On March 14, 2025, the Centers for Medicare and Medicaid Services (CMS) announced that all manufacturers of the 15 drugs selected for the second round of Medicare's Drug Price Negotiation Program have signed agreements to participate in the negotiations. This milestone follows the successful completion of the first round, which resulted in substantial price reductions for 10 high-expenditure medications.
The Drug Price Negotiation Program, established under the Inflation Reduction Act, aims to lower prices for high-cost Medicare drugs that lack generic alternatives. The second round of negotiations will continue throughout 2025, with maximum fair prices (MFPs) to be finalized by November 1, 2025, and implemented on January 1, 2027.
Economic Impact and Drug Selection
The 15 drugs selected for this second negotiation round collectively account for $40.7 billion in gross covered prescription drug costs under Medicare Part D from November 2023 to October 2024, representing approximately 14 percent of total Part D spending during that period. These medications are used by approximately 5.3 million Medicare Part D enrollees.
While the economic scale of the second round is somewhat smaller than the first round ($40.7 billion versus $56.2 billion), the impact remains significant. The first round of negotiations, completed on August 1, 2024, achieved price reductions ranging from 38 to 79 percent for drugs treating conditions including diabetes, heart failure, chronic kidney disease, and blood cancers.
Notable price reductions from the first round include:
- Imbruvica: reduced from $14,934 to $9,319 (30-day supply)
- Stelara: reduced from $13,836 to $4,695
- Enbrel: reduced from $7,106 to $2,355
CMS estimates that had these negotiated prices been in effect in 2023, Medicare would have saved approximately $6 billion in net prescription drug costs.
Key Drugs in Second Round
Among the 15 drugs selected for the second round are several high-profile medications, including Novo Nordisk's popular diabetes drug Ozempic and Teva's Huntington's disease medication Austedo. According to industry statements, many manufacturers had anticipated the selection of their products and have already begun adjusting their growth strategies accordingly.
Executives from companies including AstraZeneca and Pfizer have acknowledged that while the Negotiation Program will create pressure on their businesses, they still predict strong performance in the coming year despite these challenges.
Negotiation Process and Timeline
The negotiation process for the second round includes several key phases:
- March 14, 2025: Manufacturers signed agreements to participate
- April 16-29, 2025: CMS will host 15 patient-focused roundtable events (one for each drug)
- April 30, 2025: Public town hall meeting to discuss clinical considerations
- June 1, 2025: Deadline for CMS to present initial MFP offers
- June-November 2025: Negotiation period between CMS and manufacturers
- November 30, 2025: Publication of final MFPs
- March 1, 2026: Deadline for CMS to publish explanations of MFPs
- January 1, 2027: Implementation of negotiated prices
CMS has made several adjustments to the negotiation process based on lessons from the first round. Manufacturers will now have more time and opportunities to submit counteroffers and engage directly with CMS. The revised process includes additional negotiation meetings and enhanced data exchange parameters.
Legal Challenges and Uncertainty
Despite progress in the negotiations, the program faces significant legal and political challenges. At least eight lawsuits challenging the program are ongoing as of March 25, 2025, with seven cases currently under appeal in federal circuit courts.
The program's future is further complicated by the political landscape. The Trump administration recently revoked a Biden-era executive order aimed at lowering medication costs, potentially signaling a shift in priorities. Senate Finance Committee Chairman Mike Crapo has explicitly stated plans to repeal and replace the Negotiation Program.
Industry observers note that manufacturers face a difficult choice: either participate in negotiations or remove their drugs from Medicare and Medicaid coverage entirely. This stark choice has likely contributed to the full participation of manufacturers in both negotiation rounds thus far.
Industry Reactions
Pharmaceutical companies have expressed mixed reactions to the negotiation program. Following the first round, many industry watchers and manufacturers were disappointed that CMS's explanations of how it determined prices lacked a systematic and quantitative approach that would allow forecasting of future pricing decisions.
However, several major pharmaceutical executives have indicated they are not overly concerned about the second round of negotiations. Statements from leadership at Teva and Novo Nordisk suggest these companies had anticipated the selection of their products and had already begun strategic planning accordingly.
Healthcare System Implications
The implementation of negotiated prices will have ripple effects throughout the healthcare system. Providers working with these drugs must prepare for potential revenue impacts, including decreased revenue per drug administration but possibly increased utilization of certain medications due to lower prices.
The full impact of these negotiated prices on the broader pharmaceutical market, including effects on generic drug development and private insurer reimbursement policies, remains to be seen. Most assessments to date have focused on potential rather than actual effects, as the first round of negotiated prices has not yet taken effect.
Looking Forward
As the second round of negotiations progresses, stakeholders across the healthcare industry will be closely monitoring developments. The program represents one of the most significant government interventions in pharmaceutical pricing in recent history, with potential long-term implications for drug development, patient access, and healthcare costs.
The ultimate fate of the program may depend on both legal outcomes and political decisions in the coming months. Regardless of the program's future, the negotiations have already prompted pharmaceutical companies to reconsider their pricing strategies and business models in the U.S. market.
