The US Drug-Pricing Reset: Competing on Net Value

US drug pricing has crossed an important threshold. The issue is no longer whether intervention occurs, the question is how several interventions interact with portfolio strategy, evidence generation, contracting, and supply continuity.

These interventions include Medicare negotiation, inflation rebates, benefit redesign, pharmacy benefit manager (PBM) oversight, direct-to-consumer cash channels, and international-reference initiatives.

The durable industry response is not simply lower list prices. It is competition on auditable net value: clinically differentiated products, transparent channel economics, patient-centered benefit design, and reliable supply.

Affordability pressure remains structural

The Centers for Medicare & Medicaid Services (CMS) reports that retail prescription-drug spending reached $467.0 billion in 2024, 7.9% above 2023, and projects $518.7 billion for 2025, an 11.1% increase. The forecast reflects utilization and mix, including diabetes and obesity medicines, not price inflation alone.

It also excludes medicines administered in hospitals and physician offices, so it understates the full pharmaceutical market.^1,2 IQVIA’s broader all-channel series places 2025 net medicine spending at $606 billion and attributes $14 billion of that year’s growth to glucose-dependent insulinotropic polypeptide/glucagon-like peptide-1 (GLP-1) agonists.³

Patient experience remains disconnected from aggregate net-price moderation. In a 2026 KFF poll, 43% of adults reported at least one cost-saving behavior involving medicines; 27% did not fill a prescription and 19% cut pills or skipped doses.

The burden was higher among uninsured and lower-income adults and among Black respondents.⁴ RAND’s mix-adjusted comparison helps locate the problem: in 2022, US manufacturer gross prices were 2.78 times those in 33 comparison countries overall and 4.22 times as high for originator brands, while unbranded generics were cheaper in the United States.⁵

The strategic implication is that “price” must always be qualified. Wholesale acquisition cost (WAC), payer net cost, manufacturer net revenue, cash price, patient out-of-pocket cost, and total episode cost are different measures.

A policy or contract can improve one while worsening another. Leaders should demand stakeholder-specific evidence rather than rely on a single discount percentage.

Medicare negotiation is now an operating reality

The first 10 Medicare maximum fair prices (MFPs) took effect on January 1, 2026. CMS estimates that applying them to 2023 utilization would have reduced Medicare net covered-drug spending by $6.0 billion, or 22%, and projects $1.5 billion in 2026 beneficiary out-of-pocket savings.

These figures are a historical counterfactual and a projection — not measured 2026 savings. The MFP discounts of 38%–79% against 2023 WAC are real price benchmarks, but they do not represent reductions from confidential pre-MFP net prices.⁶

The program is expanding. Fifteen agreed MFPs take effect in 2027; CMS estimates they would have reduced 2024 net spending by $12.0 billion, or 44%, excluding Coverage Gap Discount Program spending. The 2028 cycle, the first to include Part B drugs, covers 15 selected products plus Tradjenta (linagliptin) for renegotiation. CMS had not published prices by September 7, 2026.^7,8

Part D redesign changes the market beyond negotiated products. The annual beneficiary out-of-pocket threshold is $2,100 in 2026, and the Medicare Prescription Payment Plan permits interest-free monthly smoothing without reducing total liability.⁹

Inflation rebates are also operational. CMS assessed more than $1.2 billion owed for the first two Part D periods and $136 million across the first two Part B calendar years. These assessed amounts are neither confirmed collections nor point-of-sale savings.^10,11

For manufacturers, MFP exposure now belongs in indication sequencing, evidence plans, channel forecasts, and lifecycle investment reviews. For plans and providers, formulary compliance, pharmacy reimbursement, patient communication, and medical-versus-pharmacy-benefit migration require equal attention.

The relevant metric is not the announced discount alone, but access, adherence, net budget impact, and outcomes after implementation.

PBM reform is shifting from transparency rhetoric to auditability

Concentration makes channel economics central. Federal Trade Commission (FTC) staff reported that the three largest PBMs processed nearly 80% of ~6.6 billion US prescriptions in 2023.

Their affiliated pharmacies received 68% of specialty-drug dispensing revenue, up from 54% in 2016. In a selected sample of 51 specialty generics, FTC staff estimated more than $7.3 billion in affiliated-pharmacy dispensing revenue above the National Average Drug Acquisition Cost from 2017 to 2022.

