CMS published the 15 drugs selected for Initial Price Applicability Year 2028 on January 27, 2026, the third cycle under the Inflation Reduction Act's negotiation program. Five of them are Part B drugs, the first time Part B has entered the framework. That single change moves the program out of a benefit design where every stakeholder's share is defined by formula and into one where it is not.

Key Takeaways

  • $27 billion of combined Part B and Part D spending across the 15 selected drugs, roughly 6% of combined expenditures, used by about 1.8 million beneficiaries between November 2024 and October 2025.
  • Five Part B drugs at roughly $7.4 billion against ten Part D selections at $19.6 billion, with the Part B complexity concentrated in coinsurance and supplemental coverage.
  • 67% of the selected drugs exceed $10,000 in annual per-patient cost, up from 53% in IPAY 2027 and 30% in IPAY 2026.
  • The eligible spending pool would have been about $39 billion rather than $27 billion without the orphan drug changes in H.R. 1, a 44% difference.
  • CBO revised its score of the expanded orphan exclusion upward by 80%, from $4.9 billion to $8.8 billion of additional Medicare cost over ten years.

Where the Third Cycle Sits

Cycle IPAY Drugs Selected Benefits Covered Total Spending Estimated Net Savings
First 2026 10 Part D only ~$50B ~$6B (22% discount)
Second 2027 15 Part D only ~$46B ~$8.5B (36% discount)
Third 2028 15 + 1 renegotiation Part D + Part B ~$27B $5.9B-$11.9B (projected)
Fourth+ 2029+ 20 per year Part D + Part B TBD TBD

The 15 drugs cover roughly $27 billion of Part B and Part D spending, about 6% of combined expenditures, used by approximately 1.8 million beneficiaries. Immunosuppressants and immunomodulators dominate with six drugs, the most represented category in any cycle, and four of them, Orencia, Cimzia, Cosentyx, and Xeljanz, compete across overlapping autoimmune indications. Verzenio and Kisqali join Ibrance from IPAY 2027, so all three major CDK4/6 breast cancer options will carry negotiated prices by 2028.

The cost concentration is climbing. 67% of IPAY 2028 drugs exceed $10,000 in annual per-patient cost, against 53% in IPAY 2027 and 30% in IPAY 2026, which indicates CMS working systematically down from the highest-cost tier of the formulary. CMS also selected Tradjenta for the program's first renegotiation, triggered by a change in monopoly status.

Part B Has No Cap, and That Changes Who Gets the Saving

Part D operates inside a defined structure: a $590 deductible in 2026, 25% coinsurance in the initial phase, then a $2,000 out-of-pocket maximum, with plan sponsors, manufacturers, and federal reinsurance absorbing costs above it by formula.

Part B does not work that way. Medicare pays 80% of the approved amount after a $257 annual deductible, and the beneficiary owes 20% with no annual cap in Original Medicare. On a $50,000 drug that is $10,000 of beneficiary liability where Part D would have stopped at $2,000.

Milliman's worked example shows what a negotiated price does to that. A drug reimbursed at $1,000 ASP plus the 6% add-on, $1,060 in total, receiving an MFP of $400 pays $424. Medicare covers 80%, or $339, and the beneficiary or Medigap plan owes $85. The Medigap per-claim liability falls from $212 to $85, a 60% reduction. Roughly 12 million beneficiaries carry Medigap, and Plan G, the most popular since Plan F closed to new enrollees in 2020, covers 100% of Part B coinsurance after the deductible.

The asymmetry with Part D runs the other way. For a high-cost Part D drug the $2,000 cap already bounds the beneficiary, so a beneficiary on a $40,000 antiretroviral reaches it early in the year whether the price falls 20% or 50%. Those savings accrue to plan sponsors and to the federal government through lower reinsurance, not to the member. Every dollar off a Part B MFP reduces beneficiary or Medigap liability directly, which is why the smaller Part B pool may deliver larger per-beneficiary savings.

The provider side compresses at the same time. The 6% add-on, effectively 4.3% after the 2% sequestration reduction, is meant to cover acquisition, storage, and administration of physician-administered infusions. In the same example it falls from $60 to $24. Avalere estimates add-on payments could decrease by over $25 billion across the first ten negotiated Part B drugs, concentrated in oncology and immunology practices, which puts site-of-care mix in play: hospital outpatient facility fees partly offset the loss, and independent practices that cannot absorb it consolidate.

Medicare Advantage sits inside this too. CMS confirmed that MA encounter data as well as fee-for-service claims identify eligible Part B drugs, and Milliman notes Botox likely would not have been selected without it. That creates a feedback loop for MA bid work: higher MA utilization raises a drug's selection probability, and selection then lowers its cost in the bid, with the net effect turning on whether the saving reaches beneficiaries as supplemental benefits or the government through future benchmarks.

The Program Creates the Incentive That Shrinks Its Own Base

H.R. 1, signed in July 2025, widened the orphan drug exclusion in two ways. Drugs with multiple orphan designations are now exempt as long as every approved indication is for an orphan condition, where the original test required a single one. And for drugs carrying both orphan and non-orphan indications, the eligibility clock now starts from the first non-orphan approval rather than initial FDA approval.

The effect on this cycle is measurable. Milliman estimates the eligible spending pool would have been approximately $39 billion rather than $27 billion, a 44% difference. Keytruda, at roughly $17 billion of annual US sales, and Opdivo at roughly $5 billion each had eligibility delayed twelve months to February 2027 by the clock reset. Darzalex, at roughly $6 billion, is permanently exempt because all of its approved indications are orphan.

CBO's revision is the part worth watching. It scored the expanded exclusion at $8.8 billion of additional Medicare cost over ten years, revised upward by 80% from an original $4.9 billion as analysts identified more drugs likely to qualify. A score that moves that far in one direction indicates the eligible universe was misjudged, not mismeasured.

The behavioural consequence is what makes this structural rather than a one-time carve-out. A manufacturer with a drug approaching eligibility now has a quantifiable reason to pursue additional orphan designations, and the calculation is an ordinary investment comparison between the trial cost and the MFP revenue reduction avoided. The $8.8 billion CBO score is, read one way, the expected value of that strategy across the industry.

That leaves anyone modelling the program's fiscal path tracking orphan designation filings alongside the pipeline. From IPAY 2029 the program moves to 20 drugs a year and CBO's ten-year program-wide savings estimate stands at $98.5 billion, but the denominator those selections come from is not fixed. It responds to the program, and it responds in the direction that shrinks it.

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