Medicare drug price negotiations help unlock hospital resources
Writer: Mariana Hernández
September 2025 — The Medicare Drug Price Negotiation Program, introduced under the Inflation Reduction Act (IRA), marks one of the most significant federal efforts to address the high cost of prescription drugs. After facing multiple lawsuits from pharmaceutical companies, courts have repeatedly protected the program’s momentum despite industry opposition.
“We believe drug pricing should be evaluated in the totality of the supply chain system. We have filed comments with the Division of Consumer Affairs, stressing the need for an unbiased and confidential review by the Council, that the entire supply chain is considered, that artificial caps aren’t put in place, and that we’re not hindering innovation in our home state,” said Chrissy Buteas, president and CEO at the HealthCare Institute of New Jersey in an interview with Invest:.
The program gives the Centers for Medicare and Medicaid Services (CMS) the authority to negotiate prices for the most expensive drugs covered under Medicare Part D. In its first round, CMS identified 10 high-cost drugs, including Eliquis, Jardiance, and Xarelto, which together accounted for $56.2 billion in total Medicare spending during 2023. These negotiations are expected to significantly reduce patient costs while easing financial burdens on hospitals and health systems that rely on these treatments.
This year, another 15 drugs will be added, with the new prices taking effect in 2026. High-profile medications such as Wegovy and Ozempic, widely prescribed for obesity and diabetes, are also being targeted. Together, these negotiations represent billions of dollars in spending and affect some of the most commonly used treatments among Medicare patients.
While the discussion has focused on patients’ out-of-pocket costs, the implications for hospitals and health systems are just as relevant. Drug expenditures represent a substantial portion of hospital operating budgets, which will be covered under Medicare Part B.
“It’s a real challenge. Medicare reimbursement rates are declining, and safe, quick access to healthcare is becoming harder to find. As a result, people often end up in urgent care or emergency rooms when they really should be treated through primary care,” said Usha Menon, dean at USF Health’s College of Nursing in an interview with Invest:.
Hospitals and physicians participating in Medicare have faced limits on payments for their services to ensure affordability for beneficiaries. The program offers a chance to redirect financial resources toward other health initiatives — including staffing shortages, long-delayed technology upgrades, and essential maintenance of hospital sites — or to reduce the federal deficit by lowering drug costs on budgets. With greater transparency and more predictable spending, hospitals can better plan their investments and expand services that directly benefit patients.
In addition, by lowering patient out-of-pocket costs, hospitals may experience a reduction in uncompensated care. When patients can afford their prescriptions and take them consistently, they are less likely to face complications from untreated conditions, which reduces costly emergency visits and hospitalizations in the long term. These savings enable hospitals to reallocate resources.
The combined effect of Medicare’s drug price negotiation program is therefore twofold: immediate relief for patients struggling with high drug costs and a long-term rebalancing of hospital budgets. By reducing prescription drug spending, hospitals across the country can prioritize the relocation of resources toward staffing, technology, and infrastructure. As the first negotiated prices take effect in 2026, hospitals will be positioned to channel these savings into strengthening the foundation of patient care.
