The ability for Medicare to negotiate lower prescription drug costs was a key component of last year's Inflation Reduction Act. The Centers for Medicare & Medicaid Services this week issued initial guidance about the requirements and parameters of the Medicare Drug Price Negotiation Program for 2026, the first year in which the negotiated prices will apply.

"Drug price negotiation is a critical piece of how this historic law improves the Medicare program," CMS Administrator Chiquita Brooks-LaSure said. "By considering factors such as clinical benefit and unmet medical need, drug price negotiation intends to increase access to innovative treatments for people with Medicare."

Related: CMS' new Medicare Advantage audit rule, expected to recoup $4.7B in overpayments

Brooks-LaSure and Dr. Meena Seshamani, CMS deputy administrator and director of the Center for Medicare, discussed implementation of the law during a March 16 webinar. Among other things, the initial guidance details how CMS intends to identify selected drugs, consider factors in negotiation, conduct the negotiation process and establish requirements for manufacturers of selected drugs. CMS will accept only one formal written counter offer during the negotiation process but will allow up to three additional in-person or virtual negotiation meetings,