Medicare Part D Changes for 2025
Direct Drug Price Negotiations and Inflation Rebates
The Inflation Reduction Act (IRA) made several key changes to Part D. The Centers for Medicare and Medicaid Services (CMS) can now negotiate drug prices for certain high-priced/high-utilization medications. Additionally, drug companies are now required to pay CMS a rebate for Part D and B drugs if prices rise faster than the rate of inflation, helping to control the impact of cost increases for beneficiaries and the program.
Insulin Cost Cap
Insulin affordability remains a priority under the IRA. Insulin cost-sharing in Part D is now capped at $35 per month, with no deductible requirement for covered insulin. This price cap also applies to insulin delivered via insulin pumps covered under Medicare Part B durable medical equipment (DME) or Medicare Advantage (MA) plans.
Out-of-Pocket (OOP) Cap
The Medicare Part D benefit structure has evolved since the program’s inception, and the IRA eliminated the historic coverage gap, commonly known as the “donut hole”. IRA also instituted an annual out-of-pocket (OOP) cap of $2,000, eliminating patient cost-sharing in the catastrophic phase. Previously, after exceeding the initial coverage limit, beneficiaries were responsible for 100% of costs in the donut hole before reaching catastrophic coverage, which required a 5% co-insurance. In 2025, the annual deductible is $590, after which enrollees may pay as much as 25% of drug costs during the initial coverage phase. Once total spending reaches $2,000, catastrophic coverage kicks in, eliminating further OOP costs for the year.
Medicare Prescription Drug Payment Plan
Under the IRA, beneficiaries now have the option to pay for prescription medications through a monthly installment plan. The Medicare Prescription Drug Payment Plan allows beneficiaries who enroll in the program to spread existing and future prescription cost-sharing over the remaining months in the year. Under the payment plan, beneficiaries pay the monthly bill sent by their Part D plan, and do not pay anything at the pharmacy.
Negotiations for High-Cost Drugs
Under the IRA, CMS begun negotiating prices for select high-cost/high-utilization drugs. Drugs and effective years for decreased prices are:
- 2026 list: Eliquis, Enbrel, Entresto, Farxiga, Fiasp/Novolog, Imbruvica, Januvia, Jardiance, Stelara, and Xarelto
- 2027 list: Austedo/Austedo XR, Breo Ellipta, Calquence, Ibrance, Janumet/Janumet XR, Linzess, Ofev, Otezla, Ozempic/Rybelsus/Wegovy, Pomalyst, Tradjenta, Trelegy Ellipta, Vraylar, Xifaxan, Xtandi
Negotiated prices for these drugs take effect approximately two years after they are identified for negotiation. Each year, a set number of additional drugs will be selected for negotiation, starting with 10 drugs in 2026 and increasing to 20 drugs per year by 2029 and beyond.
Expanded Vaccine Coverage
Medicare Part D is now required to cover several essential vaccines at no cost to beneficiaries. Covered vaccines include COVID-19, Hepatitis B, Influenza, Pneumococcal pneumonia, and Shingles.
Extra Help Program Expansion
Under the IRA, the Extra Help (Low Income Subsidy) program now assists beneficiaries up to 150% of the Federal Poverty Level by capping medication costs at $4.50 for generic drugs and $11.20 for brand-name drugs.
Base Beneficiary Premium Cap
To prevent rapid increases in premiums, the IRA caps the base beneficiary premium (different from individual plan premiums) increase at 6% per year through 2029. The base beneficiary premium will be $36.78 in 2025, a 6% increase from 2024. Although the base premium is increasing, that does not mean individual premiums are guaranteed to increase. For example, the average monthly premium for stand-alone Part D plans will decrease by 4% in 2025.
The 2025 updates to Medicare Part D represent a major shift toward affordability and accessibility for enrollees. With lower OOP costs, expanded coverage, and direct price negotiations, beneficiaries will experience more predictable and manageable prescription drug expenses. Magnolia helps clients understand and navigate the Part D and Part B landscapes and provide strategic recommendations to improve patient access.
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