Medicare Drug Price Negotiation Projections Can Help PBMs, Payers Plan Ahead

In 2028, the federal government will likely negotiate the prices of 38 drugs covered under Medicare Part D and two under Medicare Part B, according to an analysis published this month in the Journal of Managed Care & Specialty Pharmacy. Inmaculada Hernandez, Pharm.D., Ph.D., one of the study’s authors, tells AIS Health the evaluation “is going to be very helpful for health plans and PBMs to know which drugs are going to be negotiated” as they evaluate the impact of the Inflation Reduction Act (IRA).

The IRA, which passed last year, includes a provision that requires the government to negotiate for the first time with pharmaceutical manufacturers the prices of some high-cost medications that are not subject to generic or biosimilar competition. It will begin with 10 Part D drugs in 2026, an additional 15 Part D drugs for 2027, another 15 Part D and Part B drugs in 2028 and an additional 20 Part D and Part B medications each year starting in 2029. Part D covers retail prescription drugs, while Part B covers provider-administered medications.

If President Joe Biden gets his way, there could be even more drugs slated for Medicare price negotiation. In a March 7 New York Times op-ed outlining the president’s plan to extend Medicare solvency, he wrote that his fiscal year 2024 budget “will build on drug price reforms by strengthening Medicare’s newly established negotiation power, allowing Medicare to negotiate prices for more drugs and bringing drugs into negotiation sooner after they launch. That’s another $200 billion in deficit reduction.” [Editor’s note: The president’s 2024 budget, released on March 9, did indeed call for this.]

Biden administration officials in January disclosed the first 10 drugs selected for negotiation will be announced on Sept. 1, while the maximum fair price for those drugs will be revealed in September 2024.

Richard G. Frank, Ph.D., director of the USC-Brookings Schaeffer Initiative for Health Policy, tells AIS Health that there are still a lot of unknowns when it comes to which drugs Medicare will negotiate, although many payers, manufacturers and others in health care are making their own projections.

“We don’t know all of the ways that the criteria are going to be applied,” Frank tells AIS Health, a division of MMIT. “It’s kind of a moving target, so you don’t know exactly who’s going to have a generic or biosimilar [in 2026 or subsequent years] and how it’s actually going to play out. But these lists are good. They tend to give us some ballpark ideas.”

High-Cost Drugs Span Numerous Therapeutic Areas

Hernandez, an associate professor at the University of California-San Diego, co-authored the analysis with Sean Dickson, director of health policy at West Health Policy Center, a non-profit based in Washington, D.C.

For this analysis, Hernandez and Dickson obtained Part B and Part D gross spending data from CMS for 2020 and used the FDA’s website to determine how long a medication has been on the market and whether it was a small-molecule, biologic or orphan drug. They also estimated when a drug will lose its patent and exclusivity based on the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, which is commonly referred to as the Orange Book, as well as Cardinal Health’s 2022 biosimilars report. They noted that CMS will negotiate for the highest gross spend drugs and will include dispensing fees for Part D medications and add-on and bundled payments for Part B medications when calculating the spending.

For 2026, the three highest-cost drugs that Hernandez and Dickson say will be subject to negotiation are Eliquis (apixaban), an anticoagulant from Bristol-Myers Squibb Co. and Pfizer Inc., which Medicare spent $9.94 billion on in 2020; Xarelto (rivaroxaban), a blood thinner from Janssen Pharmaceuticals, which Medicare spent $4.7 billion on in 2020; and Januvia (sitagliptin), an anti-diabetic medication from Merck & Co. Inc., which Medicare spent nearly $3.87 billion on in 2020. Eliquis will face generic competition in 2028, while Xarelto will have generic competition in 2027 and Januvia in 2026, meaning that is when those drugs will no longer be subject to Medicare negotiation.

For 2027, the three highest-cost drugs predicted to be added to the Medicare price negotiation list are Trelegy Ellipta (fluticasone furoate, umeclidinium and vilanterol), a medication to treat chronic obstructive pulmonary disease from GSK plc, which Medicare spent nearly $1.5 billion on in 2020; Ozempic (semaglutide), an anti-diabetic from Novo Nordisk, which Medicare spent $1.46 billion on in 2020; and Invega Sustenna (paliperidone palmitate), an antipsychotic from Janssen, which Medicare spent $1.37 billion on in 2020. Trelegy Ellipta will face generic competition in 2027, while Ozempic and Invega Sustenna will both have generic equivalents in 2031.

For 2028, the three highest-cost drugs that the authors project will be subject to negotiation are Keytruda (pembrolizumab), a cancer immunotherapy from Merck, which Medicare spent $3.5 billion on in 2020; Trulicity (dulaglutide), a type 2 diabetes medication from Eli Lilly & Co., which Medicare spent $3.28 billion on in 2020; and Opdivo (nivolumab), a cancer medication from Bristol-Myers Squibb, which Medicare spent $1.59 billion on in 2020. Those three drugs are expected to have generics in 2028.

Keytruda and Opdivo are the only two Part B drugs that will be subject to negotiation in 2028, according to the authors.

“I thought more of the drugs of that type [Part B] would be negotiated in 2028,” Hernandez says. “But when you run the numbers, it looks like the other top-spending [Part B] drugs that are physician-administered will probably have biosimilar or generic competition by then. I think that was the most surprising finding, in my opinion.”

Frank, meanwhile, says he is not too surprised at the lack of Part B drugs in 2028 because although those medications often have high prices, “their volume tends to be much smaller than Part D drugs, which are the ones that you go to a drugstore for.”

However, he predicts that in the years beyond 2028, “I think you’re going to see Part B playing a larger role.”

Medicare Is Expected to Save Billions Through Negotiations

Hernandez notes drugs that have been marketed for up to 16 years will be subject to a minimum discount of 25%, and those that have been available for more than 16 years will be subject to a minimum discount of at least 60%. After 2030, drugs marketed for 12 to 16 years will have a minimum discount of 35%.

Hernandez adds that she and Dickson have a follow-up analysis that is under review regarding the potential savings that consumers and payers may experience starting in 2026 due to the Medicare negotiations. She expects that paper will be published in the coming months. But she notes that the Congressional Budget Office projects that Medicare will save $3.7 billion on negotiations in 2026, $8.3 billion in 2027 and $17.5 billion in 2028.

“Our list informs health plans of the drugs that will likely see major reductions in price and subsequently cost sharing under Medicare and identifies other top-spend drugs that will be ineligible for negotiation,” Hernandez and Dickson wrote in their analysis. “This information will guide Part D benefit design, formulary placement and insurer negotiations with manufacturers for discounts.”

Contact Hernandez at and Frank at

This article was reprinted from AIS Health’s biweekly publication RADAR on Drug Benefits.

© 2024 MMIT
Tim Casey

Tim Casey

Tim has worked as a reporter and editor for more than 20 years. Before joining AIS Health in December 2021, he was a business reporter covering the commercial real estate industry’s capital markets for four years. He previously covered health care business issues for two medical publishing companies and high school, college and professional sports for the Sacramento Bee newspaper. Tim has a B.A. in Psychology from the University of Notre Dame and an M.B.A. from Georgetown University.

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