A quiet hinge

For nearly two decades after Medicare Part D was created, the federal government was statutorily prohibited from negotiating prescription drug prices. The 2022 Inflation Reduction Act lifted that prohibition, narrowly. The first round of negotiations, completed in 2024, covered ten high-cost drugs. New rounds expand the list each year.

This is the largest structural change to the US prescription drug market in a generation. It is also widely misunderstood.

What the law authorizes

• Negotiation, not price-setting. The Secretary of HHS negotiates “maximum fair prices” for selected drugs with the manufacturer.
• A narrow eligibility test. Drugs are eligible only after a long market exclusivity period (9 years for small molecules, 13 for biologics).
• Medicare only. Prices apply only to Medicare beneficiaries. Private insurers benefit indirectly through pricing pressure but are not bound.

What the first round did

The 2024 round produced negotiated prices on ten drugs, including blood thinners, diabetes medications, and several cancer treatments. The negotiated prices ranged from roughly 38% to 79% below previous list prices, with savings flowing both to Medicare and to beneficiaries through lower cost-sharing.

What the next rounds will surface

Three things to watch:

1. Litigation. Manufacturers have challenged the program on constitutional grounds. Most lower courts have upheld it; the issue may reach the Supreme Court.
2. Coverage expansion. Pressure to extend negotiated prices to private plans, and to shorten the eligibility window.
3. Pipeline effects. Manufacturers argue negotiation will reduce R&D investment. Early evidence is mixed and worth tracking carefully.

What to ask your representatives

• Will they support extending negotiation to a larger set of drugs, and to private payers?
• Will they support shortening the exclusivity window before negotiation eligibility?
• How are they responding to industry-funded efforts to repeal or weaken the program?