Medicare Drug Negotiation: AARP Finds $197B in Potential MFN Savings

What the study found

AARP has put a number on a question Washington keeps returning to: how much would Medicare save if it paid what other wealthy countries pay for brand-name drugs? The organization's answer is close to $200 billion over five years, from just 10 medicines. The analysis came from the AARP Public Policy Institute and California-based Verdant Research and was published in early August. It looked at the 10 brand-name drugs with the highest total Medicare spending in 2025 that have never been part of Medicare's price negotiations.11 Medicare spent nearly $50 billion on those drugs last year, for more than 3 million enrollees.11

The researchers modeled "most-favored-nation" (MFN) pricing, which would require drugmakers to charge Medicare the lowest price they accept in comparable countries. Under that approach, projected Medicare spending on the 10 drugs from 2029 through 2033 would drop from $273 billion to $76 billion, a cut of $197 billion.11 The report also tested a milder option: applying Medicare's existing negotiation process to the same drugs. That would lower projected spending to $155 billion, saving about $118 billion.1215 Savings for individual drugs ranged from $2 billion to $55 billion, according to report author Leigh Purvis.11

The study's most pointed finding concerns eligibility, not savings. Each of the 10 drugs cost Medicare more than $2 billion in 2025, yet only one can be selected for negotiation in 2027 because of exemptions in current law.15 Under the 2022 Inflation Reduction Act, a drug must be on the market for seven or 11 years before it qualifies. AARP estimates that cutting the wait to three years would save $21 billion between 2026 and 2030.11 It also wants to repeal a newer exemption for drugs treating diseases that affect fewer than 200,000 people, which is projected to raise Medicare drug spending by almost $9 billion over a decade.11

How the negotiation program sets the baseline

The proposal builds on a program that is already reshaping drug prices. Negotiated prices for the first 10 Part D drugs took effect on January 1, 2026. A second set of 15, including Ozempic and Wegovy, takes effect in 2027.2 CMS expects Part D enrollees to save $1.5 billion in out-of-pocket costs from the first round and $685 million from the second.14 In January 2026, CMS chose another 15 Part B and Part D drugs whose negotiated prices will start in 2028.14 In June, it proposed making the program permanent.8

The second round shows how hard it is to say what "savings" means. CMS described the 2027 prices as a 44% reduction, or $12 billion, measured against 2024 spending.4 Officials also said a better methodology puts the true net savings at about $8 billion, or 36%.10 Milliman's actuaries went lower, estimating real net savings at 25% to 30% once manufacturer discounts already built into Part D are counted.9 For any headline projection, AARP's included, the underlying assumptions matter as much as the total.

The administration's separate MFN deals complicate things further. Under its agreements with Eli Lilly and Novo Nordisk, Medicare would pay $245 for Ozempic and Wegovy, less than the $274 price set through formal negotiation.4 A Milliman analysis likewise found the $245 price to be 36% below Wegovy's negotiated price of $386.9 In practice, deals the White House struck outside the statute have beaten the statute's own results on at least one blockbuster drug. That strengthens AARP's argument that international benchmarks can push prices lower than negotiation alone. Seventeen companies signed MFN agreements in July 2025, and the TrumpRx cash-price website launched in February. TrumpRx does not work with Medicare or with insurers.11

The Part D premium squeeze

AARP presents the study as more than a budget exercise. Its immediate concern is premiums for stand-alone Part D plans, which pair with traditional Medicare. On July 28, CMS said it would end a three-year Part D premium stabilization pilot after only two years. CMS Administrator Mehmet Oz called the pilot an insurance-industry "bailout."11 AARP says it is hearing more and more from older Americans who fear much higher drug-plan premiums in 2027.11

This is where the coverage diverges most. CMS's projections, released at the end of September, are far less alarming. The agency expects the average stand-alone Part D premium to rise by less than a dollar, from $35.09 to $36. It expects the drug portion of Medicare Advantage premiums to fall 38%, from $11.32 to $7.24 One plausible reading is that both accounts are true: the national average stays flat while some regions and plans see sharp increases. That fits AARP's careful wording that premiums "may rise sharply for some."11 Averages also leave out other costs that are clearly rising. In 2027 the Part D deductible goes from $615 to $700, and the annual out-of-pocket cap goes from $2,100 to $2,400.22

