The Inflation Reduction Act (IRA) introduced the Medicare Drug Price Negotiation Program for selected high-cost, single-source drugs, and replaced the Part D Coverage Gap Discount Program with the Manufacturer Discount Program (MDP). In 2024, negotiated prices, Maximum Fair Prices, were announced for the first 10 drugs, effective in 2026. We evaluated the impact of negotiation on 2026 Medicare spending.
We modeled 3 scenarios: (1) “Historical Benchmark,” no negotiation and no changes to the Part D Coverage Gap Discount Program; (2) “Negotiation under the IRA,” negotiation implemented, and the selected drugs exempt from the MDP; and (3) “No Negotiation under the IRA,” no negotiation and the MDP applied to selected drugs. Spending in scenarios (1) and (3) was estimated as net prices multiplied by projected volumes. In scenario (2), spending was estimated using Maximum Fair Prices and projected volumes. Volumes and net prices were adjusted for expected generic and biosimilar entry through 2026.
Projected 2026 Medicare Part D net spending for the 10 drugs was $26.1 billion in scenario (1) and $23.8 billion in scenario (2), a $2.3 billion (8.8%) reduction with negotiation. Scenario (3) projected $26.2 billion in spending, $2.4 billion (9.0%) higher than scenario (2).