Monitoring Medicare: Drug Plans & Premiums under Inflation Reduction Act

Medicare Part D Suffers from Increased Premiums and Decreased Competition

Due to the effects of the Inflation Reduction Act (IRA), the Medicare Part D market has seen a notable decline in plan availability and a surge in premiums by 2026. Standalone drug plans (PDPs) are exiting the marketplace, leading to higher costs and fewer options for beneficiaries if they choose to remain in a PDP. This has also led to the increase in Medicare Advantage drug plan (MA-PD) enrollments.[1] However, those living in rural areas, who largely depend on PDPs are at a disadvantage due to limited MA-PD options.[1]

Impact of the Inflation Reduction Act (IRA) on Part D Market

The IRA has exacerbated the issues of the Part D market by increasing the expenses of Medicare Part D drug plans, especially for beneficiaries with serious medical conditions. For 2026, the government has set prices for ten frequently used medications via the Medicare Drug Price Negotiation Program (MDNP), which is expected to reduce the rebates given by drug manufacturers to Part D plans. As a consequence, PDP sponsors are forced to increase premiums, restrict their formularies, or completely exit the market.[2][3]

Presently, the number of PDPs has declined drastically from 709 to 360 in 2026 due to the implementation of the IRA.[6][7] The initial premium submissions of 2025 showed a 179% increase in the national average bid amount. To address these issues, a substantial subsidy pilot program from the federal government has been introduced to keep drug plan premiums manageable. However, this program will expire after three years.[8][9]

Plan Access and Premiums in 2026 vs. Previous Years

In an analysis comparing access to Medicare Drug Plans (PDPs and MA-PDs) and premiums in 2026 to 2025, 2024, and 2021, it was found that there are significant differences in premiums and their growth between different types of plans.[10] Rural areas have seen a larger decline in Part D plans, leaving beneficiaries with fewer options and higher premiums. In a prior assessment, it was also observed that plans were restricting their formularies and increasing cost-sharing in 2025.[10]

Plan Type and Premium Growth

The analysis revealed that the average premium in rural counties is $10 higher than in urban counties in 2026 ($43 vs. $33). Furthermore, premiums for PDPs are $35 to $47 higher compared to MA-PDs across county types. Rural counties experienced the highest premium growth, witnessing an 11-percent increase relative to 2021, whereas urban areas saw a 2-percent decline. The 78-percent decline in premiums since 2021 for PDP-LIS plans, which are available at no cost to beneficiaries receiving the federal low-income subsidy, is likely due to the federal subsidy.[11][12]

While PDPs are offered statewide, MA-PDs are not as accessible outside of urban counties. It is also notable that PDP-LIS plans have the least availability of any plan type, with only two to three plans per county.

In rural areas, the exit of PDPs was not balanced by an increase in MA-PD plans, resulting in fewer Part D plans overall. The average number of PDPs declined by 19 between 2026 and 2021, a 64-percent decline. However, MA-PD plans grew by an average of 13.1 per county (98-percent growth) in urban counties and by 5.4 per county (80-percent growth) in rural counties.[15]

Further Investigation

Given the impact of the IRA on the Medicare Part D market, it is essential to continue monitoring changes in plan offerings, especially in rural counties where access to care is limited. DLA Piper is planning to examine the 2026 CMS formulary data in their next assessment, which will provide insights on coverage and cost sharing for commonly used medicines.[15]