The War on Drug Prices: Medicare Is Just Saying ‘No’ to High Costs

Jenna Knutson, PharmD, Broadway Family Medicine

The Centers for Medicare and Medicaid Services (CMS) announced maximum prices for the first 10 drugs under the Inflation Reduction Act (IRA), effective January 2026 (see table below). This marks a significant policy shift in U.S. prescription drug pricing, aligning with practices in other high-income countries and paving the way for potential broader reforms and long-term savings. 

*Years since approval represents the time between the first Food and Drug Administration (FDA) approval and January 1, 2026, when negotiated prices will take effect. List prices (wholesale acquisition costs) as of August 2024 were obtained from Merative’s Red Book. International prices include those from Australia, Canada, France, Germany, Japan, Switzerland, and the United Kingdom, are from 2021, and don’t include rebates. All prices reflect the most prescribed dosage form of each drug in the United States, according to the IQVIA National Prescription Audit. Unit prices were converted to prices for a 30-day supply on the basis of standard dosing, in accordance with FDA labels. Prices per 30-day supply of insulin aspart assume a dose of 40 units per day, based on the World Health Organization’s defined daily dose. Prices per 30-day supply of ustekinumab were based on dosing for Crohn’s disease and ulcerative colitis; prices for psoriasis treatment are lower because of a lower dose and less-frequent dosing. US vs International Cost was calculated using the difference between Negotiated Price and Range of International Prices with values in parentheses indicating instances where Americans paid less than other countries. Medications listed in descending order using the US vs International Cost. 

CMS estimates that Medicare spending could have been reduced by $6 billion in 2023—a 22% savings for the selected drugs—if negotiated prices had been in place. Medicare’s negotiated prices remain higher than those in many other high-income countries, revealing limitations in the U.S. approach. While drugs like Xarelto and Stelara show some potential savings, their prices still fall short of the lowest global benchmarks. This first round of negotiations demonstrates progress and highlights the need for further reforms to make medications more affordable and accessible.

Looking ahead, several changes could enhance the impact of Medicare’s drug price negotiations. Creating a centralized health technology assessment agency, similar to those in other countries, could strengthen future negotiations by incorporating cost-effectiveness analyses. Accelerating timelines for negotiating prices on newer drugs could further boost savings. While expanding negotiated prices to commercial insurance markets would require significant legislative action, it could lead to substantial cost savings for Americans. The success of this initial round highlights an opportunity to build on these efforts, leveraging federal price negotiations to address high drug costs and improve medication affordability across the U.S. Yet, the pressing question remains: Why are Americans still paying significantly more than the rest of the world for the same medications?

Published March 7, 2025

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Reference: 

1. Rome BN, Kesselheim AS, Feldman WB. Medicare's First Round of Drug-Price Negotiation - Measuring Success. N Engl J Med. 2024 Nov 21;391(20):1865-1868. doi: 10.1056/NEJMp2411265. Epub 2024 Oct 16. PMID: 39413368.
2. Cubanski, Juliette. FAQs about the Inflation Reduction Act’s Medicare Drug Price Negotiation Program. KFF, November 19, 2024 (https://www.kff.org/medicare/issue-brief/faqs-about-the-inflation-reduction-acts-medicare-drug-price-negotiation-program/#first-round-negotiation).
3. Congressional Budget Office. A comparison of brand-name drug prices among selected federal programs. February 18, 2021 (https://www.cbo.gov/publication/56978).
4. Gumas ED, Huffman P, Papanicolas I, Williams RD. How prices for the first 10 drugs up for U.S. Medicare price negotiations compare internationally. New York: Commonwealth Fund, January 4, 2024 (https://www.commonwealthfund.org/publications/2024/jan/how-prices-first-10-drugs-medicare-negotiations-compare-internationally).
5. Centers for Medicare and Medicaid Services. Medicare Drug Price Negotiation Program: negotiated prices for initial price applicability year 2026. August 14, 2024 (https://www.cms.gov/newsroom/fact-sheets/medicare-drug-price-negotiation-program-negotiated-prices-initial-price-applicability-year-2026).