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Preparing For The Inflation Reduction Act Drug-Price Negotiation Era (Medicare)
Right on schedule, the first cycle of the new Medicare Drug Price Negotiation Program (MDPNP) took effect on January 1, 2026, imposing a “maximum fair price” on 10 specific drugs dispensed to Medicare Part D beneficiaries. As predicted, the program has generated concern and confusion among independent pharmacies, with reduced payments, new compliance requirements, and growing cash-flow challenges reshaping how pharmacies operate in the new pricing era.
Table of Contents
- The Inflation Reduction Act’s Drug Provisions: What Are They & Why Do They Matter?
- MDPNP: Overview And Timeline
- What Does The Medicare Drug Pricing Negotiation Program Mean For Pharmacies?
- Compliance: Two New Technology Systems
- How Can Pharmacies Strengthen Inventory & Cost Controls In The New Pricing Environment?
- How Can PrimeRx Help Pharmacies Navigate The Medicare Drug Pricing Era?
- What Should Pharmacies Do To Ensure Success During The MDPNP Era?
The Inflation Reduction Act’s Drug Provisions: What Are They & Why Do They Matter?
The Medicare Drug Price Negotiation Program was created by the Inflation Reduction Act (IRA) of 2022. Within healthcare, the IRA established two major cost-containment initiatives:
- The Medicare Drug Price Negotiation Program: Authorizes the Secretary of Health and Human Services (HHS) to negotiate prices for certain high-spend Medicare drugs.
- The Inflation Rebate Program: Requires manufacturers to pay rebates if Medicare drug prices rise faster than inflation.
This article focuses on the MDPNP, which has direct and immediate implications for pharmacies participating in Medicare Part D.
MDPNP: Overview & Timeline
Cycle One – Ten Medicare Part D Medications
- January 2023-September 2024: CMS identified 10 medications to be subject to price negotiations. This was followed by a period of offers/counteroffers with manufacturers. The final list of negotiated maximum fair prices was announced on September 1, 2024.
- January 1, 2026: Maximum fair prices for those 10 medications became effective. The 10-cycle one medications include:
| Name of Drug | Primary Use(s) | Percent Price Reduction (based on 2023 list pricing) |
| Eliquis | Prevention/treatment of blood clots | 56% |
| Enbrel | Rheumatoid arthritis; Psoriasis; Psoriatic arthritis | 67% |
| Entresto | Heart failure | 53% |
| Farxiga | Diabetes; Heart failure; Chronic kidney disease | 68% |
| Fiasp and NovoLog | Diabetes | 76% |
| Imbruvica | Blood cancers | 38% |
| Januvia | Diabetes | 79% |
| Jardiance | Diabetes; Heart failure | 66% |
| Stelara | Psoriasis; Psoriatic arthritis; Crohn’s disease; Ulcerative colitis | 66% |
| Xarelto | Prevention/treatment of blood clots; Reduced risk of artery disease | 62% |
How were drugs selected?
CMS selected drugs for negotiation based on several criteria:- At least seven years must have elapsed since FDA approval (11 years or biologics).
- No generic or biosimilar competition
- Exclusion of certain orphan drugs, low-spend drugs, and plasma-derived products.
- Priority given to drugs with the highest levels of Part D spending.
Cycle Two – 15 Medicare Part D Medications
A second round of negotiated prices will take effect on January 1, 2027. Cycle 2 will affect an additional 15 medications covered by Medicare Part D. Key dates in the development of that list include:- January 2025: CMS announced a list of 15 drugs to be subject to price negotiations with drug companies. This was followed by a period of negotiations with drug companies.
- November 2025: CMS released the finalized list of maximum fair prices for those medications.
