CMS Proposed Rule Locks in Lower Prices and Fosters Innovation for the Medicare Drug Price Negotiation Program
A new proposal from the Centers for Medicare & Medicaid Services (CMS) would establish a permanent framework for the Medicare Drug Price Negotiation Program (“Negotiation Program”), creating a more transparent and sustainable process for lowering drug costs for millions of Medicare beneficiaries. The proposed rule would also create greater long-term certainty for drug manufacturers that participate in negotiations. It includes policies for negotiating and renegotiating high-cost, single-source drugs beginning with initial price applicability year 2029, while continuing to support innovation and strengthen the program.
“This proposed rule lowers drug prices for seniors and ensures continued savings,” said CMS Administrator Dr. Mehmet Oz. “We are moving from annual updates to a permanent, predictable framework. This approach puts patients first, strengthens Medicare, and protects the innovation pipeline that delivers future cures.”
CMS will select up to 20 additional negotiation-eligible drugs covered under Part D and/or payable under Part B for this fourth cycle of negotiations and subsequent cycles of the Negotiation Program. As required by law, the Negotiation Program must also transition from being implemented through guidance to being codified in regulations as a durable, long-term framework. This rule also would create certain new policies for the Negotiation Program and the Medicare Prescription Drug Benefit Program (“Part D”).
The rule also proposes a narrow modification of the policy used to identify qualifying single source drugs to address potential program integrity concerns posed by certain new formulations. Together, these policies would strengthen program integrity, improve predictability for stakeholders, and ensure compliance with the law while continuing to deliver meaningful savings for beneficiaries.
In addition to codifying the existing program, CMS is proposing to implement the Temporary Floor for Small Biotech Drugs, as required by law, which limits CMS from offering or agreeing to a counteroffer for a maximum fair price (MFP) for Small Biotech Drugs below the floor for certain eligible drugs during initial price applicability years 2029 and 2030. This policy supports continued innovation while maintaining fairness for small biotech companies.
The rule also proposes to codify two policies affecting the Medicare Part D benefit, consistent with statutory requirements. Specifically, CMS would codify policies related to formulary inclusion of selected drugs and the definition of “negotiated price.” These policies ensure that Part D plans include selected drugs with an MFP in effect on their formularies and that the negotiated prices paid to dispensing entities by Part D plans do not exceed the MFP plus any dispensing fees.
“The program is already delivering real savings,” said Chris Klomp, Director of Medicare and Chief Counselor of the U.S. Department of Health and Human Services. “This rule builds on that foundation by establishing clear, consistent rules of the road—giving patients, plans, pharmacies, and drug manufacturers the certainty they need as we continue to drive down costs.”
Since launching the Medicare Drug Price Negotiation Program, CMS has completed multiple negotiation cycles, establishing a strong, transparent foundation for long-term success.
Key accomplishments include:
- Delivering results: CMS has negotiated prices for 25 high-expenditure drugs during the program’s first two years, generating significant savings for Medicare and beneficiaries.
- Lower costs at the pharmacy counter: MFPs for the first 10 selected drugs took effect January 1, 2026, which may reduce out-of-pocket costs for beneficiaries.
- Commitment to transparency: CMS has engaged patients, drug manufacturers, providers, and other stakeholders through public comment and ongoing outreach.
- Maintaining access: Beneficiaries can access selected drugs at local, independent, and long-term care pharmacies nationwide.
- Building infrastructure: CMS established systems, such as the Medicare Transaction Facilitator, to facilitate manufacturer effectuation of the MFP.
This proposed rule marks the next phase of the program’s evolution, establishing a permanent, scalable framework to deliver savings and stability for years to come.
To view the proposed rule on the Federal Register, visit: https://www.federalregister.gov/public-inspection/current.
To view a fact sheet on the proposed rule, visit: https://www.cms.gov/files/document/mdpnp-nprm-fact-sheet.pdf.
To view Initial Price Applicability Year 2029 Key Milestones and Timeline, visit: https://www.cms.gov/files/document/mdpnp-nprm-milestones.pdf
Additional information about the Medicare Drug Price Negotiation Program, including selected drugs, agreed-upon MFPs, and past program guidance, is available at: https://www.cms.gov/priorities/medicare-prescription-drug-affordability/overview/medicare-drug-price-negotiation-program.
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