The US Medicare program announced Tuesday that newly negotiated prices for 15 of its most expensive medications will reduce annual spending on those drugs by 36%, amounting to roughly $8.5 billion in net covered prescription costs.

The new prices take effect in 2027 and include a monthly cost of $274 for Novo Nordisk’s GLP-1 medication semaglutide, sold as Wegovy for weight loss and Ozempic for diabetes.

Medicare’s recent net cost for Ozempic was $428 per month, according to an analysis in the Journal of Managed Care and Specialty Pharmacy, while the program listed its nondiscounted price at $959 a month before rebates and confidential discounts. Based on these list prices, Medicare estimated that savings across the 15 drugs would fall between 38% and 85%.

“They were gonna go to the table and try and push on those prices, and that’s what they did,” said William Padula, professor of pharmaceutical and health economics at the University of Southern California.

AstraZeneca’s leukemia drug Calquence, Boehringer’s lung-disease treatment Ofev, and Pfizer’s breast cancer therapy Ibrance saw the steepest reductions in estimated net prices, each cut by more than $4,000.

These annual price negotiations were established under the Inflation Reduction Act (IRA) of 2022, President Joe Biden’s signature healthcare reform. Before the IRA, Medicare was legally prohibited from negotiating directly with pharmaceutical companies.

Savings surpass first year of negotiations

The projected 36% savings for 2027 outpace the 22% reduction in net spending, based on Goldman Sachs estimates, achieved during last year’s first round of price negotiations for 10 different drugs.

“They are getting more efficient with their methodology,” Padula said, adding that the latest group of therapies, many of them newer products, likely had “more wiggle room” for price adjustments.

Drugs added to the negotiation list this year include GSK’s Trelegy Ellipta inhaler for asthma and COPD, which will cost $175 compared with a $654 list price. AbbVie’s irritable bowel syndrome medication Linzess will fall to $136, down from $539.

Analysts say they will also compare the new Medicare prices with those paid by other wealthy countries, a practice President Donald Trump has championed under the “most-favored-nation” (MFN) pricing concept.

The pharmaceutical sector has opposed such measures. “Whether it is the IRA or MFN, government price setting for medicines is the wrong policy for America,” said Alex Schriver, spokesperson for PhRMA.

Medicare currently provides coverage to more than 67 million older adults and people with disabilities.
“These prices are going to come down below the existing net prices. There will be some real savings,” said Sean Sullivan, a pharmacy professor at the University of Washington.

“All of the other payers can see them. What is going to stop them from asking manufacturers for that same price?” he added.

Prices still higher than in other advanced economies

Last year, Medicare released its maximum prices for the first 10 high-cost medicines negotiated under the IRA, set to take effect in 2026.

For those drugs, including Eliquis, the Pfizer and Bristol Myers Squibb blood thinner, and Amgen’s arthritis drug Enbrel, the new US prices remained, on average, more than double, and in some cases five times, the amounts drugmakers accepted in four other high-income countries.

Under the IRA, Medicare must weigh several factors when determining prices, including manufacturer data and the availability of alternative therapies. However, the process does not take international pricing into account.

Many countries with universal prescription drug coverage rely on centralized negotiations to keep costs down.

The Trump administration later outlined its own version of MFN pricing: using the lowest price available in any country within the Organisation for Economic Co-operation and Development that has a GDP per capita of at least 60% of that of the United States.

Separately, Medicare has proposed a pilot program using a narrower “country basket” consisting of six G7 nations, the UK, France, Germany, Italy, Canada, and Japan, along with Denmark and Switzerland. The MFN benchmark would be calculated from the second-lowest price within that group, adjusted for GDP per capita.

Medicare’s next negotiation cycle is set to begin in February and will cover 15 additional prescription and hospital-administered medicines.

Medicare, a target of Trump's OBBB

Under the Trump-backed 2025 budget and related legislation, the nonpartisan Congressional Budget Office (CBO) warns that Medicare could face as much as $491 billion in automatic cuts between 2027 and 2034, triggered by so-called “sequestration” because the law greatly increases the federal deficit.

While there have been no direct reductions so far in eligibility or core benefits under traditional Medicare, the policy changes include reduced reimbursements to hospitals and providers, especially for outpatient drug-administration services at off-campus facilities, under what’s called “site-neutral payment” rules.

The repercussions could be serious: if funding and reimbursements shrink, access to care could become harder, especially for seniors, disabled people, or those in rural areas, because some hospitals or clinics might scale back services or close.

At the same time, reductions in provider payments could also mean fewer doctors willing to care for Medicare patients, possibly increasing wait times, reducing the choice of providers, or raising out-of-pocket costs.