CMS Codifies Drug Price Negotiation Program—With Modifications for 2029

On June 16, 2025, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule, “Medicare Drug Price Negotiation Program and Medicare Prescription Drug Benefit Program” (“Proposed Rule”), to codify the Medicare Drug Price Negotiation Program (“Negotiation Program” or “MDPNP”) and to establish new policies with respect to the MDPNP, for initial price applicability year 2029 and subsequent years.

“The [P]roposed [R]ule would…create greater long-term certainty for drug manufacturers that participate in negotiations,” the CMS news release states. “It includes policies for negotiating and renegotiating high-cost, single-source drugs beginning with initial price applicability year 2029, while continuing to support innovation and strengthen the program.”

As noted in an accompanying CMS Fact Sheet, Sections 11001 and 11002 of the Inflation Reduction Act of 2022 (IRA) (Pub. L. 117-169, August 16, 2022) established the MDPNP to negotiate maximum fair prices (MFPs) for certain high expenditure, single source drugs and biological products. In accordance with the Social Security Act (the Act), MFP means, with respect to a year during a price applicability period and with respect to a selected drug (as defined in section 1192(c) of the Act) with respect to such period, the price negotiated in accordance with section 1194 of the Act, and updated to account for inflation in accordance with section 1195(b) of the Act, as applicable, for such drug and year.

CMS notes that the fourth and subsequent cycle of negotiations for initial price applicability year 2029 will include up to 20 additional negotiation-eligible drugs (for a total of nearly 60 drugs). The MDPNP is currently in its third cycle, with CMS negotiating prices for 15 drugs (including the first Medicare Part B drugs) with the agreed-upon prices slated to take effect on January 1, 2028.

We discuss notable provisions of the Proposed Rule below.

Codification of Existing IRA/MDPNP Policies

The Proposed Rule, at 91 Fed. Reg. 36236, would codify policies related to the implementation of certain provisions of the IRA and amendments made by the Working Families Tax Cut legislation (Pub. L. 119-21, July 4, 2025). Specifically:

• The Proposed Rule would codify the Medicare Drug Price Negotiation Program, consistent with sections 1191 through 1198 of the Act, with limited modification. A new 42 C.F.R. Part 429 would codify:
  • definitions of terms consistent with the Act or established in the Negotiation Program Guidance; and
  • existing policies relating to, for example, identification of selected drugs; requirements for manufacturers of selected drugs; negotiation factors; the negotiation process; ineligibility for selection or deselection; and renegotiation of an MFP.

Note that CMS did not propose to codify the exception for Small Biotech Drugs from being considered negotiation-eligible, an exception that applied to initial price applicability years 2026, 2027, and 2028, though a temporary floor for Small Biotech Drugs newly applies for 2029 and 2030, as described below.

• The Proposed Rule would codify the Medicare Prescription Drug Benefit Program at 42 C.F.R. Part 423, consistent with section 11001(b) of the IRA. The rule proposes to codify two policies affecting the Medicare Part D benefit, consistent with statutory requirements. Specifically, CMS would codify policies related to formulary inclusion of selected drugs and the definition of “negotiated price.” The first policy ensures that Part D plans include selected drugs with an MFP in effect on their formularies, and the second policy ensures that the negotiated prices paid to dispensing entities by Part D plans do not exceed the MFP plus any dispensing fees.

New MDPNP Policies

The Proposed Rule would also establish new policies for the MDPNP at the new Part 429, as follows:

Proposed § 429.125(b)(4)(i)

• Would address a fixed combination drug loophole by modifying the general fixed combination drug policy to clarify treatment of certain fixed combination drugs that are new formulations.
  • Under the modification, if CMS determines that products with the same New Drug Application (NDA)/Biologics License Application (BLA) holder differ in active moiety(ies)/active ingredient(s)—due to the inclusion of an active moiety/active ingredient that creates a new formulation and enables an alternative route of administration for the co-administered active moiety(ies)/active ingredient(s)— then CMS will identify the potential qualifying single source drug using all dosage forms and strengths of the shared active moiety(ies)/active ingredient(s) that is offered by the same NDA/BLA holder.

Proposed § 429.125(c)(3)(i)

• Would clarify how CMS would identify the day from which to measure the seven- and 11-year time since approval and licensure periods for drugs that formerly qualified for the Orphan Drug Exclusion.

Proposed § 429.130

• Would codify the process and schedule according to which CMS reviews information to determine if the manufacturer of a generic drug or biosimilar that is approved or licensed, respectively, is engaged in Bona Fide Marketing (as defined in § 429.20) of that generic drug or biosimilar.

Proposed  429.20

• Would add a number of definitions borrowed from existing laws and regulations.

Proposed § 429.210(c)

• Would provide additional details related to the Primary Manufacturer transfer of responsibility for all requirements of the Negotiation Program Agreement to an acquiring entity.

Proposed § 429.415(a)(2)

• Would explain how CMS would calculate the 30-day equivalent supply for a selected drug that is typically administered one time (for example, some vaccines, gene therapies, and cancer therapies).

Proposed § 429.440

• Would explain how CMS would implement the Temporary Floor for Small Biotech Drugs for initial price applicability years 2029 and 2030.

Proposed §§ 429.605 and 429.610

• Would clarify when off-label use would be considered for renegotiation eligibility and selection by aligning the renegotiation eligibility and selection policies for off-label use with the initial offer development process. This clarification maintains consistency across CMS processes for negotiation and renegotiation, as required by section 1194(f)(4)(B) of the Act.

Takeaways

• CMS is accepting comments on the Proposed Rule until no later than 5 p.m. on August 17, 2026, either electronically or by mail at the addresses listed on the announcement. Submissions should refer to file code CMS-4215-P. (Note: The correct link is https://www.regulations.gov/docket/CMS-2026-2080, not https://www.regulations.gov/docket/CMS-2026-CMS-2026-2080, which appears on the announcement.)
• A CMS timeline for the MDPNP for 2029 is available
• CMS expects to publish the final version of the rule in Fall 2026. If finalized, the proposals described above would apply with respect to all initial price applicability years beginning with 2029, including the selection of drugs and the negotiation or renegotiation of MFPs for initial price applicability year 2029 that will take place during calendar year 2027.
• Since the processes for drugs that were selected for negotiation for initial price applicability years 2026, 2027, and 2028—and for renegotiation for initial price applicability year 2028—will be at varying stages of implementation when the Proposed Rule is finalized, consistent with the program instruction requirement at sections 11001(c) and 11002(c) of the IRA, the program guidance issued by CMS for initial price applicability years 2026, 2027, and 2028 remains applicable and is not superseded by the Proposed Rule with respect to those years.
• CMS reminds stakeholders that the exclusion for Small Biotech Drugs from what is otherwise a negotiation-eligible drug under section 1192(d)(2) of the Act ended in initial price applicability year 2028 and is, therefore, not codified in this rule. However, the definition of an eligible Small Biotech Drug for purposes of the calculation of the temporary floor on the maximum fair price for Small Biotech Drugs under section 1194(d) of the Act is included in this Proposed Rule.

If you have questions, please reach out to the author.

Epstein Becker Green Staff Attorney Ann W. Parks contributed to the preparation of this post.