- January 2027: Maximum fair prices will take effect for the 15 medications included in cycle 2.
| Name of Drug | Primary Use(s) | Percent Price Reduction (based on 2024 list price) |
| Austedo; Austedo XI | Chorea in Huntington’s disease; Tardive dyskinesia | 38% |
| Breo Ellipta | Asthma; Chronic obstructive pulmonary disease | 83% |
| Calquence | Chronic/lymphocytic leukemia/Small lymphocytic lymphoma; Mantle cell lymphoma | 40% |
| Ibrance | Breast cancer | 50% |
| Janumet; Janumet XR | Type 2 diabetes | 85% |
| Linzess | Chronic idiopathic constipation; Irritable bowel syndrome with constipation | 75% |
| Ofez | Idiopathic pulmonary fibrosis | 50% |
| Otezla; Otezla XR | Oral ulcers in Bechet’s Disease; Plaque psoriasis; Psoriatic arthritis | 65% |
| Ozempic; Rybelsus; Wegovy | Type 2 diabetes; Type 2 diabetes and cardiovascular disease; Cardiovascular disease and obesity/overweight | 71% |
| Pomalyst | Kaposi sarcoma; Multiple myeloma | 60% |
| Tradjenta | Type 2 diabetes | 84% |
| Trelegy Ellipta | Asthma; Chronic obstructive pulmonary disease | 73% |
| Vraylar | Bipolar I disorder; Major depressive disorder; Schizophrenia | 44% |
| Xifaxan | Hepatic encephalopathy; Irritable bowel syndrome with diarrhea | 63% |
| Xtandi | Prostate cancer | 48% |
Cycle Three
Cycle three of MDPNP will affect up to 15 additional eligible drugs covered under Part D and/or payable under Part B. In addition, cycle 3 may also include renegotiations of drugs considered during cycles 1 or 2. Cycle 3 will adhere to the following timeline:- September 2025: Final guidelines issued outlining criteria for the selection and negotiation processes.
- February 2026: Deadline for CMS to publish the list of up to 15 drugs selected for negotiation. Beginning of the negotiation period.
- November 2026: Deadline for CMS to publish MFPs for drugs included in cycle 3 negotiations (and possibly, renegotiations).
- January 1, 2028: Maximum fair prices negotiated or renegotiated for selected drugs become effective.
What Does The Medicare Drug Pricing Negotiation Program Mean For Pharmacies?
The stated goal of the MDPNP is to lower costs for Medicare beneficiaries and reduce federal healthcare spending. However, for pharmacies, the program introduces significant financial and administrative challenges.
According to the National Community Pharmacists Association (NCPA), pharmacies are facing new compliance burdens, delayed payments, and reimbursement structures that threaten already-thin margins.
MFP and Revised Reimbursement Processes
Beginning January 1, 2026, pharmacies are reimbursed for MFP drugs through a two-part mechanism:
- Reimbursements: Medicare Part D plans reimburse pharmacies up to the maximum fair price, plus a dispensing fee.
- Refunds: Because MFP-based reimbursement often doesn’t cover a pharmacy’s acquisition cost, manufacturers are required to issue refunds to pharmacies to bridge the gap.
While refunds are required to be paid within 14 days, pharmacies may experience longer waits due to data exchange and processing delays. The NCPA has warned that these delays create substantial cash-flow challenges and could result in tens of thousands of dollars lost in annual revenue per pharmacy
Compliance: Two New Technology Systems
The MDPNP relies heavily on new technology infrastructure to track dispensing activity and process refunds. Two systems now play a central role.
Medicare Transition Facilitator System
The Medicare Transition Facilitator (MTF) System is a CMS-managed platform designed to support data exchange related to MFP drugs. Enrollment in the MTF is mandatory and a condition of Medicare participation.
The system includes two components:
- MTF Data Module. The purpose of the data module, according to analysis by Frier Levitt law firm, is to “ensure the seamless exchange of data among CMS, manufacturers, and pharmacies to facilitate efficient and timely application of the negotiated prices.”
- In addition, notes CMS, the data module allows manufacturers to determine which pharmacies are dispensing their medications under the negotiated maximum fair price, and how many prescriptions for those medications are being processed each day. This information is crucial for manufacturers to have in order to determine if additional refund payments to pharmacies are needed.
- Enrollment in the MTF Data Module is mandatory and a condition of Medicare participation. As such, pharmacies were encouraged to register with the MTF, which is available free of charge, beginning in June 2025, when the system became available. CMS offers a step-by-step enrollment process, during which pharmacies indicate their preference to receive refunds through an electronic transfer, a paper check, or through a third-party entity such as a PSAO.
- MTF Payment Module. The payment module, notes the Frier Levitt analysis, is an optional service available to manufacturers to facilitate the distribution of MFP refunds to pharmacies and other dispensing entities.
