Medicare is not yet permitted to negotiate prescription drug prices; however, it will begin negotiating reduced prescription drug prices in 2026.
Prescription medications are covered under Medicare Part D. Part D plans, which are sold by private companies, are governed by Medicare guidelines. However, under current federal law, Medicare cannot negotiate lower prescription drug pricing.
A new law that goes into effect in August 2022 will allow Medicare to begin negotiating prescription drug prices, but not right now.
Here's what you need to know about how Medicare prescription drug pricing discussions currently work and what will change in the coming years.
The legislation that established Medicare Part D also banned Medicare from bargaining for lower prescription medication pricing.
Medicare Part D plans became available in 2006, a few years after the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or MMA, established the program.
The MMA contains a "noninterference" provision that specifies that Medicare cannot do the following:
Bills to provide Medicare the authority to negotiate Part D prescription medication costs have been proposed in every session of Congress since Medicare Part D's inception, but none have been passed until 2022.
In August 2022, President Joe Biden signed the Inflation Reduction Act into law. For the first time, this measure gives Medicare the authority to negotiate certain prescription drug pricing.
Beginning in 2026, Medicare will negotiate rates for a limited number of pharmaceuticals each year: 10 drugs in 2026, 15 total in 2027, 15 overall in 2028, and 20 total each year from 2029 on.
Medicare will bargain for the most expensive brand-name prescription pharmaceuticals on which it has spent the most money. According to data from the Centers for Medicare & Medicaid Services for 2020, the most expensive medications include those used to treat the following conditions:
Other Medicare Part D amendments slated for implementation in the Inflation Reduction Act include the following: