AARP Says a Proposed Medicare Change Could Save Nearly $200 Billion on Drugs

According to a new study by AARP, proposed Medicare changes could help older adults save money in retirement. The study revealed that if Medicare required drug manufacturers to charge the lowest prices that similar countries pay for the same medications, the program could save nearly $200 billion over five years on 10 of the highest-cost brand-name prescriptions. Those savings might help lower Medicare Part D premiums, saving retirees money.

The study focuses on a policy change that could potentially impact millions of retirees who need prescription medication.

How Medicare drug prices compare to what other countries pay

The study, performed by the AARP Public Policy Institute and Verdant Research, found a stark difference between the prices that Medicare pays for medicines and that other countries pay for the exact same medicines. According to the study, the prices for 25 brand-name medicines increased by an average of 81% after those medicines entered the U.S. market. However, lifetime prices for the same medicines decreased by an average of 13% in 19 high-income countries.

Nearly 15 million Medicare enrollees use those brand-name medicines.

"Those costs flow directly to what older Americans pay at the pharmacy counter and in their monthly premiums, which is why addressing the root cause — high drug prices — is essential to keeping Part D coverage affordable," Megan O'Reilly, AARP's vice president of government affairs, wrote.

The proposal to extend the Medicare prescription drug negotiation program

The study proposes extending the Medicare prescription drug negotiation program, which is sometimes called "most-favored-nation" pricing. Thanks to the Inflation Reduction Act, Medicare had the authority to negotiate prices for some high-cost medications. AARP proposes strengthening that program.

Under current law, the number of drugs eligible for negotiation is limited. AARP studied 10 medications, but just one of those medications is eligible to be selected in the next round of Medicare price negotiations.

The proposal to shorten the negotiation eligibility waiting period

Currently, medications don't become eligible for Medicare cost negotiations until they're on the market for at least seven or 11 years. The report notes that shortening that waiting period to three years could potentially save Medicare $21 billion between 2026 and 2030.

How much money expanded negotiation might save

According to the analysis, Medicare spent nearly $50 billion on 10 brand-name drugs for more than 3 million enrollees in 2025. The drugs have not yet been part of Medicare drug price negotiations.

If most-favored-nation drug prices were applied to those medications, the analysis projects that spending on the 10 drugs would decrease by $197 billion from 2029 through 2033; spending could drop from $273 billion to $76 billion.

"The lower prices would further reduce beneficiaries' premiums and out-of-pocket costs, consistent with current practice for Medicare drug price negotiation," says the report.

What Medicare drug cost negotiation has already delivered

To date, Medicare has concluded two rounds of drug price negotiations. Centers for Medicare & Medicaid Services (CMS) estimates that Medicare beneficiaries may save $1.5 billion when the negotiated prices for the first 10 Part D drugs take effect in 2026. CMS estimates that Medicare beneficiaries may save $685 million when negotiated prices for the next round of 15 Part D drugs take effect in 2027.

CMS announced an additional 15 Part D and Part B drugs selected for negotiation in January 2026, and those negotiated prices should go into effect in 2028.

The importance of keeping Medicare Part D premiums affordable

AARP's study comes at a time when it's particularly important to ensure that Medicare Part D premiums remain affordable. On July 28, CMS announced that it plans to cancel the three-year Part D rate stabilization pilot program after just two years of operation. The program helps limit premium increases. 

Reducing medication costs may help keep Part D premiums lower. "Those costs flow directly to what older Americans pay at the pharmacy counter and in their monthly premiums, which is why addressing the root cause — high drug prices — is essential to keeping Part D coverage affordable," wrote Megan O'Reilly, AARP's vice president of government affairs.

The growing concern about costs for retirees

Retirees already face increases in premiums, deductibles, and drug costs, and AARP reports that it's increasingly hearing from retirees who are concerned about potentially higher Part D premiums in 2027.

The health status of many Medicare beneficiaries leaves them particularly vulnerable to high medication costs. More than two-thirds of Medicare beneficiaries have multiple chronic conditions. Additionally, those with Medicare Part D coverage take an average of four to five prescriptions per month.

Bottom line

AARP's proposal to expand Medicare drug cost negotiation would require Congressional approval, and the drug industry opposes most-favored-nation pricing. Stephen J. Ubl, president and CEO of the Pharmaceutical Research and Manufacturers of America, stated that such a policy would threaten jobs and make the American economy more reliant on China for innovative medicines.

During open enrollment, it's a good idea for Part D enrollees to double-check plans for any premium increases. If you take prescription medications, especially higher-cost medications, check to make sure the plan you choose offers the best coverage and prices on the medications you need. Taking the time to do some extra research and choose the right plan for your needs may help you keep more cash in your wallet. 

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