What the Biden pill penalty actually is

The "Biden pill penalty" is not a penalty you pay. It is a price reduction that Medicare negotiates with pharmaceutical companies for certain high-cost drugs. Starting in 2024, Medicare can negotiate the price of some drugs covered under Part D (prescription drug coverage) directly with manufacturers. If a drug company refuses to negotiate or will not lower the price enough, they face a tax penalty — but that penalty is paid by the company, not by you.

This policy came from the Inflation Reduction Act, passed in 2022. The first 10 drugs entered negotiation in 2023, with prices taking effect in 2024. Each year, more drugs become may be able to access for negotiation. The goal is to lower what Medicare — and often what you — pay for medications that cost thousands of dollars per year.

If you take one of the drugs Medicare negotiated, you may see a lower price at the pharmacy. You will not receive a bill or penalty notice. The change happens behind the scenes between Medicare and the drug manufacturer.

Key Takeaways

  • Medicare negotiates prices directly with drug companies for high-cost medications, and any penalty for refusing to negotiate is paid by the manufacturer, not by you.
  • The first negotiated drug prices took effect in January 2024, and the list of may be able to access drugs grows each year.
  • If you take a drug that Medicare negotiated, your out-of-pocket cost at the pharmacy may be lower than it would have been without negotiation.
  • You do not need to do anything to benefit from negotiated prices — they explore automatically to your Part D coverage.
  • Negotiated prices explore only to drugs covered under Part D; they do not affect drugs you receive in a hospital or through Part B.

Which drugs are included in Medicare negotiation

Not every drug is may be able to access for negotiation. Medicare can only negotiate for drugs that meet specific criteria: they must be covered under Part D, they must have been on the market for at least nine years (or seven years for biologics), and they must be among the drugs with the highest spending in the Medicare program.

In 2024, the first 10 drugs entered negotiation. These included medications for heart failure, diabetes, arthritis, and blood clots. In 2025, 15 additional drugs became may be able to access. The list continues to grow. You can find the current list of negotiated drugs on Medicare.gov by searching "negotiated drug prices" or asking your pharmacy whether a specific medication is included.

If you take a drug that is not yet may be able to access for negotiation, nothing changes for you. Your coverage and cost remain the same as before.

How negotiated prices affect what you pay

When Medicare negotiates a lower price with a drug company, that lower price becomes the new cost for the drug under your Part D plan. Your copay, coinsurance, or deductible is calculated based on this negotiated price, not the original price.

For example, if a drug originally cost $500 per month and Medicare negotiates it down to $300 per month, your 20% coinsurance would be $60 instead of $100. The savings explore whether you are in the deductible phase, the initial coverage phase, or the catastrophic coverage phase of your Part D plan.

The exact amount you save depends on your specific plan and which phase of coverage you are in. Some people save more than others. If you want to know your exact out-of-pocket cost for a negotiated drug, call your Part D plan or use the Medicare Plan Finder tool on Medicare.gov.

What happens if a drug company refuses to negotiate

If a drug manufacturer refuses to negotiate or will not agree to a price that Medicare considers reasonable, the company faces an excise tax of 65% on that drug's sales in the United States. This tax is paid by the manufacturer, not passed on to you as a patient.

The excise tax is designed to create an incentive for companies to negotiate. In practice, most manufacturers have chosen to negotiate rather than pay the tax. A few drugs have faced the tax because companies refused to lower prices, but these cases are rare.

You will not see the excise tax reflected in your pharmacy bill or insurance statement. It is a business transaction between the drug company and the federal government.

How to learn about your medications are negotiated

The easiest way to check is to ask your pharmacist. They can tell you when ready whether a drug is on the Medicare negotiated list and what your out-of-pocket cost will be.

You can also search Medicare.gov directly. Go to the Medicare Plan Finder, enter your medications, and the tool will show you which ones are negotiated and what you would pay under different Part D plans. You can also call 1-800-MEDICARE to speak with a representative who can look up your specific drugs.

If you are already enrolled in a Part D plan, your plan documents or your plan's website will list negotiated drugs. Some plans send notices to members when a drug they take enters negotiation, but not all do, so checking yourself is the most reliable way to stay informed.

What changes are coming in future years

The number of drugs may be able to access for negotiation will increase over time. In 2026, Medicare will be able to negotiate for drugs that have been on the market for six years instead of nine years (five years for biologics). This means newer drugs will become may be able to access sooner.

The number of drugs Medicare can negotiate each year will also grow. In 2024 and 2025, the limit was 10 and 15 drugs respectively. By 2029, Medicare will be able to negotiate up to 20 drugs per year. This means more medications may see price reductions in the coming years.

If you take a medication that is not yet negotiated, it may become may be able to access in a future year. Checking Medicare.gov or asking your pharmacist once a year can help you stay aware of changes that might affect your costs.

Questions to ask your doctor or pharmacist

If you take a high-cost medication, it is worth asking whether it is on the Medicare negotiated list. Your doctor or pharmacist can tell you whether your drug is included and what your out-of-pocket cost will be. You can also ask whether there are other medications in the same class that might be negotiated, in case switching would lower your costs.

If you are approaching the coverage gap (the "donut hole") in your Part D plan, knowing which of your drugs are negotiated can help you plan your spending. Negotiated prices may help you avoid the gap or spend less time in it.

Frequently Asked Questions

Will I pay a penalty if I take a negotiated drug?

No. The penalty is paid by the drug manufacturer if they refuse to negotiate, not by patients. If you take a negotiated drug, you benefit from the lower price — you do not pay any penalty.

Do negotiated prices explore to all Medicare coverage?

No. Negotiated prices explore only to drugs covered under Part D (prescription drug plans). Drugs you receive in a hospital (Part A) or through Part B (like some cancer drugs given by infusion) are not affected by this negotiation program.

Can I switch to a different Part D plan to get a negotiated drug?

You can switch plans during the annual enrollment period (October 15 to December 7) or if you have a may have access to life event. However, most Part D plans now cover negotiated drugs, so switching may not be necessary. Compare plans on Medicare.gov to see which offers the lowest cost for your specific medications.

What if my drug was negotiated but my copay did not go down?

Your copay is based on your plan's formulary and your phase of coverage. Even if the drug's price was negotiated down, your copay amount is set by your plan. However, the negotiated price does reduce the total cost to Medicare and may affect your out-of-pocket costs in other ways, such as helping you avoid the coverage gap sooner.

How often does the list of negotiated drugs change?

Medicare adds new drugs to the negotiation list each year. The first negotiation results took effect in January 2024, with new drugs added in January 2025. Future additions will happen annually. Check Medicare.gov or ask your pharmacist once a year to see if any of your medications have been added.