018 to 2020, when most increases exceeded it.

List price is not what patients pay. ASPE notes that what reaches the pharmacy counter depends on insurance, plan design and sometimes manufacturer coupons, and our guide to drug price benchmarks shows how far WAC can sit from transaction prices.

Inflation rebates now sit on top of list prices

Medicaid has charged manufacturers extra when prices outrun inflation for decades. Its rebate formula adds an inflation component tied to the consumer price index, per the Medicaid drug statute⁷, and Congress extended it to generics starting with the first quarter of 2017, according to the HHS inspector general⁸. Before that change, the inspector general estimated Medicaid would have collected $1.4 billion more on the top 200 generics from 2005 through 2014 had the rule applied.

The Inflation Reduction Act of 2022 brought a similar idea to Medicare. Manufacturers owe rebates when prices for certain Part D drugs rise faster than inflation over 12-month periods starting Oct. 1, 2022, and for certain Part B drugs over calendar quarters starting Jan. 1, 2023, according to a CMS fact sheet². The money goes to a Medicare trust fund. For the period from October 2024 through September 2025, CMS's June 2026 fact sheet⁶ says Part D inflation rebates owed came to more than $1.9 billion; GxRadar counted 1,048 distinct NDC-9 product codes on its list. CMS posts these reports on its inflation rebate program page⁵.

Neither rule bars an increase. They change what a manufacturer keeps from one, and both are measured against inflation over set periods, which is one more reason price changes cluster at fixed points on the calendar.

Why most generics sit outside the Medicare rule

Medicare's law counts a generic as a Part D rebatable drug only in narrow cases. Under 42 CFR 428.101⁴, CMS checks whether the brand-name reference drug or an authorized generic of it is being marketed, whether any other therapeutically equivalent generic is on the market, and whether the maker is a first applicant still inside its 180-day exclusivity or the first approved maker of a competitive generic therapy. In practice the rule reaches mainly generics that have the market to themselves.

A separate test drops drugs whose average annual Part D cost is under $100 per user, a threshold that has been indexed to inflation since the period beginning October 2023, per the same regulation⁴. CMS's December 2023 revised guidance³ adds that a generic can stop qualifying in the middle of a period if FDA approves another equivalent version and it is marketed, and that units dispensed after that date are excluded. Our articles on authorized generics, competitive generic therapy and the Inflation Reduction Act and generics explain those categories.

What GxRadar's NADAC data show for January

List prices are only one view. GxRadar also looked at what pharmacies pay, using the monthly NADAC series for 47 generics from the 2014 files¹¹ through the October 2026 files¹⁰. For each drug we took the change from one month to the next and grouped about 7,100 of those changes by calendar month.

January does not stand out. Its median change was a fraction of a percent, and big jumps were no more common than in March, June or August. NADAC tracks invoice prices pharmacies actually pay, and those can move independently of published list prices. CMS's methodology¹² notes that generic rates have been smoothed with a three-month moving average since December 2024, which would mute any single-month effect in the latest two years; our piece on the 2024 NADAC swings explains why CMS made the change.

Over the long run, those small monthly moves have mostly pointed down. The GxRadar generic price index stood at 47.4 in October 2026, against 100 in January 2014, down about 53 percent, and our long-deflation analysis and price-spike history cover the exceptions. Individual drug histories are on our price pages.

What changes on Jan. 1, 2027

For people in Medicare drug plans, the plan-year changes are already set: the $700 standard deductible and $2,400 out-of-pocket threshold in CMS's 2027 announcement⁹. Our explainer on Part D changes covers what those numbers mean in practice. Questions about how a specific plan's tiers or copays will change are best put to the plan or a pharmacist.

On the manufacturer side, the Medicare inflation rebate period that began Oct. 1, 2026, runs through Sept. 30, 2027. Price increases on Part D rebatable drugs during that window will be measured against inflation through the annual manufacturer price, based on the average manufacturer price, that ASPE¹ describes.