The First Ten Drugs and How Medicare Price Negotiation Works

On August 29, 2023, the Centers for Medicare and Medicaid Services published a list that drug companies had spent years and a great deal of money trying to prevent. It had ten names on it. Eliquis and Xarelto, the blood thinners that millions of older Americans take to prevent strokes. Jardiance, Farxiga and Januvia, used for diabetes, with Jardiance and Farxiga also prescribed for heart failure and kidney disease. Entresto, for heart failure. Enbrel, for rheumatoid arthritis and related conditions. Imbruvica, for blood cancers. Stelara, for psoriasis and Crohn's disease. And a group of NovoLog and Fiasp insulin products. For the first time since Medicare's drug benefit began, the government would sit across the table from the makers of these medicines and bargain over what it would pay. The prices that came out of that process took effect on January 1, 2026. If you or someone you love fills a prescription for one of those drugs through Medicare, the number at the pharmacy counter is, in part, the product of that list.

In short: The Inflation Reduction Act of 2022 let Medicare negotiate prices for a limited number of high-cost drugs, starting with ten Part D medicines whose negotiated prices took effect in 2026. The process follows a strict calendar and a formula that limits which drugs can be chosen and how high the final price can be. This explainer walks through the selection, the bargaining, the penalties and the results.

Why Medicare could not bargain before

When Congress created Medicare's outpatient drug benefit, Part D, in 2003, it included a provision usually called the noninterference clause. It barred the secretary of Health and Human Services from interfering in negotiations between drugmakers and the private insurers that run Part D plans, and from setting a formulary or price structure. The theory was that competing private plans would bargain hard on their own, so the government did not need to.

For many drugs, that theory works reasonably well. When several medicines treat the same condition, plans can play them off against each other and win rebates. But for drugs without close competitors, particularly those still under patent protection, individual plans had little leverage. And because each plan negotiates separately, Medicare as a whole, the largest buyer of prescription drugs in the country, never used its size.

Other parts of the federal government did negotiate. The Department of Veterans Affairs has long used its purchasing power, along with statutory discounts, to get prices well below what Medicare pays. Most wealthy countries negotiate or regulate prices nationally. Medicare was the conspicuous exception.

Democrats campaigned on changing that for years. The House passed a broad negotiation bill in December 2019 that did not advance in the Senate. The version that finally became law, as part of the Inflation Reduction Act signed on August 16, 2022, was narrower, and the narrowing explains much of how the program works.

Which drugs qualify

Not every drug is eligible. The law sets a series of filters.

Time on the market. A small-molecule drug, the kind usually taken as a pill, becomes eligible for selection seven years after FDA approval. A biologic, a large and complex medicine usually made from living cells and often given by injection, becomes eligible eleven years after licensure. Because the negotiated price takes effect about two years after selection, the practical windows are roughly nine and thirteen years.

No generic or biosimilar competition. If a generic or biosimilar version is being marketed, the drug is out. Negotiation is meant for medicines whose makers face no price competition.

High spending. Among eligible drugs, CMS ranks by total Medicare spending and picks from the top.

Exclusions. The law carves out certain orphan drugs approved for rare diseases, low-spending drugs, and plasma-derived products, among others. It also has a temporary protection for some small biotech companies.

Numbers. The law set a schedule: ten Part D drugs for prices starting in 2026, fifteen more Part D drugs for 2027, fifteen drugs including physician-administered Part B drugs for 2028, and up to twenty a year after that. The drugs remain under negotiated prices until generic or biosimilar competition arrives.

The first ten were simply the eligible Part D drugs with the highest spending. According to CMS, they accounted for roughly $50 billion in Medicare Part D gross costs over a one-year period before selection, a large share of the program's total.

How the bargaining actually runs

The negotiation is not an open-ended haggle. It follows a calendar written into the statute.

1. Selection. CMS published the list on August 29, 2023.
2. Agreements. Each manufacturer had to sign an agreement to participate. All ten did.
3. Data. Companies submitted information on research and development costs, production costs, federal funding that contributed to the drug, patents, sales and more. The public and other stakeholders could submit information on alternatives and on what the drugs mean for patients.
4. Initial offer. CMS sent each company an initial offer by February 1, 2024, along with a written explanation.
5. Counteroffer. Companies had thirty days to respond.
6. Meetings. CMS held negotiation meetings with each company through the spring and summer of 2024.
7. Deadline. Negotiation ended on August 1, 2024.
8. Publication. CMS published the agreed prices on August 15, 2024.

In weighing a price, CMS considers both the manufacturer's information and evidence about therapeutic alternatives, meaning how the drug compares in benefit and cost to other treatments for the same condition. A drug that offers a large advantage over alternatives can justify a higher price than one that offers little.

The law also sets a ceiling. The negotiated price, called the maximum fair price, cannot exceed a percentage of the drug's average non-federal price, and the percentage drops the longer the drug has been on the market. The older the drug, the lower the ceiling. There is no floor.

The penalty that makes the table real

A manufacturer could, in principle, refuse to negotiate. The law makes that very costly. A company that declines to participate or to accept a price faces an excise tax on its sales of the drug that starts high and climbs steeply the longer it refuses. In practice the alternative to the tax is withdrawing all of its drugs from Medicare and Medicaid entirely, which for most companies is unthinkable given how much of their revenue those programs supply.

