WASHINGTON, D.C. — The Centers for Medicare & Medicaid Services (CMS) released its final guidance for the third cycle of the Medicare Drug Price Negotiation Program on Tuesday, introducing major changes aimed at boosting transparency, expanding protections for rare disease treatments, and aligning drug cost calculations across Medicare plans.
The new rules, part of President Donald Trump’s “Lowering Drug Prices by Once Again Putting Americans First” initiative, mark another step in the administration’s push to reduce prescription drug costs and expand access to affordable medication.
“Thanks to President Trump’s leadership, HHS and CMS are working every day to lower drug prices, increase transparency, and unleash American innovation,” said Health and Human Services Secretary Robert F. Kennedy, Jr. “Today’s guidance will provide Americans with greater access to affordable, life-saving medications while promoting continued investment in new drugs.”
The final guidance incorporates feedback from pharmaceutical manufacturers, healthcare providers, and patient advocates, refining how drugs are selected and priced under Medicare Parts B and D. It also implements expanded orphan drug protections enacted in the Working Families Tax Cuts Act, signed earlier this year.
Under the updated policy, CMS will now exempt from negotiation any Food and Drug Administration–designated orphan drug developed solely for one or more rare diseases or conditions. Officials said the change ensures incentives remain strong for companies developing therapies for rare diseases while keeping negotiations focused on widely used, high-cost drugs.
“CMS is working to lower healthcare and prescription drug costs for Americans while ensuring the negotiation process is open, fair, and responsive to changes in the market and patient needs,” said CMS Administrator Dr. Mehmet Oz. “We’ve listened to stakeholders, and their feedback helped us make the program more transparent and workable for manufacturers and patients alike.”
Other key revisions include integrating Medicare Advantage (MA) encounter data into drug selection calculations — a shift from earlier guidance that relied solely on traditional fee-for-service data. The change aims to create a more accurate picture of overall Medicare drug spending.
The new framework also clarifies how vaccines for infectious diseases will be treated under the negotiation program, defining eligibility based on their antigen components while maintaining flexibility for future vaccine innovations.
“This final guidance shows CMS’ commitment to ensuring Americans get the best value for their healthcare dollars,” said Chris Klomp, director of the Center for Medicare. “By negotiating fair prices for high-cost drugs, we protect beneficiaries from unaffordable out-of-pocket costs while safeguarding taxpayer resources.”
The third round of drug negotiations will take place in 2026, with new maximum fair prices taking effect on January 1, 2028. CMS will announce up to 15 additional drugs for potential negotiation by February 2026, building on the 25 drugs already under review from previous rounds.
Officials said the policy reflects the administration’s broader effort to control healthcare costs while sustaining innovation across the pharmaceutical industry — a balancing act that remains central to Medicare reform.
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