Many 2025 Medicare Part D formularies will look notably different from those in prior years, largely driven by significant changes in the Part D benefit set forth by the Inflation Reduction Act of 2022 (IRA). This article discusses changes in plan incentives and the resulting key trends in 2025 formulary coverage, as well as considerations for 2026 formulary development for standalone Prescription Drug Plans (PDPs) as well as Medicare Advantage and Prescription Drug (MAPD) plans.

Changing incentives

Key IRA changes directly affect plan costs and therefore are likely to impact formulary design decisions

• Reductions in federal reinsurance and increases in plan liability in the catastrophic phase of the Part D benefit increase plan risk, especially for patients taking higher-cost drugs.
• Increases in mandatory discounts for most pharmaceutical manufacturers driven by the replacement of the Coverage Gap Discount Program (CGDP) with the Manufacturer Discount Program (MDP) likely put downward pressure on negotiated rebates between pharmaceutical manufacturers and pharmacy benefit managers (PBMs).
• Certain pharmaceutical manufacturers (i.e., specified or specified small manufacturers) are eligible to make lower MDP payments, but the plan is liable for the difference between the full MDP payment and the reduced payment for these manufacturers. Figure 1 displays the difference in defined standard plan liability for different brand drug claims.¹ On average, Part D plans will be compensated via higher revenue for the phase-in of MDP because this is reflected in the 2025 direct subsidy calculation. However, the plan bears risk if claims from specified manufacturers are higher than expected. This dynamic financially incentivizes plans to steer utilization toward drugs produced by non-specified manufacturers, all else equal.

To mitigate the increase in financial risk, plan sponsors adjusted their formulary coverage for 2025 and are likely to continue this strategy going forward. Many observed trends we discuss in this article are particularly pronounced among standalone PDPs relative to MAPD plans, reflecting a preference for cost-effective alternatives, likely influenced by the heightened desire of PDPs to limit anti-selection risk. Further, plan sponsors took varying approaches to their 2025 formularies, and certain trends in coverage discussed below are driven by a few, large plans making particular changes. This underscores the importance of a thorough review of the formulary landscape files to understand overarching strategies at the plan or regional level.

Data and methodology

To perform this analysis, we rely on the 2024 and 2025 formulary files released by the Centers for Medicare and Medicaid Services (CMS) in October 2023 and October 2024, respectively. We do not account for midyear 2024 formulary additions during calendar year (CY) 2024. This analysis does not include Employer Group Waiver Plans (EGWPs). To derive member-weighted averages for formulary coverage, we relied on September 2024 enrollment, published by CMS, mapped to 2024 and 2025 formulary IDs using plan ID to formulary ID crosswalks published by CMS. We assume 100% of September 2024 membership crosswalks from the 2024 plan to the corresponding 2025 plan, as applicable.

Key trends in 2025 formulary coverage

IRA provision for small manufacturers leads to unintended consequences for formulary access

As discussed above, the phase-in of manufacturer discounts under the IRA incentivizes plans to shift utilization away from drugs produced by specified and specified small manufacturers. Drugs manufactured by specified small manufacturers have a particularly disproportionate reduction in formulary coverage, with average PDP coverage of these drugs decreasing from 74% of members in 2024 to 56% of members in 2025.² Formulary disruption for these drugs is also occurring on MAPD formularies, but to a lesser extent.

The key therapeutic classes affected by these changes include multiple sclerosis (MS), pulmonary arterial hypertension (PAH), long-acting injectable antipsychotics, and urinary antispasmodics. In particular, formulary changes for several key drugs among PDPs are likely related to the unfavorable plan economics created by the MDP phase-in, shown in Figure 2. All of the drugs shown in Figure 2 also have coverage decreases among MAPD plans, but to a lesser extent.

