Background

As the Inflation Reduction Act’s (IRA) Medicare Drug Price Negotiation Program continues to be implemented, negotiation outcomes from earlier cycles will increasingly shape those that follow. The Centers for Medicare & Medicaid Services (CMS) has conducted negotiations for the first two years of maximum fair prices (MFPs) for Initial Price Applicability Year (IPAY) 2026 (effective January 1, 2026) and IPAY 2027 (effective January 1, 2027).

For IPAY 2028, CMS finalized guidance in late September 2025 and announced the list of 15 drugs selected for negotiation on January 27, 2026. Based on the list of selected products, 13 of the 15 IPAY 2028 drugs fall within the same therapeutic classes as drugs with negotiated prices from IPAY 2026 and 2027. Across IPAYs 2026, 2027, and 2028, this includes 31 total drugs treating chronic diseases and nine oncology drugs. Given this overlap, CMS is likely to treat previously negotiated drugs as “therapeutic alternatives,” making them a key input to the MFP starting point for IPAY 2028 drugs. As a result, negotiation outcomes from earlier cycles are expected to shape IPAY 2028, alongside new dynamics introduced by the inclusion of Part B drugs.

Key Negotiation Dynamics to Watch for IPAY 2028

1. Reliance on previously negotiated MFPs as reference points may not fully reflect innovation in evolving therapeutic classes. The negotiation framework incorporates a value assessment alongside market factors such as volume, utilization, and pricing patterns. As drugs negotiated in earlier cycles are used as therapeutic alternatives for products selected in subsequent cycles, unique product factors that shaped prior negotiation outcomes will play an increasing role in setting price benchmarks for newly selected drugs. This dynamic is particularly relevant in chronic disease areas, where multiple drugs have been selected across IPAYs 2026, 2027, and 2028 for common conditions, such as diabetes (eight drugs), immunology (eight drugs), heart disease (five drugs), and respiratory conditions (five drugs).

• Influence of prior negotiated products on future MFP starting points: When previously negotiated drugs are used as therapeutic alternatives, later-cycle negotiations may begin from pricing benchmarks informed by MFPs that were set based on a different set of clinical evidence, market conditions, and value considerations. If market factors such as volume, product-specific pricing, and utilization play a larger role in determining the earlier MFP, this may limit the ability of subsequent negotiations to fully reflect differentiation among newer products.
• Selection of therapeutic alternatives in increasingly targeted treatment landscapes: As medicines, including those for chronic diseases, become more focused on specific patient populations, differences in clinical benefit, population size, and treatment positioning become increasingly important. Therapeutic alternatives selected based on partial indication overlap may not fully capture these differences, highlighting the need for rigorous selection of therapeutic alternatives to appropriately reflect clinical differentiation.
• Cumulative effects on innovation incentives over time: In therapeutic areas where multiple products are negotiated across cycles, MFPs may increasingly function as reference points for later entrants. If these reference points do not fully account for therapeutic advances or clinical differentiation, newer therapies may face pressure to enter the market at lower price points than prior entrants. Over time, this could create deflationary pricing pressure, which economic experience suggests may dampen innovation incentives by constraining the returns on investment that are needed to support research and development.

2. The number of negotiated oncology products will expand further, increasing negotiation complexity. Five oncology products were negotiated in IPAYs 2026 and 2027, and four additional oncology products were selected for IPAY 2028. Oncology treatments often involve complex care pathways, with important distinctions across lines of therapy, biomarkers, and combination regimens. Consequently, defining therapeutic alternatives and interpreting evidence may be more challenging and require additional consideration.

What to watch heading into IPAY 2028:

• More complex therapeutic alternatives: With the negotiation of more oncology products, the selection of therapeutic alternatives is increasingly complex, requiring a nuanced understanding of real-world prescribing patterns and clinical decision making. Patients with different subgroups of biomarkers have specific treatment pathways, with treatment choices further driven by line of therapy, prior treatment history, and use in combination regimens. As more targeted cancer therapies are selected for negotiation, drugs used as therapeutic alternatives may not be interchangeable in practice if the role of biomarkers is not fully considered.
• Evolving evidence expectations: With more oncology drugs entering negotiation, CMS and payers may place greater emphasis on performance within treatment subgroups, durability of response, and real-world outcomes, as comparative claims across products become more central to negotiation positioning.
• Downstream access and practice considerations: Given clinical complexity for oncology, negotiation outcomes may have a greater effect on continuity of care and provider decision making. As plans face greater financial risk for higher-cost specialty medications under the Part D redesign, classes that were previously less managed may become increasingly restricted through use of formulary controls like utilization management, impacting treatment initiation and patient adherence. Additionally, providers may increasingly consider new economics, such as the potential for lower patient costs for Part D MFP drugs with the out-of-pocket spending cap vs. Part B alternatives and reimbursement changes for negotiated Part B drugs.

3. Part B eligibility introduces new selection and operational dynamics for IPAY 2028. The September 2025 guidance implemented negotiation of Part B drugs for the first time. Updates to incorporate Part B products in the Medicare Drug Price Negotiation Program may affect not only which products are selected, but also how utilization, spending, and therapeutic alternatives are defined and applied in the negotiation process.

What to watch heading into IPAY 2028:

• Effectuation of MFPs for Part B drugs: CMS has not yet detailed MFP effectuation policies for Part B drugs, which will affect a broader set of stakeholders (e.g., providers and health systems). These MFPs will also introduce new Part B vs. Part D dynamics and operational complexities into the negotiation program.
• Use of Medicare Advantage (MA) encounter data for Part B: Spending data used to select Part B drugs for IPAY 2028 will include both fee-for-service (FFS) claims and MA encounter data (with payment estimation methods). This is likely to shift the drugs that would have been selected if only relying on FFS claims.
• Comparisons between Part B and D products: With both Part B and Part D drugs being selected and used as therapeutic alternatives for each other, comparative challenges between these product types will become more apparent, affecting spending and utilization calculations, evaluation of alternatives, and development of negotiation starting points.

The IPAY 2028 cycle will provide insight into how negotiations may evolve as CMS builds on prior outcomes and incorporates new selection dynamics. As the footprint of the IRA negotiation program expands and grows more complex, it will become increasingly important to assess the evolving effects on pricing, formulary, and access strategies and consider opportunities for methodological refinements in future negotiation cycles.

Funding provided by Eli Lilly. Avalere Health retained full editorial control.