Drugmakers argued in court that this structure amounted to coercion, that it forced them to sell at government-dictated prices and to speak in ways they disagreed with when they signed agreements calling the result a "fair" price. Several companies, along with industry trade groups, filed suits in different federal courts. So far, the courts that have decided these challenges have rejected them, reasoning broadly that participation in Medicare is voluntary and that the government, as a buyer, may set terms on what it buys. The question has not reached the Supreme Court as of this writing. For the current status of litigation over federal health programs, see our court tracker.

What the first round produced

When CMS published the prices in August 2024, it reported that the discounts from list price ranged from 38 percent to 79 percent across the ten drugs. The agency estimated that if the negotiated prices had been in effect in 2023, Medicare would have saved about $6 billion, roughly 22 percent of net spending on those drugs, and that people with Medicare would save about $1.5 billion in out-of-pocket costs once the prices took effect.

Two caveats help read those numbers honestly. First, list prices are not what Medicare plans actually paid before negotiation; plans already received confidential rebates. The comparison that matters is with net spending after rebates, which is why the 22 percent figure is more meaningful than the 79 percent headline. Second, the savings to an individual patient depend on the patient's plan design and on other changes in Part D happening at the same time.

Those other changes matter. The same 2022 law capped out-of-pocket drug spending for Medicare Part D enrollees at $2,000 a year starting in 2025, adjusted for inflation thereafter. It also capped insulin copays at $35 a month in Medicare starting in 2023. For many older people on several expensive drugs, the out-of-pocket cap has done more for their monthly budget than any single negotiated price. Negotiation's larger effect may be on what Medicare and taxpayers spend, and therefore on premiums over time.

The pharmacy side of the change

A negotiated price is only useful if it actually reaches the pharmacy. Under the law, pharmacies buy drugs at their usual cost from wholesalers and are then made whole by the manufacturer for the difference between that cost and the negotiated price. CMS set up a system to process those payments, and community pharmacists raised early concerns about cash flow: if the reimbursement arrives slowly, a small pharmacy is effectively lending money to a drug company while it waits. How smoothly this works in practice has been one of the quieter tests of the program in 2026, and independent pharmacies have been watching closely.

Plain answers to common questions

Do people with Medicare have to sign up for the negotiated prices? No. The prices apply automatically to covered prescriptions of the selected drugs filled through a Part D plan.

Are the prices secret? No. Unlike the confidential rebates private plans negotiate, the maximum fair prices are published by CMS, along with explanations of how the agency reached them.

Will every patient's copay fall? Not necessarily by the same amount, and for some not at all. What a person pays depends on the plan's design: whether it charges a flat copay or a percentage, where the person is in the deductible, and whether the yearly out-of-pocket cap has already been reached.

Does this apply to private insurance or Medicaid? The negotiated prices are for Medicare. People with employer coverage or marketplace plans do not get them automatically.

Does negotiation change which drugs a plan covers? The law requires Part D plans to include the selected drugs on their formularies. Plans still manage coverage in other ways, such as tiers and prior authorization, so it is worth reading a plan's drug list each fall rather than assuming nothing has changed.

Can a drug leave the program? Yes. Once a generic or biosimilar version is marketed, the drug is no longer subject to a negotiated price, because competition is expected to do the work.

What comes next on the list

In January 2025, CMS named the next fifteen drugs, whose negotiated prices take effect in 2027. The list included semaglutide, sold as Ozempic, Wegovy and Rybelsus, one of the most heavily prescribed and expensive drug families in the country. Later rounds will reach physician-administered drugs in Part B, which include many cancer treatments given in clinics.

The program's future shape is contested. Industry groups have pressed Congress to lengthen the waiting period for small-molecule drugs to match biologics, arguing that the shorter window for pills discourages investment in them. Other changes to exclusions have been debated and, in some cases, enacted. Progressive lawmakers have pushed in the other direction, toward more drugs, shorter waits, and extending negotiated prices to people with private insurance. Those arguments are taken up in a separate post on this blog. This one stops at how the machine works.

Reading the program fairly

It is worth pausing on what the negotiation program is and is not. It is not a price control across the whole market: it applies to Medicare, to a limited and growing number of drugs, and only after years of exclusive sales. It is not a ban on high launch prices, since new drugs enter the market at whatever price their makers set. And it is not a single dramatic event, but an annual process whose effect accumulates as more drugs are added.

It is a real change in who holds bargaining power. For the drugs on the list, a manufacturer no longer faces a scattered set of private plans; it faces Medicare. That shift is why the industry fought it so hard and why, in polling over many years, large majorities of Americans across parties said they wanted it.

What you can do

If you take one of the negotiated drugs through Medicare, review your plan during the annual open enrollment window rather than renewing by default. Plans can differ in how they cover even the same drug. This is general information, not advice for your situation; Medicare's official plan finder and your State Health Insurance Assistance Program offer free help, and local senior and health groups are listed in our organizations directory.

Watch the rules. CMS issues guidance and, at times, formal rules for each negotiation cycle, and when a related federal rule opens for public comment it shows up on our comment page, soonest deadline first, with tips on writing a comment that counts.

Follow the corporate fight over the program. Drugmakers have pressed both in court and in Congress to narrow it, and our topic page on corporate power gathers the reporting on how industries shape the rules that govern them.

Ask your members of Congress a specific question: do they support adding more drugs each year, or carving more out? Find them here, along with their recent votes.

Ten drug names on a government webpage in 2023 do not sound like much. For the people who take those drugs every day, the list is the reason a bargain was struck on their behalf at all.