Drug Deals: Medicare Issues Final Rule on Drug Negotiation Program

On Nov. 5, 2026, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that codifies policies established in guidance documents for the Medicare Drug Price Negotiation Program (“Negotiation Program”) for initial price applicability year 2029 and beyond (CMS-4215-F). The final rule is effective Dec. 5, 2026.  Below, we provide the key highlights arising from the rule based largely on a fact sheet on the final rule also released by CMS.

Identification of Selected Drugs

 Section 1192 of the Act establishes the requirements governing the publication of the selected drug list for an initial price applicability year, the identification of selected drugs, ranking of negotiation-eligible drugs, and the identification of qualifying single source drugs. CMS codifies these policies consistent with statute and guidance for initial price applicability year 2028, with a new policy to clarify how CMS will identify qualifying single source drugs to address potential program integrity concerns posed by specific new formulations.

Additionally, CMS clarifies the treatment of withdrawn approvals for indications when identifying whether a drug that formerly qualified for the orphan drug exclusion meets eligibility criteria to be a qualifying single source drug, in accordance with amendments made by the “Working Families Tax Cut” legislation (Pub. L. 119-21).

Requirements for Manufacturers of Selected Drugs

 Section 1193(a) of the Act establishes the Negotiation Program Agreement and the requirements for a willing primary manufacturer to enter into and sign the Negotiation Program Agreement no later than Feb. 28 following the selected drug publication date. The Negotiation Program Agreement will remain in effect, including through renegotiation, as applicable, until the selected drug is no longer considered a selected drug under section 1192(c) of the Act, unless it is terminated sooner by the primary manufacturer under specified conditions.

CMS finalizes additional details related to the primary manufacturer transfer of responsibility for all requirements of the Negotiation Program Agreement to another entity. In addition, CMS codifies the timing and process for executing and terminating a Negotiation Program Agreement with CMS and the requirements a willing primary manufacturer is subject to upon executing the Negotiation Program Agreement with CMS, including mandatory submission of data to CMS, consistent with statute and guidance for initial price applicability year 2028.

Negotiation Factors

After entering into an Agreement with CMS and in accordance with section 1193(a)(4) of the Act, the primary manufacturer of each selected drug must submit the following information with respect to the selected drug: information on the non-Federal Average Manufacturer Price (non-FAMP) and any information that CMS requires to carry out the Negotiation Program, including but not limited to, information related to the manufacturer-specific factors listed in section 1194(e)(1) of the Act.

Additionally, primary manufacturers and any interested party may voluntarily submit evidence about the selected drugs and potential therapeutic alternatives as described in section 1194(e)(2) of the Act. In accordance with section 1194(e) of the Act, CMS uses manufacturer-specific data and available evidence about the selected drugs and their therapeutic alternatives as the basis for determining offers and considering counteroffers in the negotiation process. CMS codifies these policies, including submission requirements for primary manufacturers, requirements for primary manufacturers to update submitted data, and how CMS will consider evidence from comparative effectiveness studies. These policies are consistent with statute and guidance for initial price applicability year 2028.

Negotiation Process

 CMS develops and uses a consistent methodology and process for negotiation with the aim of achieving agreement on “the lowest [MFP] for each selected drug” in accordance with section 1194(b)(1) of the Act. The negotiation process includes:

• Engagement with primary manufacturers and interested parties, including patients;
• The development and delivery of the written initial offer, including a concise justification, to the primary manufacturer of a selected drug;
• The ability for the primary manufacturer to accept an offer or provide a statutory written counteroffer;
• Optional negotiation meetings between CMS and the primary manufacturer;
• Additional price exchange opportunities;
• The conclusion of negotiation, including a final offer sent by CMS to the primary manufacturer, where applicable; and
• The publication of agreed-upon MFPs and explanations of such MFPs.

CMS codifies policies for the negotiation process, including engagement with primary manufacturers and interested parties, the offer and counteroffer process, and the publication and explanation of the MFP. These policies are consistent with statute and guidance for initial price applicability year 2028.