Introduction to Medicare Price Reductions
The Trump administration has successfully negotiated lower prices for 15 widely used drugs covered by Medicare, which will reduce spending on these drugs by 44%, or about $12 billion.
Impact on Seniors
However, it’s less clear whether this initiative will help save money for seniors, as Medicare members are already protected by a cap on drug costs. The Centers for Medicare and Medicaid Services (CMS) said that as of 2027, the new prices will save the 55 million people enrolled in the Part D drug plan a total of about $685 million.
Individual Savings
The out-of-pocket reductions for individuals will likely vary depending on whether they use one or more of the medications covered by the new agreement and whether they have reached their annual spending cap. On average, with 5.3 million people taking advantage of the newly discounted drugs, this equates to a savings of about $129 per Medicare enrollee.
The Inflation Reduction Act
The lower drug prices were regulated by the Inflation Reduction Act, which included a price negotiation measure for some of Medicare’s most expensive drugs. Before the 2022 law, Medicare was prohibited from negotiating with pharmaceutical companies to secure cheaper drug prices for participants in the federal health care program.
New Agreement Details
Under the new agreement, lower prices for the 15 drugs will take effect in 2027 for medications purchased through the Part D prescription plan from Medicare. The discounts will be between 38 and 85 percent compared to the list prices of the drugs. The most well-known drugs covered by the agreement include Novo Nordisk’s Ozempic and Wegovy, popular drugs used to treat diabetes and weight loss, while other drugs on the list are used to treat common diseases such as asthma and prostate cancer.
Benefits for Seniors
According to AARP, prescription drug costs are one of seniors’ biggest concerns. Starting in 2025, the Inflation Reduction Act also imposed a $2,000 cap on out-of-pocket costs for seniors. Since this spending limit is adjusted annually for inflation, it could reach around $2,200 in 2027 based on current trends. Medicare members pay nothing for covered prescriptions above this amount. The negotiated prices for the 15 drugs could help seniors lower their costs until they reach that threshold.
Impact on Medicare
About 5.3 million people with Medicare Part D coverage used the 15 medications to treat conditions such as diabetes and asthma, according to CMS. The drugs account for $40.7 billion in Medicare Part D spending. The lower drug prices will benefit Medicare itself, as the savings achieved through the new, lower negotiated prices will allow the program to pay the cap out of pocket.
Containing Drug Prices
The program’s ability to negotiate drug costs represents "the most powerful tool we currently have at our disposal to contain drug prices and hold the pharmaceutical industry accountable." The Medicare negotiations are separate from other deals negotiated for lower prices for certain medications.
Comparison with Other Deals
The price to Medicare members for certain medications under the previous contract is lower than the price negotiated by CMS. However, the details of how the two programs might work together have not been provided.