Generic and biosimilar access improves in certain therapeutic classes relative to 2024

Prior to 2025, the Part D benefit design incentivized plans to cover higher-cost brand drugs and biologics with high rebates due to lower plan liability in the latter portion of the benefit design. To manage the increase in risk after the IRA benefit redesign, many plan sponsors are adjusting their formularies to cover lower-cost generics and biosimilars in certain classes. Some of these changes are not as common in the MAPD market and are only widespread in the PDP market. The following are notable changes in 2025 formularies relative to 2024:

• Autoimmune agents: Humira biosimilars have significant increases in access, with about half of PDP lives losing access to brand Humira but gaining access to adalimumab biosimilars, while many MAPD plans offer broader coverage.²

• Insulins: Significant wholesale acquisition cost (WAC) decreases³ and corresponding losses in rebates were drivers of recent disruption for the formulary coverage of many insulin products. Continuing the disruption trend into 2025, fewer formularies cover brands like Fiasp, Toujeo, and Tresiba, but coverage increased for authorized generics (AGs) like insulin aspart (unbranded Novolog) and insulin glargine-yfgn (unbranded Lantus). Of note, on December 5, 2024, Novo Nordisk announced plans to significantly reduce the list price of Fiasp and Tresiba starting January 1, 2026. At the same time, the manufacturer will also discontinue the corresponding unbranded products, insulin aspart and insulin degludec.⁴
• Asthma and chronic obstructive pulmonary disease (COPD) inhalers: Similar to treatment of insulins, pharmaceutical manufacturers lowered the prices of certain brand inhalers recently,⁵ thereby decreasing the amount of their rebates. There is more coverage for AGs of Symbicort and Proair along with generic Proventil, and less coverage for brands like Advair HFA, Advair Diskus, Breztri, Dulera, and Ventolin.
• PAH: Nearly all brand PAH drugs lost significant formulary coverage in both the PDP and MAPD spaces. Brand drugs like Orenitram, Tracleer, Adempas, and Opsumit lost coverage, while sildenafil (generic Revatio) and bosentan (generic Tracleer) have the largest increases in coverage. Many of the brand drug products may be disadvantaged due to their designation as specified or specified small, as discussed above.
• MS: In a class with over 15 brand drugs, only one brand drug (Kesimpta) has increased coverage across both PDP and MAPD in 2025. Most brand drug products have reduced coverage, especially those from specified manufacturers (Copaxone, Tecfidera, and Vumerity), while generics like dimethyl fumarate (generic Tecfidera), glatiramer acetate (generic Copaxone), and teriflunomide (generic Aubagio) have broader coverage in 2025.

Considerations when developing 2026 formularies

The outlook for the 2026 Part D formulary landscape is shaped by several key factors, including legislative and regulatory changes, indication expansions, and several generic and biosimilar entrants.

Medicare Drug Price Negotiation Program (MDPNP): One of the most significant changes in the IRA is the implementation of the MDPNP, where Medicare will negotiate what the IRA refers to as “maximum fair prices” (MFPs) for selected single source brands. The IRA requires selected drugs to be covered on every Part D formulary starting in 2026. However, CMS indicates it does not intend to require specific nor uniform tiering or utilization management requirements for 2026. CMS states it will require plans to submit justification for disadvantaging these products, and CMS may require formulary changes if it deems the tier placement and/or utilization management criteria for drugs with MFPs to be inappropriate.⁶ It remains to be seen whether this ambiguity will lead to manufacturers of drugs with MFPs offering supplemental rebates for 2026 to ensure their drugs are not disadvantaged by being placed on higher cost-sharing tiers or by stringent utilization management criteria. Further, competitors of drugs with MFPs may need to increase rebates to maintain formulary coverage, as plan sponsors reevaluate formulary strategy for therapeutic classes affected by drug price negotiation.

