Negotiation Outcomes Calculator
Our interactive model lets you control Medicare prescription drug price negotiation policy. Select policy options and see the effects and tradeoffs between the number of drugs that would be subject to negotiation and the potential savings to Medicare for 2029-2033.
Model Overview
This model estimates the effects of altering the Medicare Drug Price Negotiation Program (MDPNP). Impacts of policy changes are estimated for drugs selected for negotiation in 2029-2033 and include the following measures:
The model is designed to allow users to compare results from its base case (negotiation under current law, including orphan exemptions passed in 2025 under H.R.1) with policy changes they can select from the drop-down menu options.
Users can interact with the model by changing the parameters for Medicare drug price negotiations, including:
Methods
The model’s base case follows the provisions of the Inflation Reduction Act (IRA) as modified under H.R.1 and interpreted by CMS under current law. Its projections describe the characteristics of drugs selected for negotiation, their negotiated prices (Maximum Fair Prices, or MFPs), and federal spending with and without these MFPs in place.
The base case (rules under current law) reflected in the model is as follows:
1. Selection
Each year, up to 20 drugs are selected if they meet the following criteria, beginning in 2026:
Drugs are excluded if they are plasma-derived products or approved only for orphan indications. In addition, for drugs first approved for orphan indications, time to negotiation-eligibility is calculated based on the date of first approval of a non-orphan indication.
Finally, drugs already selected for negotiation with MFPs going into effect between 2026-2030 are not included in the model.
2. Negotiated Prices
For each selected drug, the model estimates a negotiated price (i.e, MFP) that is equal to the statutory offer ceiling (the maximum price Medicare is allowed to offer to pay under current law) for the negotiation process according to their time on the market once negotiated prices go into effect. This amount is the lower of:
Then, the model estimates the MFP that is likely to result from the negotiation process using the lowest of the following:
In addition, a floor of 66% of NFAMP is applied for drugs of manufacturers that qualify as a small biotech under the law. These include the following qualifications:
3. Application of Negotiated Prices Through Generic / Biosimilar Entry
The model's base case assumes that generic or biosimilar entry prompts CMS to remove a drug from selection 3 years after its negotiated price takes effect. Under current law, negotiated prices cannot apply until at least 9 years after first FDA approval for small molecules and 13 years for biologics, so drugs negotiated at their earliest eligibility would face generic or biosimilar competition within 12 and 16 years, respectively. When modeling scenarios with earlier selection, the model extends the time to deselection by however many years the negotiation timeline is accelerated relative to current law. This adjustment prevents the earlier-negotiation scenarios from implausibly assuming that generic or biosimilar competitors could enter before the originator's intellectual property protections could be challenged.
4. Renegotiation
If a drug qualifies for extended- or long-monopoly status during the modeled years, its MFP is adjusted accordingly in those years, following the methods described in 2. Negotiated Prices.
5. Estimated Federal Spending and Savings from Negotiation
The model projects gross and net federal spending on negotiation-eligible drugs through 2033. For drugs selected for negotiation, the model estimates the difference between net Medicare spending with and without negotiation, with the difference accruing each year as federal savings.
6. Model Data and Parameters
The model relies on parameters describing key characteristics of drugs eligible for negotiation, as well as their spending and spending growth projections. These elements and their sources are summarized in Table 1.
