Washington’s drug pricing reform is about to enter a new and more contentious phase.
By the end of November, and possibly this week, the Centres for Medicare & Medicaid Services (CMS) will publish its “maximum fair prices” for the next 15 medicines selected for negotiation under the Inflation Reduction Act (IRA). These prices will apply from January 2027.
UBS points out that this round of negotiations will be dominated by semaglutide, the blockbuster behind Novo Nordisk’s diabetes drug Ozempic and obesity treatment Wegovy.
Together, semaglutide products account for 70% of the net present value at risk from the 2027 negotiation list. That focus has already left investors cautious on Novo.
The key issue is how much net prices could fall. Ozempic and Wegovy already carry hefty rebates, 65% and 56% respectively, meaning CMS would need to impose even steeper discounts to shift the net numbers meaningfully.
UBS assumes a 15% cut to Ozempic’s US net price by 2027, which would imply a CMS discount of about 72–74% off list prices.
A further wrinkle is whether CMS will set one negotiated price for semaglutide across both drugs or treat them separately, preserving Wegovy’s obesity premium. Novo has indicated it expects each brand to be considered on its own.
Another unknown is the “bleed through” effect. Medicare Part D covers diabetes but not obesity, so Ozempic is more exposed than Wegovy. Some commercial insurance plans peg their prices to Medicare benchmarks, raising the prospect of wider pressure on net prices, though the extent is unclear.
The first round of IRA negotiations, which set 2026 prices, was less severe than feared. Most discounts were smaller than existing rebates, muting the net impact.
The outlier was Imbruvica, where low rebates left scope for a much sharper cut. UBS warns oncology drugs on the 2027 list, such as AstraZeneca PLC (LSE:AZN, NASDAQ:AZN) Calquence, Bristol-Myers Squibb Co's (NYSE:BMY, ETR:RM, OTC:BMYMP) Pomalyst and Pfizer Inc's (NYSE:PFE, ETR:PFE) Xtandi, could face similar treatment.
This time, UBS expects CMS to strike a harder line, not least because drug pricing has become a political lever.
The Trump administration could use the IRA process to press its case for “most-favoured nation” drug pricing in the US. For semaglutide, the world’s most closely watched drug franchise, the next two months could be pivotal.