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IRA Medicare Drug Negotiation

The process under the Inflation Reduction Act where CMS negotiates a "maximum fair price" directly with manufacturers for selected high-cost Medicare drugs.

How It Works

Under IRA Section 11001, CMS each year selects a cohort of high-spend Medicare drugs for negotiation: 10 Part D drugs for 2026 prices (selected August 2023), 15 additional Part D drugs for 2027, 15 additional Part B or Part D drugs for 2028, and 20 additional for 2029 and beyond. Eligibility requires at least 7 years post-approval for small-molecule drugs or 11 years for biologics, no generic or biosimilar competition, and high Medicare spending. The first 10 drugs selected for 2026 negotiated prices (effective January 1, 2026) are: Eliquis (BMS/Pfizer, apixaban, ~$3,900/year Medicare net per patient pre-negotiation), Jardiance (Boehringer Ingelheim/Lilly, empagliflozin), Xarelto (J&J, rivaroxaban), Januvia (Merck, sitagliptin), Farxiga (AstraZeneca, dapagliflozin), Entresto (Novartis, sacubitril/valsartan), Enbrel (Amgen, etanercept), Imbruvica (J&J/AbbVie, ibrutinib), Stelara (J&J, ustekinumab), and the Fiasp/NovoLog insulin aspart family (Novo Nordisk). CMS announced the final negotiated prices in August 2024, with discounts ranging from 38% (Imbruvica) to 79% (Januvia, Fiasp/NovoLog) off 2023 list prices. Manufacturers that refuse to negotiate face an escalating excise tax under 26 U.S.C. 5000D starting at 65% of U.S. sales and rising to 95%, or can withdraw all products from Medicare and Medicaid. CMS uses a "maximum fair price" ceiling tied to non-federal average manufacturer price (non-FAMP) or a discount schedule based on years post-approval (25-60% off). Savings to Medicare are estimated at $6 billion in 2026 alone.

Related Terms

  • Inflation Reduction Act (IRA), A 2022 federal law that, for the first time, allows Medicare to negotiate prices directly with drug manufacturers for select high-cost medications and creates new inflation rebate and Part D redesign provisions.
  • Medicare Part D, The prescription drug benefit within Medicare, covering outpatient medications for 50+ million Americans aged 65+ and those with disabilities.
  • Medicare Part D Redesign (2025), The IRA-mandated restructuring of Medicare Part D, effective January 1, 2025, that caps annual out-of-pocket drug spending at $2,000 and shifts cost-sharing liability among plans, manufacturers, and government.

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About This Definition

This definition is part of the DrugPrice Drug Pricing Glossary, 49 terms explaining how prescription drug pricing works in the United States. All definitions are written in plain language for patients, caregivers, journalists, and healthcare professionals.

this entity is one of the U.S. Medicare prescription-drug pricing concepts that recurs across this site. The definition above is the technical answer; the paragraphs below add the practical context for how the concept connects to the CMS Medicare Part D Drug Spending data data behind every per-entity page on the site.

In the CMS Medicare Part D Drug Spending data data, this concept shapes one or more of the fields that drive the per-entity grades and rankings on this site. The methodology page describes which fields feed into which output; this glossary entry documents the underlying term.

Source: CMS Medicare Part D Spending, 2026.