Medicare Drug Prices Slashed: CMS Announces 44% Savings in Second Round of IRA Negotiations

The Centers for Medicare & Medicaid Services has announced massive price cuts for 15 high-cost prescription drugs. This is the second round of negotiations under the Inflation Reduction Act. The changes will take effect in January 2027.

According to Reuters, the move will save taxpayers an estimated $12 billion. It marks a significant step in the government’s effort to control soaring pharmaceutical costs for seniors.

Which Medications Are Getting Cheaper?

Several blockbuster drugs are on the list. Novo Nordisk’s Ozempic and Wegovy will see a 71% price reduction. Their monthly cost will drop from $959 to $274 for Medicare patients.

Pfizer’s cancer drug Ibrance will be cut in half. Its price falls from $15,741 to $7,871 per month. Other medications treat conditions like asthma and various cancers.

Collectively, these drugs accounted for $42.5 billion in Medicare Part D spending in 2024. That represents about 15% of the program’s total outpatient drug costs.

How the New Drug Pricing Process Works

The IRA grants Medicare new power to negotiate directly with drugmakers. This authority aims to lower costs for brand-name drugs with no competition. The process considers research costs and alternative treatments.

CMS does not use international prices in its calculations. This differs from other government pricing models. The first round of negotiated prices takes effect in 2026.

CMS Administrator Dr. Mehmet Oz praised the improved outcomes. He said the new process delivers better value for taxpayers and seniors. The 2024 negotiations were projected to save $6 billion.

Medicaid Reforms and Future Negotiations

CMS is also targeting Medicaid drug spending. The agency will launch the GENEROUS Model in 2026. This pilot program will help states buy drugs at more competitive prices.

Medicaid prescription spending topped $100 billion last year. That was a $10 billion increase from 2022. The new model could significantly reduce state healthcare costs.

A third round of Medicare drug talks is scheduled for February. Another 15 medications will be selected for negotiation. These will include hospital-administered therapies.

The latest CMS drug price cuts represent a historic shift in healthcare policy. These Medicare drug price reductions will provide substantial financial relief for millions of Americans. The ongoing negotiations signal a permanent change in how prescription drugs are priced in the United States.

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When do the new drug prices take effect?

The negotiated prices for this second group of drugs become active in January 2027. The first round of IRA-negotiated prices begins in 2026.

Which drugs saw the biggest price cuts?

Novo Nordisk’s Ozempic and Wegovy had the largest reduction at 71%. Several cancer drugs saw cuts of 50% or more.

How much will taxpayers save?

CMS estimates a net savings of 44%, totaling $12 billion. This compares to what Medicare spent on these drugs in 2024.

Will this affect drug innovation?

Pharmaceutical companies argue it might reduce research funding. Supporters say it simply brings US prices closer to other developed nations.

What is the GENEROUS Model?

It’s a new Medicaid initiative launching in 2026. It aims to help states purchase drugs at internationally competitive prices.