Trump's CMS Locks In Medicare Drug Price Rules, Shuts Reformulation Loophole

The Centers for Medicare and Medicaid Services published its final rule for the Medicare Drug Price Negotiation program last week, replacing all previous temporary guidance with legally binding text. The regulation sets permanent policy starting in 2027, when CMS selects the next batch of 20 drugs for negotiation. It also clarifies the terms that decide which prescription medicines qualify for the bargaining table and closes loopholes around fixed-dose combination and reformulated products.

To be eligible, a drug must be a qualifying single-source medicine with no approved generic or biosimilar offering what CMS calls bona fide marketing competition. Approval and launch alone won't cut it: the rival product needs more than token sales shown in claims and utilization data, consistent supply chain availability, and no arrangements between originator and generic or biosimilar firms that could block access. Small molecule drugs need at least seven years on the market since FDA approval; biologics need at least 11.

Eligible drugs then get ranked by their total gross cost to Medicare, with the priciest prioritized. A roughly nine-month negotiation follows, producing maximum fair prices that CMS posts publicly about a year before they take effect, giving commercial payers a benchmark for their own deals. Maximum fair prices kicked in this year for the first round of ten drugs negotiated in 2023 and 2024. In January 2027, prices for the next 15 pharmaceuticals land; CMS finished negotiating a third round of 15 medicines last month, with those prices arriving in January 2028.

The reformulation language is the flashpoint. Fixed-dose combinations — two or more active drugs in one dosage form — now get grouped together if CMS deems them new formulations of existing drugs. The negotiation clock resets only when a fixed-dose combo pairs an existing drug with a completely new active moiety. Adding an inactive or co-administered ingredient just to enable a different delivery route won't shift the timing either. CMS specifically called out the practice of adding an enzyme like hyaluronidase to turn an intravenous drug into a subcutaneous injection, which previously could have extended a product's grace period.

Pharmaceutical companies have hammered the guidance, arguing it will chill innovation. Reformulations can count as innovation — they may make a product more convenient, improve patient persistence, and in some cases prove more clinically effective. Congressional Democrats, meanwhile, want to speed up both the volume and timing of negotiations, floating a jump from 20 selected drugs to 50 and pushing selection closer to launch. After their November 2026 midterm wins, those ideas could become legislative priorities, as seen in proposed bills like the Lowering Drug Costs for American Families Act. Democrats also want to extend Medicare-negotiated maximum fair prices into the commercial insurance market.

The industry has long warned that negotiating prices closer to launch and applying them systemwide would gut the financial incentives that fund clinical research and development. Any statutory change to the negotiation timeline or the number of drugs selected would require amending the law — and President Trump could veto it.