For most of its history, Medicare was barred by law from negotiating the prices it pays for prescription drugs. The 2022 Inflation Reduction Act (IRA) changed that, and the program is now in its third and most ambitious round of negotiations. By November 1, 2026, the Centers for Medicare & Medicaid Services (CMS) and drugmakers must finish talks over 15 medicines, and for the first time the list includes drugs administered in doctors' offices under Medicare Part B [1][2].
How negotiation works
Under the IRA's Medicare Drug Price Negotiation Program, CMS selects high-spending drugs that have been on the market for years without generic or biosimilar competition. Small-molecule drugs generally become eligible seven years after approval, and biologics after 11 years. The negotiated amount is called the "maximum fair price" [3][4]. The first round covered 10 drugs, with prices that took effect on January 1, 2026. The second round covered 15 drugs, including the diabetes and weight-loss drugs Ozempic and Wegovy, with prices taking effect in 2027 [5]. CMS reached agreements with manufacturers on all 15 drugs in the second round [1].
This year's drugs
CMS announced the third-cycle list on January 27, 2026. The 15 drugs are Trulicity, Biktarvy, Orencia, Cosentyx, Erleada, Kisqali, Entyvio, Verzenio, Botox, Lenvima, Xolair, Rexulti, Xeljanz, Anoro Ellipta and Cimzia [2]. They treat conditions including type 2 diabetes, HIV, breast and prostate cancer, rheumatoid arthritis, Crohn's disease, asthma, depression and chronic lung disease. CMS also selected Tradjenta, a diabetes drug from the first round, for renegotiation [6]. Together, the 15 drugs accounted for about $27 billion in Medicare Part B and Part D spending, roughly 6% of the total, and were used by about 1.8 million Medicare enrollees between November 2024 and October 2025 [1][7]. Eli Lilly's diabetes drug Trulicity topped the list at about $4.9 billion in combined spending [7].
Why Part B matters
Part D covers drugs that patients pick up at a pharmacy. Part B covers drugs administered by a clinician, such as infusions and injections, which tend to be among the most expensive medicines Medicare buys. The IRA allowed Part B drugs to be included starting with this cycle. According to an analysis by the actuarial firm Milliman, five of the selected products, Orencia, Entyvio, Xolair, Botox and Cimzia, have the majority of their gross Medicare spending under Part B [8]. Botox, which Medicare covers for medical uses such as migraines and bladder problems but not for cosmetic purposes, likely would not have been selected without a policy change that counted Medicare Advantage spending data in the calculations, Milliman found [8][7].
How CMS decides on a price
Negotiation under the IRA is not an open-ended bargaining session. CMS makes an initial written offer, the manufacturer can respond with a counteroffer, and the two sides may meet before the deadline. In developing its offers, CMS considers factors set out in the law, including a drug's research and development costs, its current costs of production and distribution, the extent of federal financial support for its development, its patents and exclusivity, and the availability of therapeutic alternatives [7]. The law also caps the negotiated price at a ceiling based on a percentage of the drug's existing price, with the ceiling depending on how long the drug has been on the market. Manufacturers face strong pressure to take part. Companies that decline to participate face a steep excise tax on sales or must withdraw their drugs from Medicare and Medicaid, which is one reason every manufacturer selected so far has signed on.
The timeline
All manufacturers signed agreements to participate before the February 28, 2026, deadline [4]. CMS sent initial offers by June 1, and companies had 30 days to accept or make a counteroffer [4]. The negotiation period ends November 1, 2026, and CMS is scheduled to publish the final negotiated prices by November 30, 2026. The new prices take effect on January 1, 2028 [3]. Some selected drugs may not stay on the list long. Milliman notes that Trulicity is expected to face biosimilar competition in 2027, which could remove it from the program after just one year of negotiated pricing [8].
The debate
Supporters say negotiation is a basic tool that other large buyers of drugs, including private insurers and many foreign governments, already use, and that it saves money for both taxpayers and patients. CMS has estimated that if the first round's negotiated prices had applied in 2023, Medicare enrollees would have saved about $1.5 billion in out-of-pocket costs, and the program as a whole about $6 billion [5]. The pharmaceutical industry has challenged the program in court and argues that price controls will reduce investment in new medicines, particularly small-molecule drugs, which become eligible for negotiation sooner than biologics. Drugmakers have so far lost those legal challenges, and the program has continued under both the Biden and Trump administrations. Some medicines on this year's list matter far more to their makers than others. One Wall Street analyst estimated that Medicare revenue from Gilead's Biktarvy would make up about 8% of the company's global revenue in 2027 [7].
Patients may not notice right away
For Medicare enrollees, lower negotiated prices do not always mean an immediate drop in what they pay at the pharmacy counter, because out-of-pocket costs also depend on plan design, deductibles and coinsurance [6]. Starting in 2025, Medicare Part D also caps annual out-of-pocket drug spending, which already limits costs for many people taking expensive medications.
Why it matters
The third cycle is a bridge to a bigger program. Next year, the number of drugs selected for negotiation rises to 20, drawn from both Part B and Part D [6]. It also overlaps with other Trump administration efforts on drug prices, including the new GLOBE model that ties some Part B rebates to international prices and company-by-company "most favored nation" pricing agreements. The prices announced by November 30 will show how much leverage Medicare has gained since it first won the power to negotiate.
Sources
- 1. "CMS Announces Selection of Drugs for Third Cycle of Medicare Drug Price Negotiation Program, Including First-Ever Part B Drugs," CMS press release, January 27, 2026. https://www.cms.gov/newsroom/press-rele ases/cms-announces-selection-drugs-third-cycle-medicare-drug-price-negotiation-program-including-first
- 2. "Medicare Selects 15 Drugs for Third Round of Negotiation," Medicare Rights Center, February 2026. https://fresh.medicarerights.org/?p=37237
- 3. "IRA Medicare Drug Price Negotiation Program Updates," Mintz, 2025. https://www.mintz.com/media/33196
- 4. "Third Cycle of Medicare Drug Price Negotiation" fact sheet, CMS, March 2026. https://www.cms.gov/files/document/fact-sheet-medicare-drug-price-negotiation-third-cycle.pdf
- 5. "CMS moves forward with 3rd round of Medicare drug negotiations," Becker's Hospital Review, March 2026. https://www.beckershospitalreview.com/pharmacy/15-drugs-selected-for-medicare-negotiation-program/
- 6. "CMS Announces Third Cycle of Medicare Drug Price Negotiations Under the Inflation Reduction Act," American Society of Consultant Pharmacists, January 29, 2026. https://www.ascp.com/news/719154/CMS- Announces-Third-Cycle-of-Medicare-Drug-Price-Negotiations-Under-the-Inflation-Reduction-Act-.htm
- 7. "Botox, Trulicity, Xolair among drugs selected for next round of Medicare price negotiations," Darwin Research Group, 2026. https://www.darwinresearch.com/news-and-insights/darwins-our-take-botox-trulicit y-xolair-among-drugs-selected-for-next-round-of-medicare-price-negotiations
- 8. "Medicare drug price negotiation: New dynamics as the tide turns to Medicare Part B," Milliman, 2026. https://www.milliman.com/es-ES/insight/medicare-drug-price-negotiation-part-b-dynamics Information in this article is current as of October 9, 2026. Bracketed numbers refer to the sources listed above.