Medicare Drug Price Fights Move to Part B, Keytruda and Courts

The calendar is the story

Medicare's drug price negotiation program now runs on a fixed annual schedule. That schedule has made the next round of fights between the pharmaceutical industry and the government easy to predict. Several separate disputes will come to a head over the next four months. The third round of talks, the first to include drugs given in doctors' offices, ends in November. A permanent rulebook for the fourth round is expected to be finalized this fall. The industry's main trade group has also sued over a separate Trump administration pricing pilot that starts in January. Together, these show that the argument has moved past whether Medicare can negotiate. It is now about how far that power reaches and which drugs it covers.

The program is already in effect. Negotiated prices for the first 10 drugs, including Eliquis, Jardiance and Xarelto, took effect January 1, 2026, and 15 more begin January 1, 2027.1 That second group includes Novo Nordisk's semaglutide drugs. Medicare's negotiated 30-day price is $274, down from a 2024 list price of $959, a 71% cut.8 CMS estimates the second-round prices would have reduced net Medicare spending on those drugs by about 44%, or $12 billion, if they had applied in 2024.8

Round three: Part B arrives

The third round is the one now nearing its end. On January 27, 2026, CMS named 15 drugs for prices that take effect in 2028. For the first time, the list included drugs paid under Part B, which covers drugs given in a doctor's office or clinic.11 The list includes Biktarvy, Botox, Cimzia, Cosentyx, Entyvio, Kisqali, Orencia, Trulicity, Verzenio, Xeljanz and Xolair, among others. Boehringer Ingelheim's diabetes drug Tradjenta was picked for the program's first-ever renegotiation.11 About 1.8 million people with Medicare used the 15 drugs, which cost $27.0 billion, roughly 6% of combined Part B and Part D spending, over the 12-month selection period.12

Every manufacturer agreed to take part, and CMS confirmed this on March 13.14 No company chose the alternative of steep excise taxes.2 Under the schedule, September 11 was the last day for negotiation meetings and September 30 was CMS's deadline for final offers.10 Companies have until October 31 to accept or reject those offers. The negotiation period closes November 1, and CMS must publish the agreed prices by November 30.4 One summary says the prices will be published in 2027.15 The statutory schedule CMS set out points to late November 2026, so readers should expect numbers before the end of this year.410

The Part B label overstates how much has changed. Milliman calculates that 80% of spending on the newly selected drugs is still in Part D. Only five of the products (Orencia, Entyvio, Xolair, Botox and Cimzia) have most of their gross spending in Part B.18 Health Affairs analysts make a similar point. Part D has more drugs and more use, so a list built on combined spending will still lean toward pharmacy drugs.13 Part B was opened, but only partly.

A list that may shrink before it takes effect

One point gets less attention than it should: the 2028 list may not survive intact. Milliman notes that Xeljanz and Xolair were expected to face generic and biosimilar competition this year. If CMS finds real competition on the market before the negotiation period ends, their negotiated prices might never take effect.18 Trulicity could be dropped after a single year if a biosimilar arrives in 2027. Tradjenta's renegotiation could become irrelevant if generics launch first.18 The program is designed to step aside once competitors arrive, so this is not a failure. Still, the headline totals for selected drugs may turn out larger than the savings that actually materialize.

The Part B ripple effect

The industry warnings that carry the most weight are about how Part B pricing affects others, more than about drugmakers' own revenue. Milliman shows that when a negotiated price replaces the average sales price, the add-on payment to doctors shrinks with it. In its example, a $1,000 drug negotiated down to $400 cuts the provider's add-on from $60 to $24 per unit.18 Because the reported average sales price drops, commercial payment rates tied to it can fall as well. Separately, manufacturers could face overlapping discounts through the Medicaid rebate program for patients enrolled in both Medicare and Medicaid.18 This means oncology practices, infusion centers and hospitals are likely to become new voices in the debate, and they may not side with the government.

