For years, Medicare couldn’t negotiate drug prices - even when a single pill cost more than a week’s groceries. That changed in 2022, when the Inflation Reduction Act gave Medicare the power to directly talk prices with drugmakers. Starting January 1, 2026, this new system is already lowering costs for 10 top-selling drugs, with discounts ranging from 38% to 79%. If you or someone you know takes Eliquis, Jardiance, or Xarelto, your out-of-pocket costs could drop noticeably next year.
What Changed? Medicare Finally Gets a Seat at the Table
Before 2022, Medicare was legally blocked from negotiating drug prices. Instead, private insurers handled rebates behind closed doors, and Medicare paid whatever the market set. The result? In 2021 alone, Medicare spent nearly $150 billion on prescription drugs. Meanwhile, the VA - which has negotiated prices for decades - paid about 40% less for the same medications. That gap wasn’t accidental. It was policy. The Inflation Reduction Act flipped that script. For the first time, Medicare can now say: "We’re not paying that." The law targets only drugs with no generic or biosimilar competition, and only after they’ve been on the market for at least seven years (or 11 for biologics). That means newer, cutting-edge drugs are still off-limits - but the big earners, the ones that have been around long enough to dominate sales, are now fair game.The 10 Drugs That Got Negotiated First (And What You Save)
The first round of negotiations, finalized in August 2024, covered 10 drugs with total Medicare spending of over $50 billion in 2022. Here’s what happened:- Eliquis (apixaban) - 79% price drop. Used for blood clots. Medicare spent $6.3 billion on this one in 2022.
- Jardiance (empagliflozin) - 73% cut. A diabetes drug that also protects the heart and kidneys.
- Xarelto (rivaroxaban) - 70% reduction. Another blood thinner, often prescribed after surgery.
- Farxiga (dapagliflozin) - 68% discount. Also for diabetes and heart failure.
- Linagliptin - 65% drop. A less common diabetes pill.
These aren’t small changes. For someone taking Eliquis, a $500 monthly co-pay could drop to under $100. That’s life-changing for seniors on fixed incomes.
How the Negotiation Process Actually Works
It’s not a backroom deal. The process is tightly defined by law:- February 1, 2024: CMS sent manufacturers their first offer - based on what other insurers pay, clinical value, and how many people use the drug.
- March 2, 2024: Drug companies had 30 days to respond with a counteroffer.
- Spring-Summer 2024: CMS met with each company up to three times. Some agreed on the spot. Others didn’t - so CMS sent final written offers.
- August 1, 2024: All negotiations closed. Prices were locked in.
- January 1, 2026: The new prices take effect for Medicare Part D plans.
There’s a cap: the final price can’t be higher than either (1) what Medicare plans actually paid last year, or (2) a percentage of the drug’s average U.S. price before rebates. That keeps manufacturers from padding the numbers.
What Happens Next? More Drugs, More Savings
This is just round one. The law requires more:- 2027: 15 more drugs - including Stelara and Farxiga - will be added.
- 2028: The program expands to Medicare Part B, which covers drugs given in clinics (like cancer treatments). This could cut costs for chemotherapy, arthritis meds, and more.
- 2029 and beyond: 20 drugs per year, every year.
By 2031, the Congressional Budget Office estimates this program will save the government $98.5 billion. That doesn’t just mean lower premiums - it means less pressure on the entire Medicare system.
Will Private Insurers Also Save Money?
Yes - and that’s a hidden win. When Medicare negotiates a lower price, drugmakers often apply that same price to private insurers. Why? Because it’s easier to update one price list than dozens. A study from the Pharmaceutical Care Management Association estimated that private insurers could save $200-250 billion over the next decade just from this "spillover effect." That means your employer-sponsored plan, your spouse’s coverage, or even your own private insurance could see lower premiums or co-pays - even if you’re not on Medicare.What About Drug Companies? Are They Losing Money?
