Medicare Drug Price Negotiation: The 2026 Update

Published July 2026 · 12 min read

The First 10 Negotiated Drugs

The Inflation Reduction Act of 2022 gave Medicare the power to negotiate drug prices for the first time in the program's history. After years of legal challenges and industry pushback, the first negotiated prices took effect on January 1, 2026.

The initial round targeted 10 drugs that represent some of the highest spending in Medicare Part D:

The Numbers: What's Actually Changed

Six months into 2026, the early data is striking. These 10 drugs accounted for $50.5 billion in Medicare Part D spending in 2023 — roughly 20% of all Part D drug costs. The negotiated Maximum Fair Prices represent discounts ranging from 38% to 79% off previous prices.

CMS projects first-year savings of approximately $6 billion for Medicare and significantly lower out-of-pocket costs for the 9 million beneficiaries who use these drugs. Combined with the $2,000 annual out-of-pocket cap that took effect in 2025, many seniors are seeing their drug costs drop by thousands per year.

What Comes Next: 2027 Expansion

The program is expanding rapidly. CMS has already selected 15 additional drugs for negotiation, with new prices taking effect January 1, 2027. Another 15 drugs will be added in 2028, and starting in 2029, 20 drugs will be added each year.

The 2027 round includes both Part D and Part B drugs (physician-administered drugs like infusions and injections), expanding negotiation beyond the pharmacy counter for the first time. This is significant because Part B drugs tend to be the most expensive — biologics for cancer, autoimmune conditions, and rare diseases that can cost tens of thousands per treatment.

Who Benefits Most

The savings aren't distributed equally. Beneficiaries in the Medicare Part D "coverage gap" (formerly the "donut hole") see the largest dollar savings, because they were previously paying a percentage of high list prices. Low-income subsidy (LIS) recipients — who already had minimal out-of-pocket costs — benefit less directly, though the program saves the Medicare trust fund money on their behalf.

Geographically, states with the highest Medicare Part D enrollment see the most aggregate savings. Florida, California, Texas, and New York — the four largest Medicare states — account for roughly 35% of total estimated savings from the first 10 negotiated drugs.

Industry Response and Legal Challenges

Pharmaceutical companies filed multiple lawsuits challenging the constitutionality of the negotiation program, arguing it violated the Fifth Amendment's takings clause and the First Amendment. Federal courts have rejected these challenges, with judges noting that participation in Medicare is voluntary and that the government has legitimate authority to set the terms of its purchasing.

Industry groups have also argued that lower prices will reduce investment in research and development. However, early data suggests pharmaceutical R&D spending has remained robust, with major drugmakers continuing to invest heavily in new therapies while posting record profits.

The Beneficiary Impact

For the 9 million Medicare beneficiaries who take one or more of these 10 drugs, the impact is immediate and tangible. Consider a patient taking Eliquis (apixaban) for atrial fibrillation — one of the most commonly prescribed blood thinners in Medicare. Before negotiation, a 30-day supply could cost a Part D beneficiary $200-500 depending on their plan and coverage phase. With the negotiated price plus the $2,000 annual cap, many patients are seeing their annual drug costs drop by $3,000 or more.

Diabetes patients benefit especially. Januvia's 79% price reduction and Jardiance's 66% reduction mean that the most common Type 2 diabetes medications — which patients take daily for years or decades — are now dramatically more affordable. For beneficiaries on fixed incomes, this can mean the difference between taking medications as prescribed and rationing doses to save money.

International Comparison: How the U.S. Compares

Even after negotiation, U.S. prices generally remain higher than what other developed nations pay. But the reductions are a significant step — bringing some drugs closer to international benchmarks for the first time. The key question is whether the program will expand aggressively enough to close the remaining gap.

The Political Landscape

Drug price negotiation remains politically contentious. Pharmaceutical manufacturers argue that price controls will stifle innovation, pointing to the multi-billion dollar cost of bringing new drugs to market. Proponents counter that the U.S. has subsidized the world's drug costs for decades, with American patients paying 2-3x more than their counterparts in Canada, Europe, and Japan for identical medications.

The program's long-term impact depends on its expansion. With 15 drugs added in 2027, 15 more in 2028, and 20 per year after that, the negotiation program will eventually cover hundreds of the most expensive drugs in Medicare. The CBO projects cumulative savings of $98.5 billion over 10 years — significant, but still a fraction of total Medicare drug spending.

What Our Data Shows

OpenMedicare's drug spending data tracks how these high-cost drugs flow through the system. Before negotiation, the 10 targeted drugs showed year-over-year price increases averaging 7.4% annually — far outpacing inflation. The negotiated prices represent the first sustained price reduction for most of these drugs in their history.

You can explore detailed spending data for each of these drugs and thousands more in our Drug Spending Explorer.

Key Milestones Timeline

Bottom Line

Medicare drug price negotiation is the most significant change to the program's pharmaceutical purchasing in its 60-year history. The first year's results — $6 billion in savings on just 10 drugs — are promising but modest relative to total Medicare drug spending of $200+ billion annually. The real test comes as the program scales to cover dozens, then hundreds of drugs over the next decade.

For beneficiaries, the immediate impact is clear: lower costs on some of the most commonly prescribed medications in Medicare. For the broader healthcare system, the question is whether negotiation can meaningfully bend the drug spending curve — or whether pharmaceutical companies will simply shift pricing strategies to maintain revenue, as they've done historically with every cost-containment effort.

How Negotiation Actually Works

The process isn't simple price-setting. CMS selects eligible drugs based on spending thresholds, time on market, and lack of generic competition. The agency then makes an initial offer to the manufacturer, followed by up to three rounds of negotiation. If no agreement is reached, the manufacturer faces an excise tax of up to 1,900% on U.S. sales of the drug — or can withdraw the drug from Medicare and Medicaid entirely.

In practice, every manufacturer in the first round reached agreement rather than face the tax or lose access to Medicare's 68.5 million beneficiaries. The negotiated "Maximum Fair Prices" are confidential during the negotiation process but published before they take effect, allowing beneficiaries and plans to see the new prices.