CHOICE PhD candidate Yunjoo Karris Jeon leads research providing a more nuanced picture of what federal drug price negotiation is projected to save.
A new study published in Value in Health offers the first drug-level analysis of projected Medicare savings from the Inflation Reduction Act’s drug price negotiation program to incorporate drug-specific utilization and price trajectories — and projects lower savings than prior estimates.
Led by CHOICE PhD candidate Yunjoo Karris Jeon, MSc, the study represents the first aim of her dissertation, projecting savings at the individual drug level for the ten Medicare Part D drugs selected for the inaugural round of negotiation, with prices taking effect in 2026. This drug-level approach reveals which drugs drive greater savings and why.
Key Findings
The research projects $2.3 billion in 2026 savings — an 8.8% reduction — compared to a historical benchmark scenario without negotiation. That figure is notably lower than prior estimates from the Congressional Budget Office (CBO, $3.7 billion) and the Centers for Medicare & Medicaid Services (CMS, $6.0 billion) — a difference the study attributes to three factors neither the CBO nor CMS accounted for: how drug use and prices naturally change over time, the anticipated entry of generic and biosimilar alternatives for five of the ten drugs, and a redesign of Medicare’s manufacturer discount structure, which affects how net prices are calculated. When generic and biosimilar competition alone was removed, projected savings rose to $4.7 billion, more in line with CBO and CMS figures. Savings projections should account for anticipated generic and biosimilar competition, which can substantially reduce negotiation’s impact.
The drug-level results showed that negotiation appears most effective for drugs with low prior rebates and long periods of market exclusivity — products that have not benefited from existing rebate systems and that have maintained sustained market dominance.
The team also went beyond a simple before-and-after comparison, evaluating negotiated prices against a counterfactual in which the selected drugs were not negotiated but instead subject to the new Manufacturer Discount Program. Under that comparison, negotiation was projected to save $2.4 billion (9.0%).
Implications for Policy
As the negotiation program expands to additional drugs, these results underscore that projected savings will vary widely.
“Medicare drug price negotiation is not a one-size-fits-all mechanism. How much it saves depends on the rebates and competitive history of each drug selected — a consideration that will grow more important as subsequent rounds proceed,” Jeon says.
The study was co-authored with CHOICE faculty Professor Sean D. Sullivan, BScPharm, MSc, PhD, and Professor Ryan Hansen, PharmD, PhD, alongside Kristi Martin, MPA, Director (Health Care) at Camber Collective and Nico Gabriel, MA, Health Insurance Specialist at the Centers for Medicare & Medicaid Services.
The full paper is available in Value in Health (DOI: 10.1016/j.jval.2026.03.010). Link: https://www.sciencedirect.com/science/article/pii/S1098301526001129?dgcid=author