A Part D plan’s pharmacy and therapeutics committee meets to set next year’s formulary. One brand in a class now carries a negotiated Medicare price, and a competing brand still comes with a manufacturer rebate. Under a final rule CMS published November 9, 2026, the plan may place limits on the negotiated drug that the competitor does not face. CMS expects the plan to justify those limits with clinical evidence at bid review.
The Medicare Drug Price Negotiation Program final rule (CMS-4215-F) codifies the program at a new 42 CFR part 429 and amends the Part D rules at part 423. It takes effect December 5, 2026 and applies starting with initial price applicability year 2029, the first year the program runs under regulation instead of guidance.
The rule requires coverage and sets no tier rules
The Inflation Reduction Act requires Part D plans to cover every selected drug with a negotiated price, the maximum fair price, in effect for the year. The final rule writes that requirement into 42 CFR § 423.120(b)(2)(vii) for 2029 onward, including every dosage form and strength the price applies to. The statute says nothing about tiers or utilization management, and CMS declined to add anything.
Patient groups and manufacturers asked for more. They argued that a drug can sit on a formulary and still be hard to get, behind a non-preferred tier, prior authorization or a step through a competing brand. Several warned that negotiated prices change plan incentives, because a selected drug no longer produces the rebates a competing brand does. Plans and pharmacy benefit managers argued that mandatory preferred placement would weaken their bargaining power on every other drug in the class.
CMS sided with the plans on the rules and kept a review. “At this time, we are not imposing tier placement, utilization management, or other special formulary requirements for selected drugs,” the agency wrote. It also said selection reflects a drug’s spending and eligibility, and is not a finding that the drug is clinically better or worse than its alternatives.
Four limits on negotiated drugs that plans must justify
The policy works through the annual formulary review. In years when a negotiated price is in effect, CMS will look for 4 practices.
- Non-preferred tier. The selected drug sits on a non-preferred tier.
- Worse tier than a competitor. The selected drug sits on a higher cost-sharing tier than a non-selected brand in the same class.
- Step through a competitor. The plan requires a non-selected brand before the selected drug.
- Tighter utilization management. The selected drug carries more restrictive prior authorization or step therapy than a non-selected brand in the same class.
None of the 4 is banned. Each requires a reasonable clinical justification at bid review, addressing whether the drugs are clinically superior, non-inferior or equivalent. CMS defines a class by the FDA Established Pharmacologic Class or a similar grouping. It will approve a bid only if the design complies, and it said it may disapprove a bid under 42 CFR § 423.272(b).
Each restriction on a negotiated drug now needs clinical evidence that CMS can review.
CMS will also watch formulary trends from the moment a drug is selected, which comes more than 2 years before its price takes effect. That monitoring is meant to catch plans that move a drug down the formulary early. CMS said the formal justification standard applies only in years when the price is in effect.
The justifications stay private
Commenters asked CMS to publish its formulary review results and the justifications plans submit. CMS declined. It does not share either one with the public or with manufacturers. A plan that writes a strong justification cannot see what other plans wrote, and a patient group cannot see why a restriction was approved.
That leaves the plan’s own record as the main evidence of how a decision was made. One commenter said plans have had limited success getting CMS to approve non-preferred placement or utilization management for selected drugs, even with clinical support, and asked for clearer standards. CMS pointed to the standards in the proposed rule and declined to say more.
For plans, the practical lesson is to write the justification before the formulary is built. A P&T committee already has to base decisions on the strength of scientific evidence under § 423.120(b)(1). For a selected drug, that evidence should name the comparator brand, the outcome that differs and the source. A justification built on net cost alone does not answer the question CMS asked, which is clinical.
The same discipline belongs in the prior authorization criteria themselves. If a selected drug requires prior authorization and the competing brand does not, the criteria should say what clinical fact the review is checking for. We argued earlier that drug prior authorization is the gap in the federal rule on electronic prior authorization. This rule leaves that gap open, and it adds a requirement to explain each restriction on a selected drug.
The exceptions process stays the same
Patients who hit a restriction use the existing Part D exceptions and appeals process. A plan must decide a standard exceptions request within 72 hours of the prescriber’s supporting statement, and an expedited one within 24 hours. Commenters asked for faster or broader exceptions specific to selected drugs. CMS said the existing timelines apply to selected drugs the same way they apply to any other Part D drug.
The program is growing. CMS negotiated prices for 10 drugs that took effect in 2026, selected 15 more for 2027 and 15 for 2028, and can select up to 20 a year starting with 2029. Each new selection adds classes where a plan may face the same tier decision. CMS said what it learns from monitoring could inform new requirements in future years. Plans that already keep a clear clinical record for each restriction will be ready if it does.