Regulation, Not Price Controls, to Lower Medicare Drug Costs

Last updated Aug 18, 2026

TL/DR –

The National Taxpayers Union (NTU) has expressed concerns about the Centers for Medicare & Medicaid Services’s (CMS) proposed rule for Initial Price Applicability Year (IPAY) 2029 under the Medicare Drug Price Negotiation Program. The NTU argues that private-sector negotiations are already driving down drug prices, and that a more coercive government-driven negotiation scheme may not produce better savings. The NTU also warns that the Inflation Reduction Act (IRA), which introduced price negotiations backed by a 95% excise tax on manufacturers that refused to submit to federal price dictates, has led to a decrease in drug developments and research programs, potentially reducing the availability and innovation of prescription drugs.

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Concerns Raised by National Taxpayers Union Over CMS’s Proposed Drug Price Negotiation Program

The National Taxpayers Union (NTU), America’s oldest taxpayer advocacy group, has raised concerns over the drug price negotiation program proposed by the Centers for Medicare & Medicaid Services (CMS). NTU’s response emphasizes the potential impact on the health care system, particularly regarding innovation in pharmaceutical development.

The Issue of Repealing Non-Interference Policy

Historically, the NTU has voiced apprehensions about repealing the non-interference policy in Medicare Part D and introducing price negotiations for prescription drugs covered under the program. Their position is informed by the belief that private-sector negotiations among manufacturers and pharmacies were already effectively reducing drug prices. Therefore, a government-driven negotiation scheme may not necessarily yield better savings. Citing an instance from 2009, then-CBO Director Elmendorf confirmed that private drug plans were already negotiating drug prices.

The Inflation Reduction Act & Its Consequences

However, the Inflation Reduction Act (IRA) of 2021 introduced a new approach, enforcing price negotiations through a 95% excise tax on manufacturers refusing to comply with the federal government’s price dictates for select drugs in Medicare Part D and Part B. Since the tax’s implementation in 2024, research programs and drug developments have been significantly disrupted, with the Incubate Coalition’s Life Sciences Investment Tracker reporting the discontinuation of 56 research programs and 26 drug developments.

Impact of One Big Beautiful Bill Act

According to the NTU, the situation would have been dire if not for the One Big Beautiful Bill Act signed into law in 2025. This law, which made provisions for full and immediate expensing and extended proper tax treatment of research and development expenses, has supported over half a trillion dollars of pharmaceutical investment in the U.S. Despite this, the IRA’s promises of budgetary savings have not materialized. The Congressional Budget Office (CBO) now estimates the program could exceed the original projections by $170 to $270 billion over the next decade.

The Unintended Consequences of CMS-4215-P

NTU’s critique goes on to illustrate how CMS-4215-P could adversely affect taxpayers, using the proposed interpretation of the drug Opdivo as an example. The NTU contends that by treating distinct drug formulations as the same for the purposes of price setting, CMS undermines the interests of taxpayers, limits the use of medical innovation, and potentially increases the overall cost of health care.

The Case of Opdivo

Opdivo offers versions of the drug that are administered subcutaneously and intravenously, with the former reducing time spent in clinical settings and overall care burdens. However, the CMS proposal would apply the same Maximum Fair Price (MFP) to both versions, despite their unique characteristics and distinct approval processes by the FDA. This sends a signal to manufacturers that investments in patient-beneficial innovations may not be financially rewarded, which could discourage further investment in medical innovation.

The Burden of Hospital Spending

The NTU emphasizes the taxpayers’ interest in therapies that limit time spent in costly clinical settings. With hospital care being the most significant component of national health expenditures, any reduction in hospital time translates to cost savings. A study published in the journal Value In Health estimated that switching 50% of Medicare patients to subcutaneous formulations of Opdivo could save approximately $637,000 per U.S. health plan over three years.

The Call for Reevaluation

In light of these potential negative impacts, the NTU is recommending a reevaluation of all the IRA’s provisions relating to prescription drugs and advises the Trump Administration to steer clear of other price-setting regimes. NTU has also urged CMS to withdraw its current proposal and maintain a pricing framework that recognizes distinct FDA-approved therapies.

Sources

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