CMS (Medicare) does NOT negotiate the prices of medications covered under Part D. That is the insurers responsibility in developing their own formulary. CMS (actually the law) does give the parameters of coverage - how many in each drug class an insurer has to include or if all of them in certain classes.
The Medicare Modernization Act of 2003 (MMA), the law that established the Part D benefit, includes a provision, the 'noninterference" clause, which stipulates that the HHS Secretary “may not interfere with the negotiations between drug manufacturers and pharmacies and PDP sponsors, and may not require a particular formulary or institute a price structure for the reimbursement of covered part D drugs.” In effect, this provision means that the government can have no direct role in negotiating or setting drug prices in Medicare Part D.
The Medicare Prescription Drug benefit is provided through a marketplace of private plans that compete for business based on costs and coverage. Medicare contracts with private plan sponsors to provide a voluntary prescription drug benefit, and gives plans authority to negotiate drug prices with pharmaceutical companies, establish formularies, and apply utilization management tools to control costs, like Quantity Limits, Step Therapy and Prior Approval on specific, usually expensive drugs or those that need added safety controls.
This approach contrasts with how drug prices are determined in some other federal programs, such as mandatory drug price rebates in Medicaid or the way drug prices and formularies are developed and handled in a national formulary associated with the Dept of Veteran Affairs.
CMS (Medicare) DOES negotiate those drugs that are covered under Part B.
Medicare Part B Outpatient Drug Coverage
It's Always Something . . . . Roseanna Roseannadanna
