CMS Could Make Drug Price Negotiations Permanent - What it Means for Pharma

CMS issued a proposed rule on June 16, 2026 that would convert the Medicare Drug Price Negotiation Program from a guidance-based initiative into permanent regulation, a shift that gives manufacturers clearer rules to plan around, while also closing a pathway that CMS says could allow manufacturers to avoid selection eligibility.¹

In a press release, CMS administrator Mehmet Oz said the agency is "moving from annual updates to a permanent, predictable framework.”²

"This approach puts patients first, strengthens Medicare, and protects the innovation pipeline that delivers future cures," he said.

Chris Klomp, director of Medicare and chief counselor of HHS, framed it as a stabilization measure for the channel, saying the program has already delivered real savings, and the proposed 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."²

The practical effect is a negotiation program that no longer resets its rules with each cycle. The IRA authorized CMS to run the program through guidance for the first three cycles covering price applicability years 2026 through 2028. That authority expires after this year, and the proposed rule codifies the framework for 2029 and beyond as up to 20 drugs per cycle, covering both Part D and Part B.¹

How Is CMS Targeting Certain Reformulation Strategies?

The provision with the most direct commercial impact targets what CMS calls a "program integrity risk." It is essentially manufacturers adding a co-administered active ingredient, such as hyaluronidase, then arguing the reformulated product is a distinct drug not subject to aggregation with the original for selection purposes.¹

Under existing policy, a fixed combination drug with two or more active moieties is treated as a separate product. CMS states in the fact sheet that it is now concerned that the fixed combination drug policy “would be in tension with the statutory requirement to identify qualifying single source drugs by aggregating across dosage forms and strengths of the drug, including new formulations of the drug."¹

“In essence, a reformulation into an FDC was an opportunity for manufacturers to manage their drug lifecycle,” explained Alan Crowther, general manager of global pricing and access at EVERSANA, in a statement to Pharmaceutical Commerce. “While many drugs would not have such an option, for cardiovascular, renal, metabolic, and obesity therapy area products in particular, such combinations are common and would potentially no longer be able to use this strategy to avoid impact," Crowther explained.

The proposed fix: if the additional active component primarily enables a new route of administration, and the product shares an NDA/BLA holder with the original, CMS would aggregate both products as a single qualifying single source drug for selection and negotiation purposes. In one example, CMS said "a product containing active ingredient X plus hyaluronidase would be identified as part of the same qualifying single source drug as a product offered by the same BLA holder that contains only active ingredient X, if the inclusion of hyaluronidase creates a new formulation and enables a new route of administration for active ingredient X."¹

The timing matters. SC formulation has been a legitimate and widely used lifecycle management strategy; Under the proposal, certain reformulations that add an active ingredient primarily to enable a new route of administration would no longer be treated as separate qualifying drugs for selection purposes.

The proposed rule also codifies a Part D provision with implications downstream of the manufacturer. Part D plans would be required to include any selected drug with an maximum fair price (MFP) on formulary, and the negotiated price paid to dispensing entities could not exceed the MFP plus applicable dispensing fees.²

The rule also introduces the Temporary Floor for Small Biotech Drugs, a pricing floor that prevents CMS from negotiating an MFP below a statutory minimum for eligible small biotech products during 2029 and 2030. It applies only to those two years and functions as a partial buffer against the steepest possible price reductions for qualifying companies entering the negotiation program for the first time.²

What Does the Proposed Rule Mean for Launch Strategy?

The program has already reshaped how manufacturers approach drugs likely to reach selection eligibility. As Pharmaceutical Commerce has previously reported, the second cycle produced a 44% average net savings — $12 billion against 2024 Medicare spending — on 15 drugs including Ozempic and Wegovy, which received a 71% reduction off list price, effective Jan. 1, 2027. With permanent codification, launch teams can no longer treat the negotiation program as a policy variable that might change between a drug's approval and its selection.

Whether lower negotiated prices will improve patient access remains a subject of debate among stakeholders. John Stanford, executive director at Incubate, stated in a previous PC interview that while the program reduces federal spending, it has not improved patient access in a meaningful way, because insurance design, not list price, is the operative barrier. "Even with price controls in place, patients still can't necessarily access those specific medicines," Stanford said at the time.

A 60-day public comment period on the proposed rule closes Aug. 17, 2026. How the industry responds to the rule will shape the drug development and pricing calculus heading into the next decade.

References

1. Medicare Drug Price Negotiation Program Proposed Rule (CMS-4215-P) Fact Sheet. CMS.gov. June 16, 2026. https://www.cms.gov/files/document/mdpnp-nprm-fact-sheet.pdf
2. CMS Proposed Rule Locks in Lower Prices and Fosters Innovation for the Medicare Drug Price Negotiation Program. CMS.gov. June 12, 2026. https://www.cms.gov/newsroom/press-releases/cms-proposed-rule-locks-lower-prices-fosters-innovation-medicare-drug-price-negotiation-program