Indication expansions: The recent approval of semaglutide (Wegovy) for cardiovascular risk reduction, combined with positive results from the ESSENCE trial on liver fibrosis and metabolic dysfunction-associated steatohepatitis (MASH), highlights a significant effort by manufacturers to seek expanded U.S. Food and Drug Administration (FDA) approval for existing treatments.⁷ Initially approved for weight loss, which is currently statutorily excluded from coverage in Part D, Wegovy received an expanded indication in March 2024 for cardiovascular risk reduction in individuals with overweight or obesity diagnoses and established cardiovascular disease, making it eligible for Medicare Part D coverage. Despite this expansion, coverage for Wegovy under Part D remains extremely limited in 2025. It is excluded from all PDPs and included on very few MAPD plan formularies, covering less than 1% of beneficiaries in total. This limited coverage indicates a cautious approach by plans, likely aiming to avoid adverse member selection and potential significant increases in plan cost. Plan sponsors may need to evaluate their non-formulary exception approval and denial rates for the drug to determine whether coverage of it would be financially feasible. Additional indication expansion for semaglutide (Wegovy, Ozempic) and its primary competitor tirzepatide (Mounjaro, Zepbound) for conditions such as sleep apnea, chronic kidney disease, and heart failure in 2025 and 2026 may increase the pressure for formulary coverage of these products.^8,9

CMS 2026 proposed rule (CMS-4208-P): On November 26, 2024, CMS issued the 2026 proposed rule, which includes a proposal to “reinterpret the statute to permit coverage of anti-obesity medications for the treatment of obesity when such drugs are indicated to reduce excess body weight and maintain weight reduction long-term for individuals with obesity.”¹⁰ Expansion of Part D coverage to include these drugs was previously proposed by the Treat and Reduce Obesity Act (TROA) in 2023.¹¹ The incoming administration will make the decision on whether to finalize this proposal. The timing of this decision is likely to create a lot of uncertainty for plan sponsors and PBMs as they develop 2026 formularies.

Generic and biosimilar entrants: Generic launches for drugs such as Farxiga (true generic launch is forthcoming, authorized generic launched in January 2024), Entresto, Xarelto, Tradjenta, Opsumit, and Brilinta are expected, requiring plans to carefully consider their coverage strategies for these and other brands, both at the initial launch and once generics are widely available at lower prices. Notably, Farxiga, Entresto, and Xarelto must be covered on all formularies in 2026 under the MDPNP, and must remain covered for the entire plan year, despite the anticipated generic launches. Similarly, biosimilars, which offer lower-priced alternatives to certain biologics, are expected to see broader coverage due to increased plan risk under IRA. Biosimilars for Stelara, Prolia/Xgeva, and Xolair are anticipated to launch in 2025, with Stelara required to be covered on all formularies in 2026 under the MDPNP. Plan sponsors may need to balance cost savings from generics and biosimilars with the potential of manufacturers offering rebates for branded products to maintain coverage. Additionally, recent updated guidance from the FDA on biosimilar interchangeability may give plan sponsors more confidence to cover biosimilars even if they are not approved as interchangeable.¹²

Plan versus pharmacy benefit manager (PBM) considerations: As the Part D benefit changes and a larger share of claim risk shifts to the plan sponsor, designing a formulary to mitigate risk and achieve positive outcomes is more critical than ever. PBMs that design and manage formularies on behalf of plan sponsors may still be focusing on strategies involving high-cost/high-rebate products over lower net cost biosimilars and generics. Plan sponsors have historically been aligned with this strategy due to the dynamics of the Part D benefit design, where rebate dollars were much more beneficial to a plan than point-of-sale discounts. However, the relative importance of rebates, lower-cost alternatives, and selection risk have changed under the IRA, resulting in plan sponsors becoming increasingly concerned with overall net plan liability and mitigating the risk of favoring high-cost drugs. Given the importance of designing formularies to support multiple goals, it is critical for plan sponsors to engage with their PBMs to understand the rationale behind formulary decisions and work collaboratively to optimize their formularies.

Conclusions

As the landscape of the Medicare Part D program continues to evolve in reaction to significant legislative and regulatory changes, it is imperative for stakeholders to stay ahead of the curve. The introduction of the MDPNP in 2026, indication expansions of key drugs, and new generic and biosimilar entrants present both challenges and opportunities, underscoring the need to thoroughly assess the market landscape to understand emerging formulary strategies. To navigate these complexities, we strongly encourage Part D stakeholders to utilize enhanced analytical tools that take into account net plan liability to determine the financially optimal formulary coverage for 2026 and beyond.

