Medicare Price Negotiation of Part B Drugs: Implications for Provider Reimbursement and Commercial Spillover

ISSUE: How will the negotiation of high-cost biologics and other physician-administered drugs (Part B) prices by Medicare starting in 2026 impact practice and clinic economics and private sector prices?

OVERVIEW: Starting in early 2026, physician-administered (Part B) drugs will be selected for Medicare price negotiation, with implementation in 2028. This will generate major changes in provider reimbursement of drugs, both in Medicare and the commercial sector. Before negotiation, Medicare reimbursed providers for physician-administered drugs 106% of Average Sales Price (ASP). For negotiated drugs, ASP will be replaced by the negotiated price. Because the negotiated price is expected to be lower than ASP, provider mark-ups will decrease. Provider mark ups are also likely to decrease in the commercial sector. This is because: 1) ASP is widely used for private sector provider reimbursement; and 2) it is expected that Medicare sales (at the negotiated price) will be factored in the estimation of ASP for negotiated drugs. The result will be spillover into the commercial health insurance markets.