CMS seeks to establish permanent rules for Medicare drug price negotiations

The US Centers for Medicare & Medicaid Services (CMS) has proposed regulations that would formally establish the Medicare Drug Price Negotiation Program as a permanent framework beginning in 2029. The proposal codifies existing policies while introducing new provisions intended to increase transparency, strengthen program integrity, and provide greater predictability for future negotiation cycles.

The Baseline

• CMS proposes moving the Medicare Drug Price Negotiation Program from annual guidance to a permanent regulatory framework.
• Up to 20 additional Medicare Part B and Part D drugs could be selected for negotiation in each future cycle beginning with IPAY 2029.
• New provisions address small biotech drugs, renegotiation criteria, generic and biosimilar competition, and selected drug pricing requirements.

CMS has proposed a rule that would formally codify the Medicare Drug Price Negotiation Program, establishing a permanent regulatory framework for future negotiation cycles beginning with Initial Price Applicability Year (IPAY) 2029 and beyond.

The proposal marks the transition of the Inflation Reduction Act's (IRA) negotiation program from implementation through guidance documents to a permanent regulatory structure. To date, the program has been implemented through guidance documents, with negotiated Maximum Fair Prices (MFPs) already finalized for IPAYs 2026 and 2027 and negotiations currently underway for IPAY 2028.

According to CMS, the proposed rule would create a more predictable and transparent structure for manufacturers, Medicare plans, pharmacies, and beneficiaries while maintaining the program's objective of reducing prescription drug costs. CMS Administrator Mehmet Oz, described the proposal as a shift from annual updates to a "permanent, predictable framework," while Chris Klomp, Director of Medicare and Chief Counselor at the US Department of Health and Human Services, said the rule would establish "clear, consistent rules of the road," giving "patients, plans, pharmacies, and drug manufacturers the certainty they need as we continue to drive down costs."

Beginning with IPAY 2029, CMS may select up to 20 additional negotiation-eligible drugs covered under Medicare Part B and Part D for the fourth cycle of negotiations and all subsequent cycles of the program. The agency also proposes to codify policies governing drug selection, negotiation, renegotiation, manufacturer participation, and implementation of negotiated MFPs, the prices negotiated between CMS and manufacturers for selected drugs.

A notable feature of the proposal is its emphasis on transparency and evidence evaluation. CMS proposes to codify how evidence submitted by manufacturers and other interested parties will be incorporated into negotiations, including information on therapeutic alternatives and comparative effectiveness studies. Such evidence forms part of the basis on which CMS develops initial offers and evaluates manufacturer counter offers.

Several provisions address operational and methodological aspects of the program. CMS outlined a modification to its fixed-combination drug policy intended to address a potential program integrity concern whereby certain new formulations could affect the identification of qualifying single-source drugs. The agency also described how it would determine whether approved generic or biosimilar competitors are engaged in bona fide marketing, an important factor in determining whether a branded product remains eligible for negotiation.

The rule would also implement the Temporary Floor for Small Biotech Drugs, a statutory provision applicable in IPAYs 2029 and 2030 that limits how low negotiated prices can be set for certain qualifying products. Additional proposals apply to Medicare Part D, including requirements that selected drugs subject to an MFP remain available on formularies and that negotiated prices paid to dispensing entities do not exceed the MFP plus applicable dispensing fees.

The proposal also provides greater detail on the renegotiation process for drugs already subject to an MFP. As successive negotiation cycles increasingly include therapies within classes that have already undergone negotiation, earlier pricing decisions, comparative evidence, and assessments of therapeutic alternatives may play a growing role in future negotiations. For manufacturers, this could further elevate the importance of evidence-generation strategies that demonstrate clinical value and differentiation across competing therapies.

CMS has opened a 60-day public comment period, with comments due by August 17, 2026.