For decades, Medicare couldn’t negotiate drug prices - even when a single pill cost hundreds of dollars. That changed in 2022 with the Inflation Reduction Act. Starting January 1, 2026, Medicare will begin paying significantly less for 10 of the most expensive prescription drugs, thanks to direct price talks with manufacturers. This isn’t a small tweak. It’s the biggest shift in U.S. drug pricing in over 20 years. And it’s already lowering costs for millions of seniors.

What’s Actually Changing?

Before 2026, Medicare Part D - the prescription drug benefit - paid whatever drugmakers charged. Private insurers negotiated rebates behind the scenes, but Medicare itself had no power to ask for lower prices. The result? Americans paid more for the same drugs than people in Canada, Germany, or Japan. In 2022, Medicare spent over $50 billion just on the 10 drugs now being negotiated. Eliquis, a blood thinner, cost Medicare $6.3 billion alone that year.

Now, the Centers for Medicare & Medicaid Services (CMS) can step in and say: “This is what we’ll pay.” They don’t ask. They negotiate. And they’re winning. For the first 10 drugs, discounts range from 38% to 79%. That means a drug that used to cost $1,000 a month could now cost $200. For people on fixed incomes, that’s life-changing.

How the Negotiation Process Works

It’s not random. There’s a strict timeline, and every step is public. Here’s how it played out for the first round:

1. February 1, 2024: CMS sent each drugmaker an initial offer - based on what other countries pay, how much the drug is used, and what cheaper alternatives exist.
2. March 2, 2024: Companies had 30 days to respond with a counteroffer.
3. Spring-Summer 2024: CMS met with each company up to three times to discuss numbers. Some deals were settled in meetings. Others were finalized through written offers.
4. August 1, 2024: The negotiation window closed. CMS announced the final prices on August 16, 2024.
5. January 1, 2026: The new prices take effect. Pharmacies and insurers must use them.

The law sets a hard cap: Medicare can’t pay more than the lower of two numbers - either the average price drugmakers charge private insurers (after rebates), or a percentage of the drug’s average price across the U.S. market. This keeps companies from inflating prices just to get a higher “baseline.”

Which Drugs Are Affected?

The first 10 drugs are all high-cost, single-source medications - meaning no generics or biosimilars are available. They include:

• Eliquis (apixaban) - blood thinner
• Jardiance (empagliflozin) - diabetes and heart failure drug
• Xarelto (rivaroxaban) - another blood thinner
• Farxiga (dapagliflozin) - also for diabetes and heart health
• Stelara (ustekinumab) - used for psoriasis and Crohn’s disease

These aren’t obscure drugs. They’re prescribed to hundreds of thousands of Medicare beneficiaries every year. For someone taking Jardiance or Eliquis daily, the savings could be $1,000-$2,000 a year. That’s more than many seniors pay for rent or utilities.

Why This Matters for Private Insurance

You might think: “I don’t have Medicare. Why should I care?” But you should. When Medicare negotiates a lower price, it doesn’t stay just for seniors.

Private insurers often use Medicare’s prices as a benchmark. If Medicare pays $200 for a drug, a commercial insurer won’t pay $800. That’s called the “spillover effect.” Stanford Medicine estimates private insurers could save $200-$250 billion over the next decade because of these Medicare deals. That means lower premiums, smaller copays, and fewer surprise bills for people with employer insurance.

Pharmacy benefit managers (PBMs) - the middlemen who handle drug pricing for insurers - are already updating their systems. A July 2024 survey found 78% of them had started training staff on the new Medicare pricing rules. That’s because they’ll need to adjust their own contracts with drugmakers to stay competitive.

What About Doctors and Hospitals?

The changes aren’t just for pills you pick up at the pharmacy. Starting in 2028, Medicare will start negotiating prices for drugs given in doctor’s offices or hospitals - like cancer treatments or arthritis infusions. These are covered under Medicare Part B.

Here’s the catch: Doctors used to get paid 6% above what they paid for the drug. So if a drug cost $10,000, they got $600 extra. That created an incentive to use expensive drugs - even when cheaper options existed.

Now, they’ll get 6% above the new Medicare-negotiated price. That means less profit per drug. The American Medical Association estimates this could cost physician practices $1.2 billion a year in lost revenue. Some clinics may cut back on stocking certain drugs. Others may shift to generics or biosimilars.

Who’s Opposing This - and Why?

Drugmakers aren’t happy. Four of the 10 companies sued to stop the program, claiming it’s unconstitutional. A federal judge dismissed those lawsuits in August 2024, but appeals are expected. The pharmaceutical industry claims the program will hurt innovation - arguing that lower profits mean less money for new drug research.

But here’s the data: The U.S. spends more on drug R&D than any other country. In 2023, the top 10 drugmakers spent $80 billion on marketing - and only $42 billion on research. The Office of Management and Budget says industry claims about innovation loss are “significantly overstated.”

Meanwhile, patients are largely supportive. A 2023 KFF poll found 72% of Medicare beneficiaries back price negotiation - 53% strongly. Groups like the Arthritis Foundation worry about losing access to specific drugs if insurers switch to cheaper alternatives. But the law requires that negotiated drugs remain on Medicare formularies. You won’t be forced off your medication.

What Comes Next?

The program doesn’t stop here. In 2027, CMS will negotiate prices for 15 more drugs. In 2028, another 15. After that, it’s 20 drugs every year. By 2030, over 100 high-cost drugs could be under negotiation.

The eligibility rule is simple: A drug must be at least 7 years old (or 11 years for biologics) to be negotiable. That means brand-new drugs are protected - but once they age out, they’re fair game. The FDA has approved 1,432 small-molecule drugs since 2013. Only 382 of them are still single-source after seven years. That’s the pool. And it’s growing.

The FTC is also cracking down on tactics like “product hopping” - when companies slightly change a drug just to block generics. That’s helping expand the list of drugs that can be negotiated.

What This Means for You

If you’re on Medicare:

• Your out-of-pocket costs for the 10 negotiated drugs will drop dramatically starting January 1, 2026.
• You’ll still pay your usual copay - but the base price just got much lower.
• You won’t lose access to your current meds. The law protects your options.

If you’re on private insurance:

• Your premiums may go down over time as insurers follow Medicare’s lead.
• Your copays for common drugs like Eliquis or Jardiance could shrink.
• Pharmacies may start showing lower prices even if you’re not on Medicare.

If you’re a caregiver or family member:

• Help your loved one review their 2026 Medicare Part D plan options - new prices mean better deals.
• Ask your pharmacist if your medication is on the negotiation list.

Bottom Line

This isn’t theoretical. The discounts are real. The savings are already locked in. By 2026, Medicare will pay nearly half as much for 10 of the most expensive drugs in America. That’s not just a policy win - it’s a health win.

The system isn’t perfect. There are legal battles ahead. Some doctors will adjust. Some companies will fight. But for millions of people who rely on these drugs, the change is simple: They’ll pay less. And that’s what matters.