Beacon MFP
Beacon MFP is a manufacturer-supported platform that supplements the MTF. While not mandatory, it offers additional tools that many pharmacies find valuable, including:
- Processing Status Details. Pharmacies can access real-time information about refund status. This includes visibility into each step in the refund process.
- Good Faith Inquiries. The platform includes a mechanism for pharmacies and manufacturers to resolve disputes through good-faith negotiation.
- Basis of Pricing. The platform provides visibility into the processes used by manufacturers to determine refund values.
Because certain data elements aren’t accessible through CMS-managed MTF, Beacon MFP can help pharmacies validate payments and identify delays more efficiently.
How Can Pharmacies Strengthen Inventory & Cost Controls In The New Pricing Environment?
The new MFP pricing strategy does not reduce the price pharmacies pay for medications. Instead, it reduces the amount pharmacies will be reimbursed for dispensing those medications and requires manufacturers to issue refunds to account for the discrepancy. This creates a very tenuous situation for pharmacists, who are relegated to “hoping” they will be made whole by the combined reimbursement/refund process. But hope, of course, is not a good business strategy.
Instead, pharmacists must take steps to optimize inventory practices and identify cost efficiencies where possible.
How Can PrimeRx Help Pharmacies Navigate The Medicare Drug Pricing Era?
The PrimeRx pharmacy management system offers functionality designed to help pharmacies adapt to MFP-based reimbursement and increased reconciliation complexity. Key capabilities include:
- Reimbursement planning and visibility: Tools that help pharmacies understand plan reimbursement structures and anticipate payment outcomes.
- PrimeRx planning tool.
- Cost and pricing controls.
- Understanding patient plan usage.
- Reimbursement/Refund Management.
- Report Generation.
- Drug Cost Comparisons with PrimeRx MARKET. Real-time comparisons across multiple wholesalers to help pharmacies source medications at the most competitive prices. Key PrimeRx MARKET benefits include:
- Direct access to dozens of drug wholesalers and suppliers.
- Single-source solution for all medication/inventory needs.
- Fast, accurate results.
- Seamless ordering capability.
- Direct integration with PrimeRx.
- Claims Processing. PrimeRx streamlines electronic claims submission and tracking for Medicare Part D prescriptions, helping pharmacies identify rejected or delayed MFP claims quickly so reimbursement and refund issues can be addressed before they impact cash flow.
- Email/SMS Text/Phone. Pharmacies can notify Medicare patients about pricing changes or coverage updates related to negotiated drugs.
- Workflow Optimization. PrimeRx reduces administrative burden by automating prescription, inventory, and claims workflows, allowing pharmacy staff to manage increased MDPNP-related complexity without adding labor costs.
What Should Pharmacies Do To Ensure Success During The MDPNP Era?
To remain compliant and financially stable, pharmacies should prioritize the following steps:
- Ensure accuracy of the pharmacy’s NCPDP profile.
- Complete MTF enrollment for each NCPDP number.
- Evaluate cash-flow exposure for MFP drugs.
- Consider enrolling in the Beacon MFP system for payment validation support.
- Work closely with PSAOs, wholesalers, and software partners.
- Prepare for more detailed claims reconciliation.
January 1, 2026, marked the first milestone in the Medicare drug price negotiation, but many more changes are ahead. While the program aims to reduce costs for beneficiaries, pharmacies must adapt quickly to manage new risks, safeguard cash flow, and sustain long-term viability in an evolving reimbursement landscape.
Is Your Pharmacy Ready for Maximum Fair Pricing?
FAQs
Will the Inflation Reduction Act continue expanding negotiated drug lists each year?
Yes, more prescription drugs will be added annually through at least 2030.
Will Medicare beneficiaries see lower out-of-pocket costs under the IRA?
Yes, many patients are expected to benefit from reduced prescription drug costs.
Does the IRA directly set pharmacy reimbursement rates?
No, it influences pricing upstream but does not directly set pharmacy reimbursement.
Should pharmacies expect more administrative work during IRA transitions?
Yes, operational and documentation requirements will likely increase.
Can pharmacy management software help mitigate reimbursement volatility?
Yes, systems like PrimeRx offer tools to optimize inventory, workflow, and financial tracking.