Established by the Inflation Reduction Act in August 2022, the Medicare Drug Price Negotiation Program is still in its infancy, but is expected to impact a wide swath of stakeholders in the U.S. healthcare system. Last year, CMS negotiated prices for the first round of drugs, and in January, the agency revealed its second list of drugs that will be subject to negotiations this year.

All manufacturers — not just those with drugs on the list — should strategize based on the agents to be negotiated. Not only could their therapeutic areas be impacted, but so could those of their competitors, and their mitigation strategies could impact that class. And as these negotiations are conducted annually, drugmakers might someday find themselves in talks with CMS over their own prices.

Selected Drugs

The negotiated prices for the initial 10 drugs take effect on Jan. 1, 2026, while prices for the newest list of 15 drugs go into effect on Jan. 1, 2027. The first two rounds include only Medicare Part D, or self-administered, drugs, after which the program expands to also include medications covered under Medicare Part B, or provider-administered, drugs.

In descending order, based on total gross covered Part D costs from Nov. 1, 2023, to Oct. 31, 2024, here is the second set of drugs to be negotiated:

• Ozempic/Rybelsus/Wegovy from Novo Nordisk
• Trelegy Ellipta from GSK
• Xtandi from Astellas Pharma and Pfizer
• Pomalyst from Bristol Myers Squibb
• Ibrance from Pfizer
• Ofev from Boehringer Ingelheim
• Linzess from AbbVie
• Calquence from AstraZeneca
• Austedo/Austedo XR from Teva
• Breo Ellipta from GSK
• Tradjenta from Boehringer Ingelheim
• Xifaxan from Salix, a wholly owned subsidiary of Bausch Health
• Vraylar from AbbVie
• Janumet/Janumet XR from Merck
• Otezla from Amgen

The agents accounted for a total of $40.7 billion in gross covered Medicare Part D costs, down from about $60 billion for the first round of drugs. In mid-March, CMS revealed that it had signed agreements with all of the manufacturers to participate in negotiations.

Impact on Commercial Coverage

In a March 2025 MMIT Indices Market Event Primer (MEP), payers indicated that they were in discussions with manufacturers over prices for the first cycle of negotiated drugs for their commercial covered lives. Most expected they would get better discounts than they currently do. Those respondents also revealed that if they are not already getting aggressive rebates from those drugs’ competitors, they would seek those incentives and disadvantage products that do not provide them.

But many payers in a December 2024 MMIT Indices MEP said they were concerned that if Medicare received “significant price concessions,” manufacturers may be less inclined to provide commercial payers with the same. One respondent said they were expecting to see similar pricing trends in the second round of negotiations as the first, but another said they are waiting to see what happens before taking any action on their commercial line.

GLP-1s Included

The inclusion of Novo’s Wegovy along with its other two GLP-1s may have surprised some observers, because that agent is mostly known for its use as a weight-loss drug for people with obesity, and Medicare Part D excludes coverage of drugs used for weight loss. Ozempic and Rybelsus mainly are used to treat type 2 diabetes.

But in March 2024 — well within the timeframe of drugs considered for inclusion based on their total gross covered Part D costs — the FDA approved Wegovy for cardiovascular risk reduction in people who are obese or overweight and have established cardiovascular disease.

Shortly after that approval, CMS issued guidance clarifying that it would cover anti-obesity medications under Part D for drugs that are approved for additional medically accepted indications but not for weight management. This announcement led to improved coverage across all channels.

The GLP-1s have received a lot of scrutiny, including by Congress, over their list prices, which are around $1,000 per month. In 2027, when negotiated prices for this round of drugs take effect, their prices should be significantly less. Payers responding to the MMIT MEP said they are especially interested in watching how negotiations go with the GLP-1s.

Off-Label Prescribing?

The three GLP-1 agents on the list — Ozempic, Rybelsus, and Wegovy — cost CMS $14.4 billion from Nov. 1, 2023, to Oct. 31, 2024. This is a tremendous amount, especially in comparison to the second agent on the list, Trelegy Ellipta, which cost $5.1 billion.

Indeed, a recent HHS Office of Inspector General (OIG) data brief found that Medicare Part D spending on 10 common diabetes drugs consisting of GLP-1s and SGLT-2s rose 364% from 2019 to 2023, totaling a whopping $35.8 billion.

