TL/DR –
The Trump administration has proposed a revision to a key element of Medicare price negotiations for pharmaceuticals. The proposal by the Centers for Medicare and Medicaid Services seeks to close a loophole that allows drug manufacturers to avoid price negotiations when they add active ingredients to drugs, and intends to make these regulations permanent from 2029. The proposal would also group original and new drug formulations together for price negotiations, and aims to strengthen the Inflation Reduction Act by preventing drug manufacturers from avoiding price negotiations for their products.
Trump Administration Moves to Plug Medicare Price Negotiation Loopholes
The Centers for Medicare and Medicaid Services (CMS), under the Trump administration, has recently proposed a revision in the criteria that determine the eligibility of drugs for Medicare price negotiations. This is aimed at closing a loophole that has previously allowed pharmaceutical manufacturers to evade negotiations by adding active ingredients to existing drugs.
CMS has also indicated its intention to codify these regulations permanently, starting from the initial price applicability year 2029. This move is designed to solidify the entire negotiation process including drug selection, offer and counteroffer procedures, and the publication of maximum fair prices.
Revised Policies for Drug Formulations
As per the proposed revisions, if an added active ingredient changes the way an existing drug is administered, CMS will consider the original formulation and the new one as a group. This new rule will be applicable to biologics that have been reformulated from intravenous to subcutaneous injectable products. One example of such a transformation is through the addition of the ingredient hyaluronidase, which enables subcutaneous injections.
According to the Trump administration, these changes in the CMS proposed rule change would strengthen the Inflation Reduction Act by closing a significant loophole, thereby preventing drug manufacturers from escaping having their products selected for Medicare price negotiation.
Significance of Price Negotiations
Price negotiations have been a core provision in the Inflation Reduction Act (IRA) of 2022. For the first time, the federal government has been negotiating prices for select sets of prescription drugs for the benefit of Medicare program enrollees, including seniors over 65 and certain disabled individuals. The first round of ten pharmaceuticals that were selected for negotiation in 2023 had their maximum fair prices implemented in January of this year. To qualify for price negotiation, small molecule drugs must be at least seven years post-launch without facing genuine competition from generic versions. For large molecule biologics, the criteria are 11 years post-launch without facing competition from biosimilars.
Under the new rule, biologics, which become eligible for negotiation 11 years post FDA approval, would no longer be able to reset their clocks through reformulation. As a result, this means that medications such as the cancer immunotherapies Keytruda and Opdivo would face Medicare price negotiations for both their intravenous and subcutaneous formats at the same time. This comes under the proposed rule.
The Public Comment Period
Following the announcement, a 60-day public comment period was initiated, due to close on August 17, 2026. The CMS is expected to finalize the new rule during the fall of this year.
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