AARP analysis examines potential $200 billion Medicare savings from international drug pricing

An AARP Public Policy Institute report examines how international drug price benchmarks and changes to Medicare negotiation rules could affect prescription drug spending and beneficiary costs.

The Baseline

• A new AARP analysis estimates that applying Most-Favored-Nation pricing to 10 high-spend medicines could reduce projected Medicare spending by nearly $200 billion between 2029 and 2033.
• Applying Medicare-negotiated prices to the same medicines could reduce projected spending by approximately $118 billion over the period.
• The report also examines potential savings from earlier negotiation eligibility and changes to exemptions under the existing program.

The analysis examines the potential impact of incorporating prices paid in other high-income countries into Medicare drug price negotiation. Established under legislation passed in 2022, the program allows Medicare to negotiate prices for selected high-spend prescription drugs on behalf of beneficiaries.

Commissioned by the AARP Public Policy Institute and conducted by Verdant Research, the analysis focused on the 10 brand-name drugs with the highest combined Medicare Part B and Part D spending in 2025 that have not yet been selected for negotiation. Together, these medicines accounted for nearly $50 billion in Medicare spending that year and were used by more than three million beneficiaries.

Despite each medicine accounting for more than $2 billion in Medicare spending in 2025, AARP reported that only one will be eligible for selection for negotiation in 2027. The report attributed this to exemptions in the legislation establishing the program, including a provision introduced in 2025 that expanded the existing exemption for orphan drugs used to treat rare diseases.

“One of the most striking findings is that only one of the 10 high-cost drugs we analyzed will be eligible for Medicare drug price negotiation next year, even though they all account for billions of dollars in Medicare spending,”

said Leigh Purvis, AARP Prescription Drug Principal, and report author.

Under the baseline projection, Medicare spending on the 10 medicines would reach $273 billion between 2029 and 2033. According to the analysis, applying Most-Favored-Nation (MFN) prices would reduce spending to $76 billion, a reduction of nearly $200 billion, with estimated savings ranging from $2 billion to $55 billion per medicine.

The analysis also modeled the impact of applying Medicare-negotiated prices to all 10 medicines over the same period. Spending would fall to $155 billion, approximately $118 billion below the baseline projection, with estimated reductions ranging from $1 billion to $36 billion per medicine.

“Our analysis shows there is significant opportunity to build on the program's early success by incorporating the prices paid in other high-income countries,” Purvis said.

The report also highlighted potential changes to Medicare drug price negotiation beyond international pricing. Previous research cited by AARP estimated that making negotiated prices available three years after US FDA approval, rather than after nine years for small-molecule drugs and 13 years for biologics, could generate an additional $21 billion in Medicare savings between 2026 and 2030. It also noted that the expanded orphan drug exemption is projected to increase Medicare spending by nearly $9 billion over 10 years.

AARP argued that applying lower prices could also reduce beneficiary premiums and out-of-pocket costs. Nancy LeaMond, AARP Executive Vice President and Chief Advocacy & Engagement Officer, said the existing negotiation program is "already proving that lower prices are possible" and called on policymakers to build on the program.