The Centers for Medicare & Medicaid Services (CMS) released the long-awaited results of its negotiations over the price of ten widely used Medicare Part D drugs in August.

Attention now turns to how these new prices will be enforced, what we can expect from the next round of negotiations and beyond, and what benefit, if any, Medicare beneficiaries will ultimately realize as a result of these actions.

At Applied Policy, we literally make it our business to follow CMS’s actions, to help shape CMS policies, and to interpret and apply those policies to our clients’ specific situations. The first round of government and drug company negotiations certainly gave us new information about the effort to control prices. But there is still a lot that we don’t know about this process and how it will play out moving forward.

The Applied Policy team and I are keeping a close watch on several issues as drug price negotiations progress.

Pharmaceutical companies agreed to the negotiated prices under the threat of a 65% excise tax that increases up to 95% for companies that do not comply with the negotiation process. We will have to wait until 2026 to see whether the negotiated prices result in lower costs to patients at the pharmacy or whether the savings only benefit the Medicare Trust Funds.

The next round of negotiations—for prices that take effect in 2027—will start in February for a longer list of Part D drugs. CMS will follow the mandated pattern set in the first round of negotiations, targeting the most expensive and widely prescribed drugs, but will be negotiating with some new manufacturers. Both CMS and the manufacturers will have the benefit of experience from getting through the first round, although if CMS waits until the statutory deadline of March 1, 2025, to release its explanation of the Maximum Fair Price for the first round of drugs, patients, researchers, and other interested parties will be forced to submit information on selected drugs for CMS to consider in this round of negotiation without this background.

For the following round—for maximum fair prices taking effect in 2028—the list of drugs will probably include Part B, or physician-administered, drugs as well as Part D medications. Given these parameters, we expect more oncology drugs to be included than there are now, both from Part B and Part D.

Even though 2028 seems far off, CMS needs to develop its approach to negotiating the Maximum Fair Price for physician-administered Part B drugs now.

Part B drugs are handled differently under the new law than Part D drugs because instead of being managed through health plan formularies, pharmaceutical benefit managers, and retail pharmacies, they are purchased by physicians, commonly from specialty distributors. CMS reimburses physicians CMS at the Maximum Fair Price plus 6 percent after they administer the drug to their patient. However, the manufacturer (and perhaps the physician) does not know at the time the drug is purchased whether it will be administered to a Medicare beneficiary and therefore subject to the negotiated Maximum Fair Price, or whether it will be administered under another kind of health insurance. Therefore, absent a different approach by CMS, the manufacturers are likely to address this through a rebate to ensure the physician only receives the benefit of Medicare’s Maximum Fair Price for drugs administered to Medicare beneficiaries.

While this sounds fair, it fails to consider the cash the physician will have to spend more than the Maximum Fair Price to acquire the drug while they wait, perhaps months, for the rebate from the manufacturer. This puts physicians in a position where they must finance the government’s drug price negotiation program, aimed at lowering drug manufacturer prices, at potentially significant financial risk due to an increased cash flow burden if the physician’s drug acquisition price is higher than the negotiated Maximum Fair Price.

Now is the time to offer CMS suggestions on how they should implement this provision instead of waiting for CMS to publish a proposal that many may be unhappy with.

We won’t know until the 2026 plans are made available in the fall of 2025 how (or whether) the negotiated prices announced in August will affect patient costs. Patients in Medicare Part D may pay a percentage of the cost as coinsurance, but they often pay a fixed dollar copay for the drugs they receive. Each plan sets its formularies and cost-sharing requirements, so the cost and savings from the negotiated drugs from a patient perspective will likely vary based on what plan they select.

Given the complexity of the moving parts in this process and the importance of the issue, one thing is certain: now is the time to engage CMS on these issues as processes are put in place that will become a lasting part of our healthcare system.