What Medicare's Drug Price Negotiation Actually Does
Starting in 2024, Medicare can negotiate the price it pays for certain drugs directly with pharmaceutical manufacturers. This does not mean Medicare sets prices for all drugs or that your out-of-pocket cost disappears. Instead, Medicare — through the Centers for Medicare & Medicaid Services (CMS) — sits down with drug makers and agrees on a lower price for specific medications. That lower price then applies to all Medicare beneficiaries who take those drugs.
The negotiation covers only a limited number of drugs each year. In 2024, the first round covered 10 medications. The list grows over time, but it will never include every drug on the market. Drugs newly approved by the FDA are excluded for a set period, and drugs with limited competition may not be included either.
The negotiated price is what Medicare pays the pharmacy or manufacturer. Your own cost — your copay, coinsurance, or deductible — is separate and depends on your specific plan. A lower negotiated price does reduce what your plan pays, which can eventually lower premiums across the program, but the savings do not automatically translate to lower out-of-pocket costs for you on that drug.
Key Takeaways
- Medicare negotiates prices for a small number of drugs each year, starting with 10 in 2024 and growing to 20 by 2026.
- The negotiated price is what Medicare pays, not necessarily what you pay out of pocket — your copay or coinsurance depends on your plan.
- Only drugs that have been on the market for at least nine years and meet other criteria can be selected for negotiation.
- Drug makers can refuse to negotiate, but if they do, Medicare can impose a tax on their sales of that drug to non-Medicare customers.
- You can find the list of negotiated drugs on Medicare.gov and compare costs across plans during open enrollment.
Which Drugs Are Subject to Negotiation
Not every medication can be negotiated. CMS follows strict rules about which drugs are may be able to access. The drug must have been approved by the FDA for at least nine years (with some exceptions for biologics, which have a longer timeline). It must be a drug that Medicare Part D covers — meaning it is a prescription drug, not an injectable medication administered in a hospital or doctor's office, which falls under Part B.
CMS also looks at how much Medicare spends on each drug. In 2024, only drugs with total Medicare spending above a certain threshold were may be able to access. That threshold changes year to year. Additionally, the drug must not have a generic or biosimilar version already available, because those are already cheaper.
The first 10 drugs negotiated in 2024 included common medications for diabetes, heart disease, and blood clots. By 2026, the number of drugs available for negotiation will reach 20 per year. You can see the full list of negotiated drugs and their new prices on Medicare.gov under the Part D section.
How the Negotiation Process Works
CMS identifies may be able to access drugs and invites manufacturers to negotiate. The manufacturer can choose to participate or decline. If they decline, they face a tax on their revenue from that drug when sold to non-Medicare customers — currently 65 percent of the drug's average manufacturer price. That tax creates a strong incentive to negotiate, though some manufacturers have refused anyway.
The negotiation itself is confidential. CMS and the manufacturer discuss the price, and they reach an agreement or they do not. The negotiated price takes effect the following year. Manufacturers must continue selling the drug at that price to all Medicare beneficiaries; they cannot charge different prices to different people.
The process repeats annually. Each year, CMS identifies a new batch of may be able to access drugs, invites negotiation, and adds negotiated prices to the list. The number of drugs in the negotiation pool grows over time as more drugs become may be able to access (by reaching the nine-year mark or by spending threshold).
What This Means for Your Out-of-Pocket Costs
A lower negotiated price does not automatically mean you pay less. Your actual cost depends on your specific Medicare plan and where that drug falls in your plan's formulary — the list of covered drugs organized by tier. Most plans charge a copay (a flat dollar amount) or coinsurance (a percentage of the cost) for each drug.
If your plan puts a negotiated drug in a lower tier, you may see your copay drop. But if your plan already had a low copay for that drug, the negotiated price may not change what you pay at the pharmacy. Over time, as negotiated prices lower the overall cost of drugs, plan premiums may decrease, which benefits all members.
