CMS Proposes Permanent Rules for Medicare Drug Price Negotiation

The Medicare Drug Price Negotiation Program, which has already secured lower prices on 25 high-expenditure drugs, is moving from temporary guidance to permanent regulation. A proposed rule from CMS would codify the program's framework for 2029 and beyond, establishing small biotech protections and refining aggregation rules for new drug formulations to protect program integrity.¹

The proposed rule issued by CMS would govern negotiations for up to 20 high-expenditure drugs per year beginning with the initial price applicability year (IPAY) 2029, while also adding new program integrity protections and provisions for small biotech companies.

The move marks a significant structural evolution for a program that has operated under temporary program instruction authority since its launch under the Inflation Reduction Act (IRA) of 2022.² That authority, which directed CMS to implement the negotiation program through guidance for IPAYs 2026 through 2028, is now expiring, which makes regulatory codification both legally required and programmatically necessary.

“We are moving from annual updates to a permanent, predictable framework,” CMS Administrator Mehmet Oz, MD, said in a statement.¹ “This approach puts patients first, strengthens Medicare, and protects the innovation pipeline that delivers future cures.”

What the Permanent Framework Would Change

Under the proposed rule (CMS-4215-P), CMS would formally codify the policies governing every phase of the negotiation cycle: drug selection and ranking, manufacturer agreement requirements, the offer-and-counteroffer process, renegotiation criteria, and the publication of maximum fair prices (MFPs). The agency described the shift as an opportunity to increase transparency and build on lessons learned across the first 3 negotiation cycles.

CMS has negotiated prices for 25 high-expenditure drugs across the program's first 2 years, and MFPs for the initial 10 selected drugs took effect January 1, 2026, reducing out-of-pocket costs for Medicare beneficiaries at the pharmacy counter.¹ Those first 10 drugs spanned diabetes, heart failure, and rheumatoid arthritis and cost Medicare enrollees a combined $3.4 billion in out-of-pocket costs in 2022, and the negotiated prices were expected to generate roughly $1.5 billion in savings, according to information at the time.^3,4

The proposed rule would also codify 2 key Medicare Part D benefit policies. First, it would require that Part D plans include any selected drug for which an MFP is in effect on their formularies. Second, it would establish that the negotiated prices paid to dispensing entities by Part D plans cannot exceed the MFP plus any applicable dispensing fees. Both policies align with statutory requirements under the IRA and had previously been addressed through program guidance.²

Small Biotech Protections and Program Integrity

Another provision outlined in the proposed rule is the implementation of a temporary floor for small biotech drugs, which applies for IPAYs 2029 and 2030 as required by statute. Under this mandatory policy, CMS is prohibited from offering or agreeing to a counteroffer for an MFP below the statutory floor for qualifying small biotech drugs during those years. The provision is intended to support continued pharmaceutical innovation among smaller manufacturers while keeping the broader negotiation program on track.

The industry has previously voiced concerns about the IRA's potential to shift economic incentives for drug manufacturers, particularly around small-molecule drug development timelines and the downstream effects on clinical research.⁵ The small biotech floor is designed to address at least some of those concerns for the program's near-term cycles.

What Comes Next for Stakeholders

The proposed rule opens a 60-day public comment period, with comments due by August 17, 2026.² CMS is encouraging input from patients, manufacturers, plans, pharmacies, and other interested parties as it develops the final rule. The agency also indicated it intends to release draft guidance in summer 2026 to address manufacturer effectuation of the MFP for 2028, with codification of those effectuation policies planned through separate rulemaking in 2027.

Manufacturers with prior experience in the process have consistently emphasized the value of clear procedural rules and advance notice.⁶ Codifying those rules into regulation, rather than relying on annually updated guidance, may reduce uncertainty for all parties as the program scales toward its full 20-drug-per-cycle capacity.

“The program is already delivering real savings,” Chris Klomp, director of Medicare and chief counselor of HHS, said in a statement. “This rule builds on that foundation by establishing clear, consistent rules of the road—giving patients, plans, pharmacies, and drug manufacturers the certainty they need as we continue to drive down costs.”

References

1. CMS proposed rule locks in lower prices and fosters innovation for the Medicare Drug Price Negotiation Program. News release. CMS. June 12, 2026. Accessed June 15, 2026. https://www.cms.gov/newsroom/press-releases/cms-proposed-rule-locks-lower-prices-fosters-innovation-medicare-drug-price-negotiation-program
2. Medicare Drug Price Negotiation Program proposed rule (CMS-4215-P) fact sheet. CMS. June 2026. Accessed June 15, 2026. https://www.cms.gov/files/document/mdpnp-nprm-fact-sheet.pdf
3. Mattina C. CMS releases list of 10 drugs subject to price negotiation under IRA. AJMC^®. August 29, 2023. Accessed June 15, 2026. https://www.ajmc.com/view/cms-releases-list-of-10-drugs-subject-to-price-negotiation-under-ira
4. New lower drug prices under the Medicare Drug Price Negotiation Program. CMS. Accessed June 15, 2026. https://www.cms.gov/files/document/infographic-negotiated-prices-maximum-fair-prices.pdf
5. McNulty R. How the IRA may shift economic incentives for drug manufacturers. AJMC. May 8, 2024. Accessed June 15, 2026. https://www.ajmc.com/view/how-the-ira-may-shift-economic-incentives-for-drug-manufacturers-dr-julie-patterson
6. Steinzor P. What 3 rounds of IRA negotiations have taught manufacturers about readiness. AJMC. April 29, 2026. June 15, 2026. https://www.ajmc.com/view/what-3-rounds-of-ira-negotiations-have-taught-manufacturers-about-readiness