The gap between Medicare Advantage and stand-alone plans is built into the system. Medicare Advantage plans receive government rebates that let them absorb Part D redesign costs without raising premiums, while stand-alone plans took the hardest hit.11 AARP has even suggested that people in stand-alone plans compare Medicare Advantage options with bundled drug coverage during the October 15 to December 7 enrollment window.13

Medicare Advantage: a cheaper premium with more risk

The Medicare Advantage figures need the same caution. CMS projects the weighted average premium will fall 16.5%, from $14.37 to $12, and says roughly eight in 10 enrollees can keep their plan at the same or a lower premium.24 Analysts see a different picture. CMS's average includes cheaper special needs plans, so it understates changes for general enrollment. A J.P. Morgan review found premiums for Medicare Advantage plans with drug coverage rising by several dollars, and Leerink Partners estimated industry-weighted premiums up about 1%.23 Leerink also found maximum out-of-pocket limits up 10% on average and Part D deductibles up 30%.23

One analysis put the trade-off this way: the median in-network out-of-pocket limit rose $600, to $7,100, while the average premium fell only $28.44 a year.29 Every major insurer is cutting plans. Humana is dropping about 2,400 and UnitedHealthcare about 690.23 Nearly 1 million people could lose access to their current plan.30 The pattern points to insurers keeping premiums low and moving costs onto enrollees who end up needing care.

Will lower prices reach patients?

Critics of the AARP study raise two objections, and they differ. The first comes from the drug industry. PhRMA chief Stephen Ubl says MFN pricing would mean fewer treatments, put planned U.S. investment at risk and increase reliance on China.14 A Washington Examiner op-ed called the $200 billion figure a "mirage" that would hurt research and development.17 Others warn that drugmakers could respond by raising prices abroad.12

The second objection is subtler and arguably more important for patients. Because Part D now caps out-of-pocket spending, someone on an expensive specialty drug reaches the same $2,400 limit whether the price is cut in half or not. On this view, lower prices mostly show up in plan costs and premiums, not in pharmacy bills.12 That is not an argument against the policy. It does mean the main benefit of MFN pricing would be lower premiums and federal spending, which is the effect AARP itself emphasizes,11 not dramatic savings at the counter for the sickest enrollees. Earlier AARP research does show clear out-of-pocket relief for patients who don't hit the cap: enrollees' costs for the first 10 negotiated drugs fell by an average of 51%.20

Medicaid and hospital costs

The Medicare debate is happening as Medicaid shrinks, and the two affect each other. Starting January 1, 2027, adults in the Medicaid expansion population must show 80 hours a month of work or similar activity, or $580 in monthly income, and must re-verify eligibility every six months.31 The Congressional Budget Office's 2025 estimate projected the law's Medicaid changes would save $887 billion over a decade and leave 7.5 million more people uninsured.40 CMS itself projects about 2.3 million people will lose coverage in the first year.37

Hospitals pay for this downstream. The Urban Institute estimates the 2025 law will produce $278 billion in uncompensated care by 2034.31 Hospitals tend to recover unpaid care through the rates they negotiate with private insurers, which means employer premiums go up.34 Meanwhile, the administration is bringing MFN pricing into Medicaid: CMS says every state has applied for its GENEROUS Model, which offers most-favored-nation drug pricing.5

The bottom line

Taken together, the coverage suggests AARP's $197 billion figure is best read as a ceiling, not a forecast. It assumes Congress acts, and that is a big assumption.12 Still, its central argument holds up. The current negotiation program leaves out most of Medicare's costliest drugs, and the administration's own MFN deals show that international benchmarks can push prices lower than the statute does. The real fight is over who benefits. Lower drug prices would mainly ease premiums and taxpayer spending, at a time when insurers are shifting costs onto sick enrollees and Medicaid cuts are pushing unpaid hospital bills onto everyone else.