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By Suzanne Blake
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A proposal to expand Medicare's prescription drug negotiation program could save the federal government nearly $200 billion while also lowering costs for millions of seniors, according to a new report from AARP.
The new report found that Medicare spending on 10 high-cost brand-name drugs could be dramatically reduced if manufacturers were required to match the lowest prices paid for those medications in comparable high-income countries, a policy often referred to as "most-favored-nation" pricing.
However, this proposal would require approval from Congress before it could be implemented.
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“For too long, big drug companies have charged Americans the highest prescription drug prices in the world, padding their profits while forcing too many older adults to skip or ration the medications they need because they simply can't afford them," said Nancy LeaMond, AARP Executive Vice President and Chief Advocacy & Engagement Officer in a statement.
Why It Matters
Prescription drug affordability is a major concern for older Americans enrolled in Medicare.
While the Inflation Reduction Act gave Medicare authority to negotiate prices for certain high-cost medications, AARP has said the program could be strengthened further to generate additional savings and help hold down future Medicare Part D premiums.
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What To Know
AARP's study examined ten expensive brand-name medications that have not yet been selected for Medicare drug price negotiations. Together, those drugs accounted for nearly $50 billion in Medicare spending in 2025 and were used by more than three million seniors.
Researchers found that applying a most-favored-nation pricing model to those medications would reduce projected Medicare spending on the drugs from $273 billion to $76 billion between 2029 and 2033, a savings of nearly $200 billion.
“Adopting a most-favored-nation approach could help stabilize prices overall,” Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek. “However, it could also have an adverse effect, with pharmaceutical companies simply raising prices in other countries to make up some of the difference.”
Thompson added: “As we know, the pharmaceutical industry has a lot of lobbyists in D.C. It is going to come down to what concessions are ultimately made and where the offsets come from.”
The report also concluded that applying Medicare-negotiated prices to the same drugs would lower projected spending from $273 billion to $155 billion over the same period.
Current law limits how many drugs become eligible for negotiation. Among the 10 medications studied, only one will be eligible for selection in the next round of Medicare price negotiations despite all of them generating billions in Medicare spending.
"One of the most striking findings is that only one of the 10 high-cost drugs we analyzed will be eligible for Medicare drug price negotiation next year, even though they all account for billions of dollars in Medicare spending,” Leigh Purvis, prescription drug principal at AARP and author of the report, said in a statement.
“Our analysis shows there is significant opportunity to build on the program's early success by incorporating the prices paid in other high-income countries," she added.
Rising Drug Prices Remain a Concern
The AARP also found that prices for 25 brand-name medicines used by nearly 15 million Medicare beneficiaries increased by an average of 81 percent after entering the U.S. market.
In contrast, lifetime prices for those same medicines fell by an average of 13 percent across 19 comparable high-income countries.
While experts say these higher drug prices ultimately affect what seniors pay both at the pharmacy counter and through monthly premiums, not everyone thinks this sort of proposal would actually end up as beneficial for those on Medicare.
“Part D out of pocket costs are already capped, at $2,400 next year. Someone on a high cost specialty drug hits that same ceiling whether the price drops by half or not,” Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek.
He added: “Lower prices don't lower the ceiling, unfortunately. They lower what the plan pays, and that comes back as premiums.”
What Happens Next
Any move to incorporate most-favored-nation pricing into Medicare's drug negotiation program would require action from Congress.
However, in the meantime, additional drugs are scheduled to be selected for future rounds of Medicare negotiations.
AARP is urging federal officials to broaden the program while keeping Part D coverage affordable for beneficiaries.
Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek: “For beneficiaries, this transition to more broad negotiations could translate into lower pharmacy bills, but getting there would require Congress to expand or at least maintain Medicare’s authority in the face of significant pharmaceutical-industry opposition.”
Contact Newsweek editors on this story: Jason Lemon and Cristina Diciu.
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