TL/DR –
The Inflation Reduction Act has enabled the US Medicare program to negotiate the prices of certain prescribed medications for beneficiaries, potentially leading to cost reductions of up to 50%. The first negotiations, involving 10 medications covered by Medicare Part D, started in 2023, with further rounds of negotiations planned for 2027 and 2028 involving 15 medications each time. The Centers for Medicare & Medicaid Services estimates that these negotiations will save Medicare enrollees up to $1.5 billion on medication costs.
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Medicare Beneficiary Prescription Drug Coverage Changes
The Medicare prescription drug coverage changes brought about by the Inflation Reduction Act are expected to help beneficiaries keep more of their hard-earned money by reducing the cost of certain medications. The Medicare program is now able to negotiate prescription drug prices for the first time ever, which could result in savings of up to 50% for Medicare beneficiaries.
This important development may not be widely known among those with Medicare coverage, so here is an overview of the changes and what they could mean for you.
Background: The Inflation Reduction Act and Medicare
It was the Inflation Reduction Act of 2022 that first gave the government the power to negotiate medication prices with pharmaceutical manufacturers on behalf of the Medicare program. Prior to this, Medicare had to pay commercial prices and was unable to negotiate for better rates. The Secretary of the U.S. Department of Health and Human Services is now tasked with conducting these negotiations annually for selected medications covered by Medicare.
As part of the Medicare Drug Price Negotiation Program, the first round of negotiations involved 10 medications covered by Medicare Part D and started in 2023.
Medications with Newly Negotiated Prices
The medications initially included in the negotiations are Eliquis, Enbrel, Entresto, Farxiga, Fiasp, Imbruvica, Januvia, Jardiance, Stelara, and Xarelto. All covered by Medicare Part D and approved by the FDA for at least seven years, these drugs accounted for approximately 20% of Medicare’s pharmacy medication costs. The new prices for these medications took effect on January 1, 2026.
Further Negotiations Scheduled
Further rounds of negotiations are planned. The next group of 15 medications, including Linzess, Austedo, Ibrance, Otezla, and Tradjenta, will have their prices negotiated next and the new prices will become effective on January 1, 2027. Another 15 medications, including Botox, Cosentyx, Cimzia, Trulicity, and Xolair, will be negotiated in a third round with the new prices taking effect on January 1, 2028.
Projected Savings for Medicare Enrollees
According to estimates by the Centers for Medicare & Medicaid Services (CMS), the first round of negotiations could save Medicare enrollees $1.5 billion and the second round could save an additional $685 million. The exact amount each enrollee will save will depend on several factors, including their specific medications, whether they are covered by Medicare Part D, and their plan’s deductible.
For example, the cost of Januvia, a Type 2 diabetes medication, could be reduced by as much as 70%, while Eliquis, used to prevent blood clots and strokes, could see a price drop of 50% for Medicare enrollees.
Annual Out-of-Pocket Cap
The introduction of an annual out-of-pocket cap as part of the Inflation Reduction Act could also lead to significant savings for Medicare enrollees. Previously in 2024, enrollees with Medicare Part D had to spend at least $8,000 on covered medications before reaching the catastrophic coverage phase, where they would pay nothing more for the rest of the year. The cap has been reduced to $2,000 as of 2025, and slightly increased to $2,100 in 2026.
Potential Challenges and Criticisms
Despite the potential benefits, there are certain challenges and criticisms levelled at the Medicare medication negotiation. Critics argue that the focus has been primarily on common medications for chronic conditions, rather than on particularly expensive drugs. Additionally, some pharmaceutical companies are engaged in legal battles with the government over the negotiations, such as AbbVie Pharmaceuticals, which filed a lawsuit in February 2026 when its drug, Botox, was included in the list of 2028 negotiations.
Conclusion
The changes brought about by the Inflation Reduction Act could represent significant savings for Medicare beneficiaries, although it may still be valuable to review your Medicare coverage and discuss your situation with your doctor to ensure you are getting the most from your plan. If any of your medications are on the negotiated list, you may see some financial relief at the pharmacy, which could help to lower your financial stress.
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