That figure is neither audited profit nor a sector-wide estimate, but it illustrates how value can move within a vertically integrated organization.¹² Rebates are similarly distributional.

The US Government Accountability Office found $48.6 billion in Part D manufacturer rebates in 2021. For 79 of the 100 most-rebated drugs, beneficiaries paid more than plan sponsors after rebates because patient liability was generally calculated from the prerebate price.¹³

Yet rebates can also restrain premiums. Eliminating one payment stream without controlling replacement administrative fees may redistribute cost rather than reduce it.

The 2026 federal appropriations law therefore matters less as a slogan than as an information architecture. Its key group-plan contract conditions, generally effective August 3, 2028, require detailed reporting, audit rights, and 100% remittance of rebates and related remuneration in covered arrangements and allow transparent bona fide service fees.¹⁴

Winning models reconcile every dollar across manufacturer, PBM, plan, pharmacy, and patient. Transparency that cannot be audited at claim and contract level is marketing, not reform.

Cash-pay and international-reference initiatives remain partial

Since 2025, the federal executive agenda has added most-favored-nation targets, manufacturer agreements, and direct-to-consumer access to the pricing toolkit. By August 2026, the administration reported agreements with 26 manufacturers covering 89% of the branded market.¹⁵

However, the underlying terms, product scope, price formulas, and enforcement provisions are largely confidential. The May 2025 executive order directed the US Department of Health and Human Services (HHS) to pursue prices linked to economically comparable countries, but it did not itself establish one binding, nationwide price schedule.¹⁶

TrumpRx, launched in February 2026, is a live federal discovery and referral platform for selected cash-pay offers. It connects patients to coupons or manufacturer and pharmacy pathways; it is not insurance, a dispensing pharmacy, or a universal federal benefit.¹⁷

Cash purchasing can help uninsured patients and people facing noncovered products, but it can be inferior to a covered copay and generally does not accumulate toward a Part D deductible or out-of-pocket threshold. It may also fragment utilization review unless prescribers, pharmacies, and plans exchange transaction data.

These initiatives introduce competitive pressure and a new launch channel, yet they reinforce the case for comparable evidence. A visible cash price should identify dose, duration, eligibility, dispensing fees, geographic exclusions, renewal terms, and whether insurance accumulation applies.

An international benchmark should disclose the country set, net-versus-list basis, currency method, pack and indication matching, and update cadence. Without these elements, the market can compare promotional numbers but cannot compare net value.

Competition must include supply resilience

Generic and biosimilar competition remains the strongest scalable affordability engine. FDA states that 9 of 10 US prescriptions are generic. HHS reports average prices 20% below the pregeneric level with 3 competitors, 70% lower 2 years after first entry when 10 or more competitors participate, and 80% lower after 3 years.

FDA estimated that 773 abbreviated new drug application approvals in 2023 generated $18.6 billion in first-year savings, including $2.37 billion from 40 first generics.^18,19 Entry alone is insufficient.

Biosimilar uptake across selected Medicare Part B molecules ranged from 26% to 80%, demonstrating the importance of formulary preference, provider economics, substitution rules, and switching workflows.²⁰ Patent scrutiny should focus on competition-delaying conduct, rather than treating every follow-on invention as abuse.

A peer-reviewed study linked 1,429 patents and applications to 10 top-selling medicines and found a median of 7.9 years of protection beyond preapproval patents from postapproval portfolios. The study did not determine that every claim was invalid.²¹

Price compression can also make essential medicines brittle. At year-end 2025, US Pharmacopeia identified 75 active shortages with an average duration more than 5 years; 71% involved sterile injectables, and 44% had at least one key starting material made in only one country. Product discontinuations rose 60% from 2024.²²

Procurement should therefore reward qualified redundancy, mature quality systems, geographic diversity, and delivery performance for clinically crucial low-margin products. Competition policy should create multiple sustainable suppliers, not merely the lowest quarterly bid.

Innovation effects demand evidence, not absolutes

Affordability and innovation are not mutually exclusive, but lower expected revenue can change marginal R&D decisions. The Congressional Budget Office modeled 13 fewer launches among roughly 1,300 expected over 30 years under the Inflation Reduction Act; that is a forecast, not an observed outcome.²³

Early peer-reviewed analyses associate the law’s passage with fewer industry-sponsored postapproval trials and a larger small-molecule decline, but pandemic recovery, higher capital costs, therapeutic mix, and industry affiliations limit causal inference.²⁴

Conversely, annual FDA approval counts cannot yet prove no effect because current launches originated years before the policy. Companies should build an evidence ledger that tracks asset-level changes in trial starts, supplemental indications, licensing terms, launch timing, and discontinuations against exposure to negotiation and rebates.

