CMS finalized the Medicare Drug Price Negotiation Program rule on November 5, which moves negotiation from annual program guidance into permanent regulation beginning with prices effective in 2029, and the rule takes effect December 5. For your Part D plan, the change turns a yearly set of instructions into a fixed framework you build formulary, payment and bid planning around, with the next group of up to 20 drugs due for selection by February 1, 2027.
What the final rule does
The first three years of the program, covering prices effective in 2026 through 2028, ran on program instruction and guidance, and the statutory authority for the approach is expiring. The final rule replaces the guidance with regulation for 2029 and every year after, and CMS finalized the core of the June proposal, as we covered in CMS proposes a permanent framework for Medicare drug price negotiation. CMS will select up to 20 drugs per year covered under Part D, payable under Part B, or both, and will select drugs for renegotiation when a drug with an agreed price meets the eligibility and selection criteria. Earlier cycles selected 10 drugs for 2026, 15 for 2027 and 15 for 2028, so the fourth cycle carries the largest ceiling yet.
What changed since the proposal
Three provisions drew the most attention, and CMS finalized all three. The first is the fixed combination policy. When a manufacturer adds a component to an existing product to create a new formulation with a different route of administration, such as adding hyaluronidase so an intravenous biologic is given by injection under the skin, CMS now groups the new product with the original when identifying drugs for selection. A negotiated price for the original therefore covers the new version in the same year, and CMS says the policy stops manufacturers from avoiding negotiation by moving patients to new formulations.
The second is a temporary price floor for qualifying small biotech drugs in 2029 and 2030, which bars CMS from offering or agreeing to a counteroffer below the floor. After public comment, CMS modified how one pricing input, non-FAMP, is treated in the adjusted ceiling calculation for certain qualifying drugs. The third is renegotiation, where CMS will weigh a drug's agreed price as one of the manufacturer-specific factors when revisiting the drug. Each provision shapes which drugs reach your formulary with a negotiated price and how many of them arrive in a given year.
What the rule means for your formulary and payment operations
Two Part D requirements now sit in regulation. Your formulary must include each selected drug while a maximum fair price is in effect, with removal allowed only under the specific provisions CMS identified, and the price you pay a dispensing entity stays at or below the maximum fair price plus any dispensing fees. CMS declined to set dispensing fee requirements and will keep monitoring pharmacy reimbursement, including pharmacy price concessions, so dispensing fee terms stay in your pharmacy network contracts while the federal rule sets the ceiling.
Commenters raised a concern about steering, meaning a plan or pharmacy benefit manager moving patients toward non-selected drugs with higher rebates. CMS responded with its formulary reviews, which check for this, so your formulary design and tiering decisions for selected drugs go in front of reviewers each year.
Effectuation is the open item
The rule does not settle how negotiated prices reach pharmacies and plans in 2029 and beyond. CMS expects to issue guidance on effectuating prices for 2028 this fall and plans to codify effectuation policies for 2029 and later through rulemaking in calendar year 2027. For your finance and pharmacy operations teams, the formulary and payment limits are set while the mechanics of payment and reconciliation for 2029 stay open.
Timing and runway
The calendar from here is specific. CMS publishes the selected drugs by February 1, 2027, manufacturers sign agreements by February 28, CMS sends initial offers on June 1, 2027, and agreed prices are published by November 30, 2027, ahead of their January 1, 2029 effective date. Those prices will be public about six months before 2029 bids are due in June 2028, which gives your actuarial and formulary teams a full planning window once the numbers post, and the final rule gives them a stable set of rules to model against in the meantime.
Operations and strategy is a focus at RISE National 2027, March 16-18 at Caesars Forum in Las Vegas, where product, pharmacy and operations leaders compare how federal policy changes shape their plans for the year ahead.