CMS 2026 Part D Redesign & the Executive Order on Drug Prices
Starting January 1, 2026, CMS will implement Medicare Part D redesign 2026 updates that were put in place by the Inflation Reduction Act. They will also enact the new Most-Favored-Nation (MFN) Executive Order issued May 12, 2025. The goal of these actions is to better align U.S. drug prices with those paid by other high-income nations.
CMS 2026 Part D Redesign: Key Cost Updates
- $615 deductible before coverage kicks in.
- Initial Coverage Phase: beneficiary pays 25% coinsurance; 65% is plan-covered, and manufacturers cover 10% (plus CMS provides a 10% subsidy on select negotiated drugs)
- Out-of-Pocket Cap: annual TrOOP limit rises to $2,100 in 2026
- Catastrophic Phase: beneficiaries pay $0; plans cover 60%, manufacturers 20%, CMS 20–40%
Watch a video on the CMS Medicare Final Rule Proposal
Selected Drug Subsidy Program & Negotiated Prices
The Direct price negotiations initiated under the IRA (Inflation Reduction Act) for the first 10 high-cost Part D drugs begins in 2026. These selected drugs also qualify for a 10% subidy, provided by CMS during the initial coverage phase.
Additionally; the expected savings for medicare is estimated at about $6 billion with an estimate of $1.5 billion in savings on beneficiary out-of-pocket costs.
Executive Order: Most-Favored-Nation Pricing (May 12, 2025)
- Directs agencies (HHS, CMS, Commerce, USTR) to benchmark U.S. drug prices against the lowest prices in OECD nations
- Encourages direct-to-consumer drug purchasing programs at these international prices
- Includes authority to impose tariffs or regulatory action if manufacturers don’t comply within 30 days
- Targets anti-competitive practices, middlemen reforms, accelerated generic and biosimilar availability, and simplified importation
- Reform measures also extend to Medicaid and facilitate value-based pricing and site-neutrality
- Implementation faces legal uncertainties, with pharmaceutical leaders raising concerns over future innovation and practicality
Medicare Prescription Payment Plan (MPPP) Updates
- Auto re-enrollment with a 3-day opt-out window for returning participants
- No extra fees and pharmacy reimbursement within 14 days (e-claims) or 30 days (paper)
- All plans must include smoothed monthly billing as an alternative to per-fill copays
What Agents Can Do
Emphasize cost cap increases: deductible ($615) and TrOOP ($2,100), and detail catastrophic phase structure.
Promote savings with negotiated drug program: mention the overall savings after the TrOOP is reached.
Educate clients about MPPP; how monthly smoothing can reduce sticker shock and how to opt out.
Highlight executive order impacts; both MFN implications and ongoing drug price negotiations that can give them additional price drops or new purchasing options.
Address drug import possibility from Canada, pending MFN implementation.
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What This Means for Agents & Clients
- Lower costs for select medications due to CMS negotiations and MFN pricing policies
- Enhanced predictability and affordability via MPPP
- Opportunities in marketing: position these changes as saving tools during Open Enrollment
- Stay alert to implementation updates and legal progress on MFN rules
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