Absolutely. For the first 10 drugs, manufacturers could lose 25-45% of their revenue from Medicare sales, according to industry analysis. Some companies are fighting back: four drugmakers sued, claiming the law is unconstitutional. But in August 2024, a federal judge dismissed all four cases. Appeals are expected, but the law stands. PhRMA argues this will hurt innovation. They claim the program could slash R&D funding by $112 billion over 10 years. But the Office of Management and Budget says those numbers are inflated. The truth? Most of these drugs were developed years ago. The profits are already huge. This isn’t about killing innovation - it’s about stopping companies from charging what they want just because they can.How This Affects You - Whether You’re on Medicare or Not
If you’re on Medicare:- Your monthly co-pay for these 10 drugs will drop sharply in 2026.
- You’ll still need to pay your deductible - but the price you pay after that will be much lower.
- Pharmacies will automatically use the new prices. No action needed.
If you’re not on Medicare:
- Your insurance might lower prices too, thanks to the spillover effect.
- Your premiums could stabilize or even drop as insurers save money.
- Drugmakers may slow price hikes on other medications, fearing future negotiations.
Even if you don’t take one of these 10 drugs, the ripple effect is real. When Medicare sets a new price floor, it pulls the entire market down.
What’s Still Missing? The Big Gaps
This program doesn’t fix everything:- No price control on new drugs: A brand-new cancer drug can still cost $10,000 a month for years.
- No limits on insulin: Insulin isn’t in the first 10, and it won’t be eligible until 2030 or later.
- No coverage gap fix: Even with lower prices, the "donut hole" still exists - you pay 25% of the negotiated price until you hit catastrophic coverage.
These gaps aren’t failures - they’re next steps. Advocacy groups are pushing to shorten the 7-year waiting period to 5 years. If that happens, dozens more drugs could be added sooner.
What to Do Now
If you’re on Medicare:- Check your Part D plan’s formulary in late 2025 - they’ll update it with the new prices.
- Ask your pharmacist: "Will my drug be affected by Medicare’s new pricing?" They’ll know.
- Don’t switch plans unless you need to - the savings are automatic.
If you’re not on Medicare:
- Keep an eye on your drug costs. If you take a drug like Eliquis or Jardiance, ask your insurer: "Are you using the Medicare-negotiated price?"
- Use tools like GoodRx or SingleCare - they often reflect the new lower prices before your insurer updates.
FAQ
What drugs are affected by Medicare’s new price negotiations?
The first 10 drugs include Eliquis, Jardiance, Xarelto, Farxiga, and Linagliptin - all high-cost, single-source medications with no generic competition. These drugs were chosen because they cost Medicare over $50 billion in 2022. Starting in 2027, 15 more drugs will be added, and by 2028, the program will expand to include drugs administered in clinics (Medicare Part B).
Will my prescription costs go down even if I’m not on Medicare?
Yes - likely. When Medicare negotiates a lower price, drugmakers often apply that same price to private insurers to simplify billing. This "spillover effect" means your employer plan, Medicaid, or private insurance may also see lower prices. Some insurers have already started adjusting their formularies ahead of the 2026 rollout.
How do I know if my drug is part of the negotiation?
Check your Medicare Part D plan’s formulary in late 2025 - they’re required to update it by October 15, 2025. You can also ask your pharmacist directly. If you take a drug like Eliquis, Jardiance, or Xarelto, it’s almost certainly affected. For other medications, search the CMS website for the "List of Negotiated Drugs for 2026" - it’s publicly available.
Why does it take until 2026 for the prices to drop?
The law gives drugmakers time to adjust. Negotiations ended in August 2024, but the new prices don’t take effect until January 1, 2026. This allows Part D plans to update their formularies, pharmacies to reprogram systems, and manufacturers to adjust supply chains. It’s not a delay - it’s a required transition period.
Are there any risks or downsides to this program?
Some drugmakers claim it will hurt innovation, but evidence suggests otherwise. Most of these drugs were developed over a decade ago, and profits are already massive. The bigger risk is if insurers shift patients to cheaper alternatives - which could limit access for some people. But the law requires that negotiated drugs remain on formularies, so you won’t lose access.