Because Medicare doesn’t cover weight-loss drugs, OIG concluded that “the surge in utilization of these drugs by Medicare Part D enrollees merits further inquiry to determine whether the drug claims were paid in accordance with Medicare requirements.”

Prescribing for “reasons that are not medically accepted indications are not in compliance with Medicare requirements and present an opportunity for fraudulent, excessive, or unnecessary Part D payments,” declared the report.

In an attempt to head off that practice, CMS also said in its March 2024 guidance that Part D sponsors could implement utilization management tools, such as prior authorization, to make sure that agents are being prescribed “for a medically accepted indication.”

Active Ingredients

In addition, CMS has clarified that “all dosage forms and strengths of the drug with the same active moiety” from the same manufacturer, even those with different names, “will be aggregated as a single potential qualifying single source drug for purposes of identifying negotiation-eligible drugs.” The three Novo agents are all semaglutide.

A similar situation occurred in the first round of drugs, when six Novo insulin aspart agents with different product names were considered as one qualifying single-source drug. Clearly, manufacturers should keep this aspect of the IRA in mind when lifecycle planning.

However, industry experts agree that in the case of intravenous medications that add hyaluronidase in order to be subcutaneously injected — such as Bristol Myers Squibb’s Opdivo, or Johnson & Johnson Innovative Medicine’s Darzalex — the additional medication is considered a second active ingredient. This means the original drug and the next-generation agent are considered separate drugs that will not be grouped together for negotiation.

This is an important point to remember as the next round of drugs will include Part B drugs, many of whom are costly and nearing the end of their patents.

Loss of Exclusivity

Several of the drugs on the initial list have patents that are due to expire by 2026, so the negotiated prices may have limited financial impact on their manufacturers. Johnson & Johnson’s Stelara, for example, has already had several biosimilars come onto the market this year.

Other drugs whose patents are expected to expire by 2026 include AstraZeneca’s Farxiga, Bayer’s Xarelto, Boehringer Ingelheim’s Jardiance and Novartis’ Entresto.

Many other drugs on the second list have patents that are expected to expire closer to the end of the decade, putting their manufacturers at risk of a greater financial hit. However, if these companies have been giving significant discounts to PBMs, the impact will be more muted.

Cancer Drugs

In the first round of negotiations, AbbVie and Johnson & Johnson’s Imbruvica was the sole cancer drug out of 10 agents, many of them medications for diabetes and cardiovascular conditions. But the second list includes four oncolytics: Xtandi, Pomalyst, Ibrance, and Calquence.

Imbruvica had the lowest discount among the first round of drugs at 38%; its negotiated price for a 30-day supply starting Jan. 1 will be $9,319.00, down from $14,934.00.

Per the IRA, drugs approved more than 16 years prior to when their negotiated price takes effect will have a minimum discount of 60% off their non-federal average manufacturer price. However, none of the cancer drugs on the current list will be subject to that discount (although Xtandi will be close). Rather, their discount will be at least 25%.

One of the respondents to the MMIT MEP said that oncology is the one area in which they expect CMS will get better pricing than they can. Some of them commented, though, that this is an area in which they try not to be too restrictive in their coverage.

Orphan Drug Designation

Also of note are the drugs that are not on the list, namely AstraZeneca’s Tagrisso. Some analysts predicted that it could be on the list based on projected spending, but questions existed around whether it would be excluded under the IRA’s orphan drug exception.

Among the types of drugs not eligible for negotiation are medications with orphan drug designation for “one rare disease or condition.” Tagrisso has five indications on its label, but all are for certain mutations in non-small cell lung cancer. This is also an important distinction for drugmakers to keep in mind.

Ultimately, all pharma manufacturers should pay attention to this list and use it to develop strategies to boost their own standing within a therapeutic class when their competitors are impacted. They should also leverage this information to help their own potential negotiations, not only with CMS but also with commercial payers. There are lessons to be applied to all phases of pharma lifecycle planning.

For more insights, consider our MMIT Indices solutions, which provide a deep dive into specific therapeutic areas, including disruptive event analysis. Our Custom Market Research solution provides pharma companies with tailored access dynamics data to help with strategic planning and forecasting.