The real savings show up most clearly if you are in the coverage gap (the "donut hole" in Part D). In the gap, you pay a higher percentage of the drug cost. A lower negotiated price means the gap is smaller, so you hit the catastrophic coverage phase sooner and pay less overall.
How to learn about Your Drugs Are Negotiated
Start by visiting Medicare.gov and looking for the list of negotiated drugs under Part D. The list shows the drug name, the negotiated price Medicare pays, and the year the negotiation took effect. Cross-reference this with the medications you currently take.
Next, check your plan's formulary. Your plan documents or your plan's website will show which tier your drug is on and what your copay or coinsurance is. Even if a drug is negotiated, your plan may not have changed the copay yet, or your plan may not cover that drug at all.
If you are shopping for a new plan during open enrollment (October 15 to December 7 each year), use the Medicare Plan Finder tool. Enter your current drugs and it will show you the out-of-pocket cost for each drug under each plan in your area. This is the fastest way to see whether switching plans would save you money on a negotiated drug.
What Happens If a Manufacturer Refuses to Negotiate
A drug maker can decline to participate in negotiation. When they do, they must pay an excise tax on sales of that drug to non-Medicare customers. In 2024, the tax rate is 65 percent of the average manufacturer price. The rate increases over time, reaching 95 percent by 2031.
This tax is designed to make negotiation financially attractive. Most manufacturers have chosen to negotiate rather than pay the tax, but some have refused on principle or because they believe their drug's price is already justified. If a manufacturer refuses, Medicare beneficiaries do not automatically pay less — the drug price stays where it was, and you pay according to your plan's copay or coinsurance.
Manufacturers can also challenge a negotiated price in court. Several have done so, arguing that the negotiation process violates their rights. These lawsuits are ongoing, and the outcome could affect how negotiation works in future years.
Comparing Plans to Find the Best Price for Your Drugs
During open enrollment, your best move is to run your specific drugs through the Plan Finder. Do not rely on last year's plan — costs change annually, and a plan that was cheapest for you in 2024 may not be in 2025.
Enter each of your current medications, including the dose and quantity. The tool will show you the total estimated cost for the year under each available plan. Pay attention to the deductible, the copays for each drug tier, and whether you will hit the coverage gap. A plan with a lower premium but higher copays might cost you more overall if you take expensive drugs.
If one of your drugs is newly negotiated, check whether your current plan has updated its formulary to reflect the new price. If not, switching to a plan that has may save you money. You can also call your plan directly and ask whether they have adjusted copays for negotiated drugs.
Frequently Asked Questions
Will my copay go down automatically if my drug is negotiated?
Not necessarily. Your copay depends on your plan's formulary and tier structure, not directly on the negotiated price. Your plan may or may not pass the savings to you through a lower copay. During open enrollment, compare plans to see which one offers the lowest cost for your specific drugs.
Can drug makers refuse to sell to Medicare at the negotiated price?
No. If a manufacturer agrees to negotiate, they must sell to all Medicare beneficiaries at that price. They cannot refuse to sell to Medicare or charge different prices to different people. If they refuse to negotiate at all, they pay an excise tax instead.
Are generic drugs included in negotiation?
No. Generic drugs are already much cheaper than brand-name drugs, so they do not meet the criteria for negotiation. Negotiation focuses on brand-name drugs and biologics that have high spending and no generic alternative.
What if my drug is not on the negotiated list?
Your cost will not change due to negotiation. You will pay whatever your plan's copay or coinsurance is for that drug. Over time, more drugs will become may be able to access for negotiation as they reach the nine-year mark or spending threshold, so check the list each year.
How do I know if I am saving money from negotiation?
Compare your out-of-pocket costs before and after negotiation took effect. If your plan lowered the copay for a negotiated drug, you are saving. If your copay stayed the same, the savings are going to Medicare and the plan, not to you directly — though lower plan costs may eventually mean lower premiums for everyone.