Today, the Centers for Medicare and Medicaid Services (CMS) released the second round of negotiated drug prices under the Inflation Reduction Act (IRA). The first negotiated prices, set to take effect in 2026, lowered the cost of 10 drugs by 38 percent to 79 percent—discounts that would have saved Medicare $6 billion in 2023 and are expected to cut beneficiaries’ out-of-pocket costs by $1.5 billion in the first year alone. The second round of negotiations targeted 15 of the program’s costliest drugs, including treatments for common conditions such as diabetes and asthma, and achieved price reductions ranging from 38 percent to 85 percent.
While the Trump administration is claiming credit for today’s lower prices, its Big Beautiful Bill (BBB) created carve-outs that shield more drugs from Medicare negotiation at taxpayers’ and patients’ expense. In place of real reform, the administration has promoted a string of largely superficial drug pricing initiatives, including best-price agreements requiring manufacturers to offer Medicaid the lowest available prices—discounts the program already receives under federal law—and the TrumpRx website, which was initially billed as a direct-to-consumer platform for lower-cost drugs but is now expected to function mainly as a portal directing users to manufacturers’ websites. Any discounts achieved will primarily be limited to the uninsured, many of whom already have access to comparable discounts through existing coupon or patient-assistance programs. And given the high cost of brand-name drugs, even reduced prices are likely to remain unaffordable for many patients.
Medicare already has a powerful tool to lower prescription drug costs: the authority to negotiate prices. The Trump administration’s BBB, however, undermines that authority—sparing high-priced drugs from negotiation and leaving billions of dollars in savings off the table.
The Big Beautiful Bill undermines Medicare negotiation
The BBB tilts the playing field back toward the drug industry in two ways. First, it broadens the IRA’s exclusion for orphan drugs—treatments for rare diseases affecting fewer than 200,000 people or treatments deemed unlikely to be profitable. Drugmakers receive several lucrative incentives to develop these therapies, including seven years of market exclusivity and waived regulatory fees. But manufacturers have widely exploited these incentives—for example, through “salami slicing” conditions into ever-narrower subtypes to win orphan status. In line with precedent, the IRA granted these manufacturers preferential treatment by exempting drugs approved for a single rare disease from negotiation. The BBB goes even further—exempting drugs with multiple orphan approvals, even as their markets expand.
The cancer immunotherapies Keytruda and Opdivo illustrate the stakes. Originally approved as orphan drugs for rare cancers, their uses have since expanded to multiple common cancers and now generate roughly $40 billion per year combined. Despite projected Medicare Parts B and D spending of more than $18 billion in 2024, the BBB exempts these blockbuster drugs from negotiation—prolonging record revenues for manufacturers and unaffordable costs for patients.
Beyond creating new carve-outs, the BBB delays when orphan drugs become eligible for negotiation. Under the IRA, eligibility began seven years after approval for small-molecule drugs and 11 years after approval for biologics—regardless of whether the drug was first approved for an orphan indication. The BBB shifts that timeline by starting the clock only once a drug is approved for non-orphan use. For therapies that first launch in rare-disease markets but later gain approval for common conditions, negotiation is postponed—and monopoly pricing preserved—for several additional years.
According to the Congressional Budget Office, these changes will cost Medicare nearly $9 billion over the next decade. However, given that just 10 of the affected 46 drugs accounted for roughly $14 billion in 2023 spending, the true impact could be far greater. Some experts warn that the BBB’s broad exemptions may leave fewer than 20 drugs eligible for negotiation each year.
The next phase of reform: Broader scope, stronger safeguards, and real transparency
The second round of negotiated prices is proof that Medicare negotiation is working. But to fully realize its potential, policymakers should pursue three key reforms: expanding the program’s scope, curbing patent abuses, and demanding greater transparency from manufacturers.
Expand the scope of negotiation
The IRA’s phased rollout—10 drugs in 2026, 15 in 2027 and 2028, and 20 annually thereafter— captures only a fraction of Medicare’s total drug spending. Congress could unlock far greater savings by lifting or raising these caps and closing the loopholes that allow drugs to avoid negotiation altogether. Key reforms include narrowing orphan-drug eligibility; revoking orphan status once a drug’s uses expand beyond rare diseases or reach blockbuster sales; prohibiting tactics that delay negotiation, such as reformulating versions of drugs to reset eligibility timelines; and shortening the period before drugs become eligible. Other U.S. programs and peer countries—including Medicaid; the Department of Veterans Affairs; and health systems in Germany, the United Kingdom, and Australia—negotiate prices at launch, preventing years of cumulative manufacturer price hikes before negotiations begin.
Over the longer term, the United States should pursue a more coordinated approach to drug purchasing to strengthen collective bargaining power. In contrast to countries such as Australia and Canada, where coordinated purchasing gives governments greater leverage and consistent pricing, the United States bargains in silos, with each program and insurer negotiating separately. Aligning prices across public programs—and ultimately the commercial market—would require legislative action but could yield significant savings across the health care system.
Curb patent abuse
While carve-outs delay negotiation, industry patent abuses keep prices inflated even once drugs are eligible. Commonly used tactics include constructing sprawling “patent thickets,” filing evergreening claims on trivial drug modifications, and cutting pay-for-delay deals that block generic competition. A Public Citizen analysis found that drugmakers used these strategies to maintain monopoly pricing on 9 of the 10 drugs selected for Medicare’s first round of negotiations—forcing CMS to negotiate from prices kept artificially high by patents that should have expired years earlier.
Case study: How Enbrel’s manufacturer extended its monopoly
If Congress fails to act on existing proposals to curb evergreening, ban pay-for-delay settlements, and accelerate generic entry, CMS should factor patent abuses directly into price determinations, applying steeper discounts to drugs whose manufacturers engage in these tactics. This would ensure negotiation not only accounts for a drug’s clinical value but also delivers accountability where the market has failed.
Require manufacturer transparency
To negotiate effectively, CMS must have access to data on manufacturers’ research and development (R&D) costs, the share of those costs funded by taxpayers, and how quickly investments are recovered. Today, drugmakers routinely withhold this information—invoking trade-secret protections and exploiting weak federal disclosure rules. This lack of transparency enables companies to inflate the cost of developing a drug, downplay the government’s contribution, and justify high launch prices or annual price increases by pointing to early R&D spending and rising manufacturing costs.
While the IRA directs CMS to consider R&D costs, federal funding, and recoupment when negotiating prices, it stops short of requiring manufacturers to disclose that information or penalizing those who fail to comply with existing reporting requirements. Congress should close this gap by requiring public, drug-level reporting of cost and revenue data, including taxpayer contributions, and federal agencies should reinforce transparency obligations through their funding and licensing terms.
Conclusion
The IRA broke through decades of unchecked pharmaceutical power. The task now is to defend those reforms against further assaults from the Trump administration and build on their successes to make affordable medicines a reality for all Americans.