CMS said June 12 it seeks to shift the Medicare Drug Price Negotiation Program from guidance-based administration to codified regulation. Here is what hospital and health system leaders need to know.
1. The rule moves the program from guidance to regulation
Since the Inflation Reduction Act authorized Medicare drug price negotiations in 2022, CMS has run the program through agency guidance, a legally fragile structure that has faced repeated court challenges. The Supreme Court’s May 2026 ruling let the program stand, and CMS is moving to cement the rule by codifying the framework in formal rulemaking.
The proposed rule covers negotiations and renegotiations for high-cost, single-source drugs beginning with initial price applicability year 2029.
2. Up to 20 drugs will be selected per cycle going forward
The proposed rule governs a fourth cycle of negotiations and all subsequent cycles. CMS will select up to 20 Part D and/or Part B drugs per cycle, which is consistent with the statutory ramp established under the IRA. The program has moved through three previous negotiation rounds, with 25 high-expenditure drugs negotiated in the program’s first two years.
3. Most-favored nation prices for the first 10 drugs took effect Jan. 1
CMS said the program is already delivering savings. Medicare enacted negotiated prices for 10 drugs Jan. 1, the first time CMS exercised direct drug-pricing authority since the 19-year ban was lifted. CMS estimated those prices would have saved Medicare beneficiaries $1.5 billion and the federal government $6 billion if applied in 2023.
4. A small biotech floor limits how much CMS can negotiate certain drugs
The June 12 rule proposes implementing a temporary price floor for small-biotech drugs, as required by statute, which prevents CMS from offering or agreeing to a maximum fair price below that floor for eligible small-biotech drugs during initial price applicability years 2029 and 2030. The provision is designed to limit negotiating pressure on smaller manufacturers.
The One Big Beautiful Bill Act, signed in July 2025, had already expanded orphan drug exemptions, moves the Congressional Budget Office estimated would cost nearly $5 billion in projected federal savings.
5. Part D formulary and pricing rules get codified alongside the negotiation framework
The proposed rule also locks in two Part D benefit policies: Part D plans must include selected drugs with a maximum fair price in effect on their formularies, and the negotiated prices paid to dispensing entities cannot exceed the maximum fair price plus applicable dispensing fees.
For hospital pharmacy leaders, the formulary inclusion requirement has direct operational implications: Pharmacy executives identified Inflation Reduction Act implementation as among their biggest headwinds entering 2026, and this rule adds another layer of compliance planning.
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