How Government Drug Price Negotiation Actually Works

The Fiscal Policy Podcast with Fexingo: Government Budgets, Stimulus, and Public Spending · Jul 10, 2026 · 10m · transcript

In this episode, Lucas and Luna drill into the mechanics of the U.S. government's new power to negotiate drug prices for Medicare. Using the first ten drugs selected for negotiation in 2023 as a concrete case, they walk through the statutory framework: the binding inflation rebate, the 'maximum fair price' formula tied to average sales price, and the perverse incentive for manufacturers to delay generics. They unpack the Congressional Budget Office's projection that the policy will save Medicare $98.5 billion over ten years—and the counterargument that it could reduce R&D…