A New Federal Medicare Proposal Could Put Hundreds Back in Seniors' Pockets

A federal proposal published in June could potentially lock in lower prescription drug costs for Medicare beneficiaries, helping seniors save money in retirement. 

Rather than functioning as a temporary program, the proposal is designed to implement a permanent framework, potentially helping millions of Medicare beneficiaries access the medications they need.

Here's what you should know about the proposal and what it could mean if you or a loved one is on Medicare.

Understanding the proposal

The proposed rule, published by the Centers for Medicare & Medicaid Services (CMS) on June 12, calls for the establishment of a "transparent and sustainable process" to help lower drug costs for Medicare beneficiaries. 

The rule is also designed to create improved long-term certainty for the drug manufacturers that engage in the Medicare drug price negotiation program.

How the Medicare drug price negotiation program currently works

The Inflation Reduction Act of 2022 created temporary instruction authority and directed CMS to implement the negotiation program through 2028. That temporary guidance is now expiring, meaning for the negotiation program to continue, it must be codified into law.

Under the Medicare drug price negotiation program, the Secretary of Health and Human Services must negotiate prices for certain high-cost drugs with the drug companies. Essentially, the program gives the federal government the right to negotiate Medicare drug prices, which amounts to lower prices for beneficiaries.

"We are moving from annual updates to a permanent, predictable framework," said CMS Administrator Mehmet Oz, MD. "This approach puts patients first, strengthens Medicare, and protects the innovation pipeline that delivers future cures."

What's already happening in drug negotiation

For the first time in Medicare's history, Medicare is negotiating directly with drug companies. The program is currently on the third cycle of negotiations, and the negotiated prices for the first set of 10 drugs chosen for negotiation went into effect on January 1, 2026. The second set included 15 drugs, including Ozempic and Wegovy, and those prices should take effect in 2027. An additional 15 drugs are included in the third cycle, and negotiated prices should take effect in 2028.

The drugs selected for negotiation are covered under Medicare Part D, and the 40 drugs account for 36% of Medicare spending on Part B and Part D drugs in 2024. CMS estimates that the first two rounds amounted to several billion dollars of savings to the Medicare program.

How drug negotiation affects Medicare beneficiaries

In addition to saving Medicare money, drug negotiation impacts Medicare beneficiaries. The first round of negotiation included medications often prescribed to treat conditions like heart disease, diabetes, arthritis, and cancer.

In 2023, Medicare Part D spent $56.2 billion on those 10 drugs, which amounted to 20% of all Medicare Part D spending. Beneficiaries paid $3.9 billion out of pocket to purchase those medications, which were likely necessary to treat or manage serious health conditions.

How much beneficiaries save

After negotiation, those medications were discounted from 38% to 79% off the 2023 30-day supply list prices.

The negotiations impacted a substantial portion of Medicare beneficiaries; according to CMS, 8.8 million Medicare beneficiaries were prescribed at least one of the 10 drugs in 2023. CMS estimates that the reduced drug prices from the first round of negotiations would save beneficiaries about $1.5 billion.

What the new rule proposes

Under the new rule, CMS would choose up to 20 drugs covered under Medicare Part D or Part B for the fourth cycle of negotiations; that pattern would continue during future negotiation program cycles. The rule would also create new policies for the negotiation program.

"The program is already delivering real savings," said Chris Klomp, Director of Medicare and Chief Counselor of the U.S. Department of Health and Human Services. "This rule builds on that foundation by establishing clear, consistent rules of the road—giving patients, plans, pharmacies, and drug manufacturers the certainty they need as we continue to drive down costs."

What's ahead

Even before this proposed rule takes effect, the negotiation program should deliver more results and more savings for beneficiaries. A second negotiation cycle including 15 drugs should take effect in 2027, and a third cycle for an additional 15 drugs is being negotiated with prices scheduled to go into effect in 2028.

As the program continues, CMS should also continue negotiating prices for more drugs. Those negotiated prices then take effect two years later. Every negotiation round adds to the number of drugs available at negotiated prices, giving beneficiaries more options and helping them and the Medicare program to save more.

Bottom line

The proposed rule is not yet final, and a 60-day comment period is currently in effect. CMS has encouraged patients, manufacturers, plans, pharmacies, and other parties to submit comments as it develops the final rule, and comments are due by August 17, 2026. CMS plans to release a final rule in fall 2026. If you wish to weigh in, you can submit comments at regulations.gov under docket CMS-4215-P.

Even with health insurance, medication costs can be high, so this may be a good time to revisit your retirement plan and make sure you're budgeting enough for potential health care and medication expenses.