Medicare Part D drug price negotiations are set to include GLP-1s, but questions abound

GLP-1 medications made the second round of drugs that are subject to price negotiations under the Inflation Reduction Act (IRA), according to a CMS announcement during the final days of the Biden administration.

However, the future of Medicare’s price negotiation authority is uncertain following the transition of power in Washington, D.C. Congressional Republicans have criticized the IRA, which passed with exclusively Democratic support in 2022. President Donald Trump occasionally advocated for drug-price negotiations during his first term but has not voiced support for the IRA.

For now, 15 Part D drugs are scheduled for negotiations with manufacturers this year, with the negotiated prices taking effect in 2027.

Jan. 30 update: A statement from CMS says a request for information from stakeholders will be forthcoming on ways to potentially change the negotiation process this year. It says lowering the cost of prescription drugs is a top priority for Trump.

Ozempic, Wegovy and Rybelsus, all of which are brand names for the GLP-1 drug semaglutide, comprise one entry on the list. The three products are used by 2.3 million Medicare beneficiaries at an annual program cost of more than $14.4 billion, nearly three times higher than any other drug that’s up for negotiation, according to CMS.

Another recent policy move with respect to GLP-1s was an announced plan to cover the drugs in Medicare and Medicaid when prescribed for obesity. The Trump administration has leeway to change or retract the proposal before its 2026 effective date.

Whereas the IRA negotiations are intended to bring down costs for consumers and Medicare, the coverage expansion would be projected to raise federal spending by nearly $36 billion over a decade.

Prior developments

Prices for an initial list of 10 drugs were negotiated in 2024 and are set to commence in 2026.

Negotiations resulted in price reductions of between 38% and 79% for those drugs. The high end of that range applies to Januvia, a Type 2 diabetes drug manufactured by Merck. The manufacturer is one of several that have filed lawsuits against the IRA.

Although Merck’s case is pending in Washington, D.C., federal court, other manufacturers have been unsuccessful in challenging the 2022 law. Among their arguments, manufacturers have said the negotiations are not as voluntary as CMS describes them because declining to participate would require either paying an excise tax of up to 19 times the price of the drug or departing the Medicare program.

CMS said the 25 drugs up for negotiation in 2024 and 2025 accounted for more than a third of Medicare Part D gross covered prescription-drug spending during a year-long period ending in October.

For the 10 drugs that were negotiated last year, CMS said the lower prices would have represented savings of $6 billion (22%) in net covered prescription-drug costs, had they been in place for 2023.  A study (login required) conducted by Harvard Medical School researchers and published in the New England Journal of Medicine in October posited that the actual Medicare savings would be less substantial because the prices of older drugs on the list likely would have come down anyway based on competition from generic or biosimilar versions.

The program savings are intended, in part, to offset the additional costs incurred by Medicare through an IRA provision that established a significantly tighter cap on annual out-of-pocket costs for Part D beneficiaries ($2,000 for 2025).

Process for selection

Drugs are subject to negotiation if they have been on the market for at least seven years since FDA approval, or 11 years for biologics, and do not have generic or biosimilar competition.

CMS then selects the drugs with the highest total gross Part D costs during a 12-month span. Whereas the negotiated prices for 2026 were announced in August, the upcoming negotiations are authorized to last until November. In future years, drugs selected for negotiation can include Part B medications such as infusion therapies.

Providers participating in the 340B Drug Pricing Program will pay the lower of the negotiated price or the 340B ceiling price. A lack of specific guidance from CMS on avoiding duplicate discounts arising from the intersection of the IRA and 340B was cited by manufacturers as part of their justification for seeking to establish a rebate model for furnishing 340B discounts.

The Health Resources and Services Administration (HRSA) thwarted those plans on the basis that the 340B statute requires upfront discounts. At least four manufacturers have responded by filing lawsuits (Sanofi and Bristol Myers Squibb filed after the linked article was published). It’s unclear what the Trump administration’s take on the issue will be and to what degree HHS and HRSA will continue to back providers in the dispute.

Trump’s early steps

Trump quickly began the process of whittling away at the previous administration’s actions on drug costs. On Inauguration Day, he rescinded an executive order by former President Joe Biden that included a directive for the Center for Medicare & Medicaid Innovation (CMMI) to study and implement models to lower drug costs. In the wide-ranging order, Trump cited various Biden policies that merit reconsideration.

Trump’s order does not terminate specific actions on drug costs but sets the stage for several CMMI models to possibly be modified or withdrawn. Proposed pilots that were spawned by Biden’s order and thus are on shaky ground include the Two-Dollar Drug List Model for low-cost generics and the Cell and Gene Therapy (CGT) Access Model.

In the $2 Drug List Model, Part D plans would apply a maximum $2 copayment to all cost-sharing phases of the Part D drug benefit for a designated list of generics targeting common chronic conditions. The drugs would not be subject to network or utilization management restrictions, aside from protocols to ensure drug safety.

The CGT Access Model, a state-focused Medicaid model, would promote outcomes-based agreements for cell and gene therapies, with Medicaid agencies voluntarily designating CMS to negotiate such agreements on their behalf.

During Trump’s first term, CMMI considered an International Pricing Index Model for Part B drugs. The model did not get off the ground amid industry opposition to what critics viewed as a price-setting mechanism that was unlikely to help out-of-pocket costs.