The Centers for Medicare and Medicaid Services finalized its rule for the Medicare Drug Price Negotiation Program on Nov. 5. The rule was published in the Federal Register on Nov. 9 and takes effect on Dec. 5. Its most important date is later: 2029, the first year in which the program will run under a permanent regulation rather than a series of annual guidance documents.
The rule, known as CMS-4215-F, is the government's attempt to make the negotiation program durable. The Inflation Reduction Act required CMS to run the program through guidance for its first three cycles. That authority ends after 2028. The final rule codifies the program for 2029 and beyond, adds a new part to the Code of Federal Regulations, and resolves several policy questions that had been left open.
The timing matters because the program is no longer hypothetical. The first 10 negotiated prices took effect on Jan. 1, 2026. The second cycle of 15 drugs takes effect on Jan. 1, 2027. The third cycle, selected in January 2026, includes the first Part B drugs and the first renegotiation, with prices effective in 2028. The rule sets up the fourth cycle: up to 20 Part B and Part D drugs selected by Feb. 1, 2027, with negotiated prices effective in 2029.
CMS projected about $6 billion in first-year savings from the first cycle and about $12 billion in gross savings from the second. The net figures are lower because the government shares some of the savings with plans and manufacturers. Supporters point to those numbers as evidence the program works. Critics say the savings are smaller than advertised and that price controls will reduce investment in new drugs. The rule does not settle that argument, but it makes the program's mechanics more predictable.
What the rule changes
The most consequential new policy is the treatment of fixed-combination drugs. The rule addresses a specific strategy: a manufacturer takes a drug that is already on the market, adds an ingredient that enables a new route of administration, and markets the result as a new product. The reformulation can reset the clock for negotiation and let the manufacturer avoid the maximum fair price, or MFP, that applies to the original.
CMS finalized a policy that treats the original and the reformulation as one drug when they share an active component and come from the same NDA or BLA holder. The agency will identify one potential qualifying single source drug across all dosage forms and strengths that contain the shared component. The example in the fact sheet is hyaluronidase, an enzyme that lets a biologic normally given intravenously be injected under the skin. If the original product is selected for 2029 and a price is agreed, that MFP would reach the hyaluronidase version in 2029. Treated on its own, the follow-on might not be selected until 2039.
CMS calls the policy a program-integrity measure. The agency says it prevents manufacturers from shifting patients to a new version to escape the negotiated price. Industry commenters pushed back. They argued that reformulations require separate clinical trials, pharmacokinetic testing, manufacturing work, and FDA review, and that the policy ties a newer product to an older negotiation clock. Some said CMS produced no evidence that companies reformulate specifically to avoid negotiation, noting that hyaluronidase-enabled subcutaneous products existed before the IRA. Others said small biotechs and drug-delivery platform companies would bear the greatest burden. CMS responded that the policy is narrow, that no commenter identified a qualifying product that should be excluded, and that the small-biotech floor protects qualifying firms. The agency said it will monitor the policy and may revise it.
The policy also has a timing consequence that is easy to miss. The rule treats the reformulation as part of the same drug for selection, so the MFP attached to the original can reach the new version in the same year. The alternative, treating the reformulation as a separate product, could delay its selection by a decade. CMS says that is the loophole it is closing. The industry says the rule conflates two distinct products and ignores the investment required to bring the reformulation to market.
The second major policy is the temporary floor for small biotech drugs. For 2029 and 2030, CMS cannot offer or agree to a counteroffer below 66% of a qualifying drug's inflation-adjusted 2021 average non-federal average manufacturer price. If a product has no 2021 figure, CMS uses its first complete sales year after launch. The floor is a statutory requirement, but the rule fills in how it works. Applications for the 2029 floor are due March 1, 2027.
The floor is a compromise. It protects smaller manufacturers from the steepest negotiated cuts, but it also limits the savings the program can produce from those drugs. CMS says the floor is a protection for firms that may not have the portfolio or the negotiating leverage of larger companies. Critics of the program say it is another carve-out that narrows the savings. The rule does not resolve that debate; it just writes the rule.