¹ See https://www.milliman.com/en/insight/weathering-the-reform-storm. In 2025, the IRA prescribes minimum MDP discounts for eligible manufacturers and then gradually increases these amounts until 2031. Specified manufacturers are eligible to pay reduced MDP liability for brand drug claims of low-income beneficiaries, while specified small manufacturers are eligible for reduced MDP liability on all brand drug claims. Of note, drugs selected for price negotiation in 2026 will not be eligible for the MDP, but Part D plan sponsors will be made whole via additional federal government payments.

² Based on September 2024 enrollment by plan mapped to 2024 and 2025 formulary ID. We assume 100% of September 2024 membership crosswalks from the 2024 plan to the corresponding 2025 plan based on publicly available 2025 plan crosswalk information.

³ Dunleavy, K. (March 14, 2023). Novo Nordisk follows Eli Lilly's lead, slashing insulin prices in the US. Fierce Pharma. Retrieved December 11, 2024, from https://www.fiercepharma.com/pharma/novo-nordisk-follows-eli-lillys-lead-slashing-insulin-prices-us.

⁴ Novo Nordisk (December 5, 2024). Novo Nordisk to lower US list prices for Tresiba and Fiasp by more than 70%. Press release. Retrieved December 11, 2024, from https://www.novonordisk-us.com/media/news-archive/news-details.html?id=915073.

⁵ Lupkin, S. (January 17, 2024). What to know about January's annual drug price hikes. NPR. Retrieved December 11, 2024, from https://www.npr.org/sections/health-shots/2024/01/17/1225083485/what-to-know-about-januarys-annual-drug-price-hikes.

⁶ CMS (June 30, 2023). Medicare Drug Price Negotiation Program: Revised Guidance, Implementation of Sections 1191-1198 of the Social Security Act for Initial Price Applicability Year 2026. Retrieved December 11, 2024, from https://www.cms.gov/files/document/revised-medicare-drug-price-negotiation-program-guidance-june-2023.pdf.

⁷ Novo Nordisk (March 19, 2018). Novo Nordisk A/S – Share Buyback Program. Retrieved December 11, 2024, from https://www.novonordisk.com/content/nncorp/global/en/news-and-media/news-and-ir-materials/news-details.html?id=642.

⁸ Novo Nordisk (2024). Novo Nordisk – A Focused Healthcare Company: Investor Presentation. Retrieved December 11, 2024, from https://investor.novonordisk.com/q3-2024-presentation/.

⁹ Eli Lilly and Company (October 30, 2024). Q3 2024 Earnings Call. Retrieved December 11, 2024, from https://investor.lilly.com/static-files/cdedba2e-c4a7-4047-9e61-4ac3b1e2cd73.

¹⁰ CMS (November 26, 2024). Fact Sheet: Contract Year 2026 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly (CMS-4208-P). Retrieved December 11, 2024, from https://www.cms.gov/newsroom/fact-sheets/contract-year-2026-policy-and-technical-changes-medicare-advantage-program-medicare-prescription.

¹¹ The full text of H.R.4818 – Treat and Reduce Obesity Act of 2023 is available at https://www.congress.gov/bill/118th-congress/house-bill/4818 https://www.congress.gov/bill/118th-congress/house-bill/4818.

¹² FDA (June 20, 2024). FDA updates guidance on interchangeability. Retrieved December 11, 2024, from https://www.fda.gov/drugs/drug-safety-and-availability/fda-updates-guidance-interchangeability.

¹³ Optum Rx. Rx Outlook: 3rd Quarter 2024. Retrieved December 11, 2024, from https://professionals.optumrx.com/content/dam/optum3/professional-optumrx/news/outlook/WF14631418_240829_B2B-3Q2024_RxOutlook_FINAL.pdf.

¹⁴ Rudge, D. (February 24, 2022). Patent Blocks Zydus After Landmark US Approval for Dapagliflozin. Generics Bulletin. Retrieved December 11, 2024, from https://insights.citeline.com/GB151678/Patent-Blocks-Zydus-After-Landmark-US-Approval-For-Dapagliflozin/.