Policymakers should review that evidence periodically and adjust distortions — particularly the effective 9-year small-molecule versus 13-year biologic timing — without weakening price discipline. Value-based purchasing is best reserved for measurable uncertainty.

CMS’s Cell and Gene Therapy Access Model now includes 34 Medicaid programs and 2 manufacturers, using negotiated discounts and outcomes-based rebates for sickle cell gene therapies.²⁵ It is operational, but evidence on net cost, access, and durability is still unavailable.

Such arrangements require reproducible outcomes, interoperable data, attribution rules, and financing for care delivery — not only a rebate clause.

A differentiated affordability portfolio

High-cost medicines reveal why one pricing mechanism cannot fit every product. GLP-1 medicines combine large eligible populations, chronic use, and clinically meaningful outcomes;

Medicare Part D gross GLP-1 spending reached $27.5 billion in 2024 across 21.8 million claims.²⁶ The temporary Medicare GLP-1 Bridge offers a $245 manufacturer net monthly price and a $50 patient copay for eligible beneficiaries, and semaglutide’s $274 MFP begins in 2027.^7,27

Oncology requires rapid access and protection from cost-related abandonment. One-time gene therapies require outcomes-based risk sharing, treatment-center capacity, fertility and travel support, and multiyear follow-up.

The practical agenda for life-sciences organizations is fourfold. First, replace list-price narratives with auditable net-economics maps by product, indication, channel, and patient segment. The map should reconcile gross-to-net deductions, benefit design, dispensing economics, administration costs, and patient assistance.

Second, integrate pricing, health economics, medical affairs, market access, and supply quality before pivotal-trial design — not at launch. Evidence plans should anticipate comparative-effectiveness questions, subgroup value, adherence, total episode cost, and outcomes that can support contracts.

Third, treat reliable manufacturing and equitable delivery as value components. A product cannot generate health benefit if a shortage, treatment-center bottleneck, prior-authorization failure, or unaffordable upfront payment prevents use. Procurement teams should pair price metrics with quality maturity, service level, time to therapy, discontinuation risk, and geographic access.

Fourth, disclose enough methodology for payers and patients to distinguish a genuine reduction from a shifted cost. Governance should assign owners for MFP readiness, inflation-rebate exposure, PBM data validation, cash-channel integrity, and postlaunch access measurement.

A shared scorecard can put into practice these disciplines. At minimum, it should report net cost by stakeholder; initiation, abandonment, adherence, and persistence; time to authorization and treatment; health outcomes by indication; supply interruptions and recovery time; and R&D changes for exposed assets.

Reporting the estimate type — observed, projected, modeled, or claimed — is as important as reporting the number. This is how the industry can move the debate from intent to performance.

The United States has not adopted one coherent national pricing system. It has assembled overlapping tools: statutory negotiation, benefit caps, inflation rebates, delayed PBM auditability, targeted cash-pay channels, proposed international benchmarks, and product-specific value contracts.

The organizations best positioned for this environment do not defend opacity. They demonstrate how clinical value is created, how economic value flows, and how both reach the patient without making the supply chain — or the innovation pipeline — less durable.

Disclaimer: The views expressed in the article are those of the author and not of the organizations the author represents.

About the Author

Partha Anbil is at the intersection of the life sciences industry and management consulting. He has more than 30 years of experience in life sciences. He is also a life sciences industry adviser at the Massachusetts Institute of Technology (MIT), his alma mater. He held senior leadership roles at WNS, IBM, Booz & Company, Symphony, IQVIA, KPMG Consulting, and PwC. Anbil has consulted with and counseled health and life sciences clients on structuring solutions to address strategic, operational, and organizational challenges. He is a diplomat-in-residence and fellow at MIT Computer Science and Artificial Intelligence Laboratory. He is a health care expert member of the World Economic Forum. He was a member of the IBM Industry Academy, a highly selective group of professionals inducted by invitation only and considered IBM's highest honor.

References

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