Medicare has selected the first 10 prescription drugs for direct price negotiation under the Inflation Reduction Act, beginning a process that will produce negotiated prices for 2026. The selected products accounted for $50.5 billion in gross Medicare Part D prescription-drug costs from June 2022 through May 2023—about 20% of total Part D gross drug costs during that period—and were used by approximately 8.25 million enrollees, according to the Centers for Medicare & Medicaid Services’ Aug. 29 fact sheet.

The list includes Eliquis, Jardiance, Xarelto, Januvia, Farxiga, Entresto, Enbrel, Imbruvica, Stelara and the insulin products Fiasp and NovoLog. The drugs treat common and expensive conditions including blood clots, diabetes, heart failure, chronic kidney disease, autoimmune disorders and blood cancers. CMS will negotiate with participating manufacturers during 2023 and 2024, with the resulting maximum fair prices scheduled to take effect Jan. 1, 2026.

The first list concentrates on high-spending, single-source drugs

The Inflation Reduction Act directs CMS to begin with high-expenditure Part D medicines that lack generic or biosimilar competition and have been on the market long enough to qualify under statutory rules. The agency first identified qualifying single-source drugs, excluded products covered by specific statutory exceptions, ranked eligible products by Part D spending and selected the 10 highest-cost products after applying the law’s additional criteria.

Eliquis, a blood thinner, led the list with roughly $16.48 billion in Part D gross covered prescription-drug costs during the selection period and about 3.7 million users. Jardiance followed at approximately $7.06 billion and Xarelto at $6.03 billion. The full CMS announcement describes the selection as the first direct Medicare drug-price negotiation in the program’s history.

An Aug. 29 HHS research brief from the Office of the Assistant Secretary for Planning and Evaluation examines utilization and spending trends for the selected medicines. HHS estimates that roughly 9 million Part D enrollees used one or more of the drugs in 2022 and together paid about $3.4 billion out of pocket, a measure of the financial stakes for patients as well as for the federal program.

The announcement starts a negotiation process rather than setting prices immediately

The publication of the list does not reduce prices this week. Manufacturers have until the beginning of October to sign agreements to participate and submit required information. CMS will consider data on research and development costs, production and distribution, federal financial support, market data and evidence about therapeutic alternatives, among other factors specified by law and agency guidance.

The implementation schedule was laid out months before this week’s announcement. A January HHS timeline said CMS would identify the first 10 drugs by Sept. 1, 2023, publish negotiated maximum fair prices by Sept. 1, 2024 and put those prices into effect at the start of 2026. The agency later issued detailed guidance describing offers, counteroffers, meetings and opportunities for public input.

Under that process, CMS plans to send an initial price offer to participating manufacturers by Feb. 1, 2024. Companies will have 30 days to accept or make a counteroffer, and additional negotiation meetings may continue through summer 2024. Patient-focused listening sessions are also planned this fall so beneficiaries, clinicians and other interested parties can discuss therapeutic alternatives, unmet needs and the effects of the selected medicines on specific populations.

Beneficiary savings will depend on prices that have not yet been negotiated

The government’s selection is consequential, but the size of future savings is not yet known. The negotiated prices will not be public until next year and will not take effect until 2026. A Washington Post analysis notes that the selected products are among Medicare’s largest drug expenditures and that the first list includes medicines used by millions of people for cardiovascular disease, diabetes and other chronic conditions.

For individual patients, savings will also depend on plan design and how negotiated prices interact with other Inflation Reduction Act changes. The law is separately restructuring Part D cost sharing, capping covered insulin at $35 per month and limiting annual out-of-pocket spending in future years. Negotiation is therefore one component of a broader effort to change how Medicare beneficiaries and the program pay for prescription drugs.

The Medicare Rights Center estimates the selected drugs cost beneficiaries $3.4 billion out of pocket in 2022 and points to Congressional Budget Office projections that negotiation will reduce federal Medicare spending over the coming decade. The exact distribution of savings among taxpayers, plans and beneficiaries will depend on the final negotiated prices and benefit rules.

Manufacturers are challenging the program in court

The new authority is also facing a substantial legal fight. Several pharmaceutical manufacturers and industry groups have filed lawsuits arguing that the negotiation provisions violate constitutional protections or improperly compel companies to accept government-set terms. The administration disputes those claims and is proceeding with implementation while the cases move through federal courts.

The litigation creates uncertainty but has not stopped the statutory calendar. Manufacturers whose products are selected must decide whether to participate under a law that includes significant consequences for declining. At the same time, CMS must establish a credible negotiation process that considers clinical evidence, innovation and manufacturing economics while pursuing lower prices for Medicare.

This first cycle will therefore serve as a test case for a program designed to expand over time. The law calls for additional Part D drugs to be selected for 2027, followed by a mix of Part B and Part D products in later years. Each round will increase the number of high-spending medicines subject to federal negotiation if the program survives legal and operational challenges.

For Medicare, the historic change is not a price number yet; it is the start of a new purchasing authority. Ten medicines representing $50.5 billion in recent Part D gross spending are now entering a government negotiation process for the first time. The next year will determine what prices emerge from that process and whether the promise of lower program and patient costs can be translated into measurable savings when the negotiated rates take effect in 2026.