Table 1: Model Data and Parameters
Model elements | Data | Source |
Eligibility and selection | ||
Time since approval of first BLA or NDA | Year of first FDA approval | |
No generic or biosimilar approved and marketed | ANDA or BLA for same molecule | Evaluate Pharma, FDA Orange Book, FDA Purple Book |
Gross spending in Medicare Parts B and D | Spending in Medicare Parts B and D | |
Special MFP floor: Small biotech | Proportion of total Part D spending in Part B or D in 2021 Proportion of MFR spending in Part B or D in 2021 | CMS Spending dashboard |
Exception: Orphan drugs | Orphan designations Approved orphan indications
| Evaluate Pharma, Drugs@FDA, FDA Orphan Database |
Exception: Plasma-derived product | Labeled as derived from human blood or plasma | FDA approved fractionated plasma products and FDA label search |
Medicare spending | ||
Current spending | Gross annual spending data by drug | CMS Spending dashboard |
Projected spending | Gross spending projected forward by analyst estimates of revenue growth through 2033 (Compound annual growth rate, or CAGR) For drugs with no data in Evaluate Pharma, CPI-U was used. | Evaluate Pharma, Federal Reserve |
Maximum Fair Price (MFP) calculation | ||
Non-federal average manufacturer price | Gross Medicare spending | Medicare spending reported on CMS spending dashboard, reweighting by CBO report on federal prices |
Net price | Net price estimates | |
Most-favored-nation (MFN) prices | ||
MFN prices | Prices for negotiation-eligible drugs in Canada, Australia, France, Germany, the United Kingdom, and Japan | |
Drugs included in the model
The model relies on a proprietary dataset of 663 qualifying single-source drugs (QSSDs) that are potentially negotiation-eligible and combines data from the CMS spending dashboard with information from Evaluate Pharma, SSR Health, GlobalData Poli, Drugs@FDA and other sources listed in Table 1.
To be consistent with statute and CMS guidance, different formulations of the same active ingredients or moieties produced by the same manufacturer (or authorized generic manufacturer) are considered one drug. Formulations of an existing drug that contain hyaluronidase are considered part of the original drug to align with proposed rulemaking.
Drugs are excluded if at least one generic or biosimilar competitor is already on the market or approved for at least one of the drug’s formulations, which disqualifies the branded drug from negotiation under the IRA.
In addition, products are excluded if they are marketed under Emergency Use Authorization (EUA), are plasma-derived blood products, or no longer marketed in the U.S., as these products would not meet the criteria to be selected for negotiation.
To establish whether a drug qualifies for negotiation, its time on the market is calculated from on the date of FDA approval or licensure for a non-orphan indication for the active ingredients or moieties that it contains.
Drug classifications
Small molecule vs. biologic
Drugs included in the model were classified as small molecule or biologic based on whether they were approved by FDA under a New Drug Application (NDA) or Biologic Licensing Application (BLA).
Small biotechnology
Medicare may not negotiate below a certain discount from a drug’s NFAMP for 2029-2030 if its manufacturer qualifies as a small biotechnology company. Drugs that represented at least 80% of their manufacturer’s total revenue from Part B or D in 2021 and that did not constitute more than 1% of Part B or D spending are considered to qualify for this exclusion.
Orphan indications
Drugs are classified according to their qualification for different orphan provisions that have been passed or proposed for MDPNP. Drugs are considered to meet the current law criteria for orphan exemption under H.R.1 if their only FDA-approved uses are for orphan conditions. In addition, drugs with a mix of orphan and non-orphan indications are considered negotiation-eligible based on the date of their first approved non-orphan indication. Drugs are considered to meet the IRA criteria for exemption if they have a single active or approved designation for an orphan condition and all FDA-approved uses are within that designation. Finally, drugs are also classified according to whether they have any orphan indication, regardless of their qualification for IRA or H.R.1 exemptions.
Medicare spending
Data for the latest available year of Medicare drug spending in Part D and Part B, 2023, was obtained from the CMS Drug spending dashboard. To estimate future drug spending, 2023 spending data was projected through 2033 using compound annual growth rates (CAGRs) estimated from revenue projections in Evaluate Pharma, where available, for each drug. Drugs with no revenue projections in Evaluate were assumed to grow at the pace of inflation.
Most-favored nation pricing
MFN pricing was modeled on policy originally proposed in the Elijah E. Cummings Lower Drug Costs Now Act, which applied an offer ceiling of 120% of prices in Canada, Australia, France, Germany, the United Kingdom, and Japan. Prices in these countries and in the US for drugs projected to be selected under current law were obtained from the GlobalData Poli database. MFN discounts were calculated for each drug and country as the ratio of that country’s price to US list prices. These ratios were then averaged for each drug and scaled to 120%. To estimate savings, the better of MFN discounts or MFP were applied.
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