Round four: Keytruda and the reformulation fight

The bigger fight is over the 2029 cycle. On June 12, CMS proposed its first formal regulation for the program. The law allowed the first three cycles to run on guidance, and that authority is ending.33 Starting in 2029, CMS can select up to 20 drugs a year across Parts B and D.37 The comment period closed August 17.35 The final rule is expected this fall.34

The key provision targets drug reformulations. It would group subcutaneous (under-the-skin) versions of a drug with the original intravenous version when the added ingredient mainly changes how the drug is delivered. That is the case for hyaluronidase-based shots, including the new forms of Keytruda and Opdivo.33 CMS calls this closing a loophole that lets companies extend a blockbuster's protected period. Merck, Bristol Myers Squibb and the delivery-technology company Halozyme are most exposed.31 The stakes are large: Keytruda and Opdivo brought in $41 billion in combined global sales last year.31

Both drugs are expected to make the list of 20 due by February 1, 2027.31 There is real uncertainty about this. One Leerink analyst noted that biosimilars of both drugs are expected around December 2028, and it is unclear whether that is soon enough to keep the subcutaneous versions off the list.31 Forbes contributor Joshua Cohen argues CMS probably will not treat late-2028 competition as real enough to exempt either drug by early 2027.34 Our reading agrees with Cohen. Under the statutory schedule, future competition counts for little until the products are actually on the market.

This fight was postponed once already. The 2025 reconciliation law changed the orphan-drug exclusion. Time spent on the market as an orphan-only drug no longer counts toward eligibility, which pushed Keytruda and Opdivo out of the 2028 round.39 Milliman estimates the 15 selected drugs would have totaled about $39 billion in spending, 44% more, if those two cancer drugs had been included.18 CBO now estimates the orphan change will cost about $8.8 billion, 80% above its original $4.9 billion estimate.39

The industry's two-front strategy

The industry's legal challenge to negotiation itself has mostly failed. In August, the Fifth Circuit rejected PhRMA's constitutional challenge, largely because participation in Medicare and Medicaid is voluntary.22 The Supreme Court earlier declined to hear appeals from six drugmakers. Supporters of the program say that ended the legal route for those companies.36 So the pressure has moved to Congress. Advocates point to the EPIC Act, which would extend the period before small-molecule drugs become eligible for negotiation from nine years to 13.36

At the same time, PhRMA has opened a new legal front against the administration's own pricing agenda. On October 7, it sued in federal court in Washington, D.C. to block GLOBE, a mandatory Part B pilot that ties drug payments to prices in other wealthy countries ("most-favored-nation" pricing).21 The group argues CMS has used its authority to test pilot programs to impose national price controls Congress never approved.22 GLOBE was finalized last week and is set to start January 1, 2027.23 It requires rebates measured against prices in 19 countries and covers areas with about 25% of traditional Medicare enrollees.30

The immediate financial stakes are small. The administration exempted all but three or four companies in exchange for voluntary deals to charge most-favored-nation prices in Medicaid.25 HHS's projected savings fell from about $11.9 billion in the proposal to roughly $440 million over seven years in the final rule.30 Coverage agrees on why PhRMA is suing anyway: the precedent.28 Most of the voluntary deals expire in about three years. A win for CMS could leave those companies facing mandatory pricing when the deals end, and could let the model expand without new legislation.24 A win for PhRMA would also narrow the path for GUARD, the companion pilot for Part D.26

What to watch

The industry's position now amounts to this: it has accepted price negotiation written into law, it accepts negotiated deals it signs voluntarily, and it challenges anything the executive branch imposes on its own authority. That position looks sustainable. What is less certain is how much the program will actually save. Health Affairs analysts note the administration has not shown public evidence that its voluntary deals are producing savings.33 Its own regulatory analysis projects higher Part D spending through 2030 before savings begin in 2031.33 The November 30 price list will show how hard CMS pushed in its first Part B round. The February 2027 list will show whether the reformulation rule brings Keytruda into negotiation.