Understanding the Second Round of Medicare Drug Price Negotiations: What Trump’s CMS Can and Can’t Change
Legal Framework:
The Inflation Reduction Act of 2022 empowers Medicare to negotiate drug prices directly with manufacturers for certain high-expenditure, single-source drugs without generic or biosimilar competition13.
First Cycle Outcomes:
The first cycle of negotiations concluded in August 2024, with CMS negotiating prices for 10 drugs covered under Medicare Part D, effective January 1, 20261.
Second Cycle Process:
For the second cycle, CMS will select up to 15 Part D drugs by February 1, 2025, with negotiated prices to be effective in 2027. The process will include more patient-focused roundtable discussions and additional opportunities for offer exchanges between CMS and manufacturers3.
Negotiation Guidelines:
CMS has issued detailed guidelines for the second cycle, including the use of therapeutic alternatives and Federal Supply Schedule (FSS) prices as starting points for initial offers. Manufacturers must ensure that dispensing entities pay no more than the maximum fair price and adhere to a 14-day prompt payment window34.
Limitations:
The Trump administration, if it were to take office, could potentially alter the approach to implementation but would be constrained by the statutory requirements of the Inflation Reduction Act. The law mandates specific procedures and timelines for the negotiation process, limiting the administration's ability to make significant changes3.
Previous Efforts:
Previous administrations, including Trump's, have emphasized the need to lower drug prices through negotiation. However, the Inflation Reduction Act provides the legal authority for Medicare to negotiate prices directly, a significant departure from previous policies25.
Future Implications:
The negotiation program aims to reduce drug spending and out-of-pocket costs for Medicare beneficiaries. The success of the program will depend on the effectiveness of the negotiation process and the adherence to statutory requirements13.
Sources:
1. https://www.cms.gov/newsroom/fact-sheets/medicare-drug-price-negotiation-program-negotiated-prices-initial-price-applicability-year-2026
2. https://www.cms.gov/sites/default/files/2019-12/Lowering-drug-prices-fact-sheet-508.pdf
3. https://www.kff.org/medicare/issue-brief/faqs-about-the-inflation-reduction-acts-medicare-drug-price-negotiation-program/
4. https://www.cms.gov/inflation-reduction-act-and-medicare/medicare-drug-price-negotiation
5. https://oversightdemocrats.house.gov/sites/evo-subsites/democrats-oversight.house.gov/files/documents/Negotiation%20Bill%20Two-Pager%205.10.17.pdf