Medicare Drug Negotiation
The process under the Inflation Reduction Act where CMS negotiates a "maximum fair price" directly with manufacturers for select high-cost Medicare drugs.
How It Works
Before the IRA, Medicare was prohibited from negotiating drug prices — the "noninterference clause" in the original Part D law prevented it. The negotiation process selects drugs that have been on the market for at least 7 years (small molecule) or 11 years (biologics), lack generic or biosimilar competition, and have high Medicare spending. CMS proposes a maximum fair price, and the manufacturer can accept, counter-offer, or refuse (facing a steep excise tax for refusal). The first negotiated prices take effect in 2026. This program is expected to save Medicare $100 billion over 10 years.
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.
- Medicare Part D — The prescription drug benefit within Medicare, covering outpatient medications for 50+ million Americans aged 65+ and those with disabilities.
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About This Definition
This definition is part of the DrugPrice Drug Pricing Glossary — 34 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.