New KFF Resource Answers Key Questions About Implementation of the Medicare Drug Price Negotiation Program

The Inflation Reduction Act of 2022 for the first time requires the Secretary of Health and Human Services to negotiate prices with drug companies for certain prescription drugs covered under Medicare Part D (starting in 2026) and Part B (starting in 2028).

New FAQs from KFF draw on guidance issued by the Centers for Medicare and Medicaid Services (CMS) to answer key questions about how the new Medicare drug price negotiation program will work, with a focus on details for 2026, the first year that CMS-negotiated prices will be available. The agency plans to issue final guidance this summer, and will announce the list of the first 10 Part D drugs to be negotiated on September 1, 2023.

These FAQs answer questions such as:

• Which types of drugs qualify for price negotiation for 2026 and how many will be selected?
  
  
• What is the timeline for implementing the negotiation program leading up to 2026?
  
  
• What are the steps in the negotiation process between CMS and manufacturers of selected drugs?
  
  
• What factors will CMS use in negotiating the maximum fair price for a given drug? Is there a ceiling on the maximum fair price and does it vary by the type of drug?
  
  
• Are there exceptions or delays for considering certain types of drugs?
  
  
• Are there limitations on administrative or judicial review of the drug price negotiation program?

How many Medicare beneficiaries will see lower out-of-pocket drug costs because of the program and the magnitude of potential savings are unknown at this time. Both will depend on which drugs are subject to negotiation and the level of the price reductions achieved. The program could improve Part D enrollees’ access to drugs that are selected for negotiation, since Part D plans are required to cover all selected drugs with negotiated maximum fair prices.

Related Resources:

“Changes to Medicare Part D in 2024 and 2025 Under the Inflation Reduction Act and How Enrollees Will Benefit,” also released by KFF today, describes the current Part D benefit and how it will change in the next two years, with a focus on how these changes will affect enrollees’ out-of-pocket costs. These changes include a cap on out-of-pocket drug spending for enrollees in Medicare Part D plans beginning in 2024 with the elimination of cost sharing above the catastrophic threshold and a $2,000 cap in 2025. Part D enrollees without low-income subsidies who use high-cost medications covered by Part D, including several cancer drugs, will see thousands of dollars in savings as a result. The law also requires Part D plans and drug manufacturers to pay a greater share of costs for Part D enrollees with high drug costs.

“Explaining the Prescription Drug Provisions in the Inflation Reduction Act,” released in January, provides a broad overview of how the new law’s prescription drug provisions will affect drug costs for people with Medicare and reduce drug spending by the federal government.