As part of the continued implementation of the Biden-Harris Administration’s historic prescription drug law, the Inflation Reduction Act, the U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), released final guidance today outlining the process for the second cycle of negotiations under the Medicare Drug Price Negotiation Program. The guidance also explains how CMS will help ensure people with Medicare can access drugs at the negotiated prices from the first and second cycles when those prices become effective beginning in 2026 and 2027, respectively.
“HHS, for the first time ever, negotiated directly with pharmaceutical manufacturers to lower drug prices for Medicare. The new, lower prices for the first 10 drugs will save billions for the American people,” said HHS Secretary Xavier Becerra. “Today, we lay the groundwork for the second round of negotiations. This is the latest action by the Biden-Harris Administration to improve access to affordable, life-saving prescriptions.”
In August, the Biden-Harris Administration announced the negotiated prices for the 10 drugs selected for the first cycle of negotiations. The negotiated prices are estimated to save people enrolled in Medicare prescription drug coverage $1.5 billion in out-of-pocket costs in 2026 when they go into effect. These savings are in addition to savings from other cost saving provisions in the Inflation Reduction Act, such as the first ever cap on out-of-pocket drug costs for people with Medicare prescription drug coverage, which goes into effect in January 2025 at $2,000 a year.
“Today’s final guidance for the Medicare Drug Price Negotiation Program builds off the success of the first 10 negotiated drug prices and continues the Biden-Harris Administration’s commitment to provide millions of people with Medicare affordable access to innovative therapies,” said CMS Administrator Chiquita Brooks-LaSure. “While saving Medicare and taxpayers billions of dollars, the negotiated prices will also provide people with Medicare a better deal on some of Medicare’s costliest prescription drugs, promoting necessary competition in the market, and ensuring Medicare is strong today and into the future.”
CMS will announce the selection of up to 15 additional drugs covered by Part D for the second cycle of negotiations by February 1, 2025. This second cycle of negotiations with participating drug companies will occur during 2025, and any negotiated prices for this second set of drugs will be effective starting January 1, 2027.
Today’s final guidance incorporates lessons learned from the first cycle of negotiations, as well as comments received on the draft guidance published in May. The final guidance outlines requirements and parameters for how participating drug companies must ensure eligible people with Medicare prescription drug coverage will have access to the negotiated prices for 2026 and 2027, including procedures that apply to participating drug companies, Medicare Part D plans, pharmacies, mail order services, and other entities that dispense drugs covered under Medicare Part D.
Notably, the final guidance states that CMS will engage with a Medicare Transaction Facilitator that will serve as the infrastructure in the exchange of data and the optional facilitation of payments to ensure that eligible individuals with Medicare and the pharmacies that serve them have access to the maximum fair prices. Drug company utilization of the Medicare Transaction Facilitator for payment facilitation is voluntary. Starting in October, CMS will host monthly technical calls for pharmacies that complement the existing monthly technical calls for Part D plans and drug companies. This builds on how CMS has engaged with other interested parties in a wide range of topics since passage of the prescription drug law.
Additionally, based on feedback received, the final guidance outlines improvements to the design of last year’s patient-focused engagement events to better understand patient experiences with the selected drugs and their therapeutic alternatives. The guidance states that, in Spring 2025 during the second cycle of negotiations, CMS will hold up to 15 patient-focused roundtable events, as well as one town hall meeting, to solicit feedback from interested parties, focused on the clinical considerations related to the selected drugs. The final guidance also reflects public feedback on the desire for significant engagement between CMS and the participating drug companies throughout the negotiation process and includes multiple opportunities for engagement and the potential for additional written offers and counteroffers between CMS and participating drug companies during the negotiation process.
“We are continuing to implement the prescription drug law thoughtfully, prioritizing engagement with all interested parties, and ensuring the process is as transparent and inclusive as possible,” said Dr. Meena Seshamani, MD, PhD, CMS Deputy Administrator and Director of the Center for Medicare. “As we approach the second cycle of negotiations, we continue to focus on ensuring people with Medicare prescription drug coverage have access to the innovative cures and therapies they need at prices they can afford.”
This final guidance comes as CMS prepares for Medicare Open Enrollment, which begins on October 15. Thanks to the prescription drug law, starting in January 2025, all Medicare prescription drug plans will include an annual cap on what people with Medicare pay out-of-pocket for covered prescription drugs, which will be $2,000 for next year. This change builds upon the Inflation Reduction Act’s expansion of the Extra Help financial assistance program, the $35 cap for each covered insulin product per month’s supply, free recommended adult vaccines in Medicare Part D, and other improvements.
Today, CMS also released a related information collection request on the Small Biotech Exception and Biosimilar Delay for the second cycle of negotiations for a 30-day comment period.
For the fact sheet on the Medicare Drug Price Negotiation Program Final Guidance for Initial Price Applicability Year 2027 and Manufacturer Effectuation of the Maximum Fair Price in 2026 and 2027, visit https://www.cms.gov/files/document/fact-sheet-medicare-drug-price-negotiation-program-ipay-2027-final-guidance-and-mfp-effectuation.pdf.
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