The Part D provisions
The rule also codifies two Part D policies. First, Part D plans must include selected drugs on their formularies when an MFP is in effect. Second, plan reimbursement to pharmacies for selected drugs cannot exceed the MFP plus dispensing fees. The rule preserves an exception that allows plans to remove a selected drug from the formulary in limited circumstances, and it points to the CY 2026 Part D Redesign Program Instructions for the details.
Those provisions matter because they determine how the negotiated price reaches patients and pharmacies. A plan that does not cover a selected drug, or a pharmacy that is reimbursed above the MFP, can undercut the program's savings. The rule tries to close those gaps. It also codifies the negotiation process itself, including manufacturer data updates, comparative-effectiveness evidence, offers and counteroffers, negotiation meetings, and the publication of agreed MFPs with explanations.
The rule includes several technical clarifications. It addresses the treatment of withdrawn indication approvals under the orphan-drug exclusion. It codifies the review process for "Bona Fide Marketing," the standard used to determine whether a drug has genuine competition. It sets rules for transfers of agreement responsibilities and for calculating the 30-day equivalent supply. It also clarifies how off-label use affects renegotiation eligibility.
The orphan-drug question is one of the program's most contested edges. Drugs with a single orphan designation can be excluded from negotiation, and manufacturers have used that exclusion in ways that critics say protect blockbuster products. The rule addresses withdrawn indication approvals and the timing of the exclusion. It does not eliminate the underlying debate about how broadly the orphan exclusion should apply, and that debate is likely to continue in the next selection cycle.
The reaction
CMS Administrator Dr. Mehmet Oz framed the rule as a cost-control tool. He said the administration was "using every tool at our disposal" to lower drug costs, and that the rule gives CMS more negotiating room and should produce budget and patient savings.
Patient advocacy groups that support the program praised the fixed-combination policy. They see it as a response to a real loophole, not a theoretical one. The pharmaceutical industry is less enthusiastic. The rule proceeds despite ongoing litigation over the program, and manufacturers have challenged both the negotiation process and the government's authority to set prices.
The market reaction was visible in at least one corner. Alteogen, a South Korean company whose hyaluronidase platform is used to convert intravenous biologics into subcutaneous versions, fell about 16% on Nov. 9 as investors assessed the rule's effect on reformulation strategies. The rule does not ban those strategies. It changes their economics by tying the reformulated product to the original's negotiation timeline.
What to watch
The program is also still being litigated. Manufacturers have challenged the government's authority to set prices and the process CMS uses to select drugs. The final rule does not resolve those cases. It does give CMS a more defensible regulatory record, because the policies are now in a formal rule rather than guidance. A court that reviews the program will look at the statute and the rule, not only at the guidance documents.
The next milestone is Feb. 1, 2027, when CMS is expected to select up to 20 additional Part B and Part D drugs for negotiation, with prices effective in 2029. The selection list will be the first test of the new framework. It will show whether CMS uses the fixed-combination policy to capture products that might otherwise have escaped, and how the small-biotech floor affects the mix.
The March 1, 2027 deadline for small-biotech applications will show which companies seek the floor. The 2029 prices will show whether the rule produces the savings CMS projects. The litigation will continue in parallel. A court could narrow the program or strike down parts of it, and the rule does not resolve those challenges.
The rule is also a signal about how CMS intends to run the program in its second decade. The first three cycles were run through guidance, which is easier to change. The final rule is harder to unwind. It gives manufacturers, plans, pharmacies, and patients a more stable set of rules, and it gives the agency a more durable framework for the negotiations that follow.
The first negotiated prices were the opening act. The rule is the long run. The next selection cycle, and the first prices set under the new framework, will show whether the operating manual works as intended.
Primary sources
- CMS fact sheet for CMS-4215-F, the Medicare Drug Price Negotiation Program and Medicare Prescription Drug Benefit Program final rule, for the codification, the fixed-combination policy, the small-biotech floor, the Part D provisions, and the effective date.
- The Federal Register notice at 91 FR 72176 for the full regulatory text and the response to comments.
- Pharmaceutical Commerce for the fixed-combination policy, the hyaluronidase example, the industry criticism, and the CMS response.
- Fierce Healthcare for the codification, the program's legal context, and the reaction.
- CMS for the third-cycle selection announcement and the program timeline.
- Epocrates for the rule's effective date and the 2029 start.