By Jonathan Gardner
Published June 15, 2026
The federal government has unveiled a pivotal regulatory proposal that threatens to reshape the commercial landscape for the world’s highest-grossing pharmaceutical products. As the Centers for Medicare & Medicaid Services (CMS) prepares for the fourth cycle of its drug-price negotiation program—mandated by the 2022 Inflation Reduction Act (IRA)—a new proposed rule for 2029 seeks to close a regulatory "loophole" that has long allowed manufacturers to shield successor formulations of blockbuster drugs from price scrutiny.
The proposal, released on June 12, 2026, aims to ensure that pharmaceutical companies cannot bypass Medicare price negotiations simply by transitioning patients from intravenous (IV) versions of a drug to newer, subcutaneous (under-the-skin) formulations. This move targets the strategic practice of "product hopping," a method often utilized to extend patent life and maintain market dominance as original formulations face the "patent cliff."
The Core Conflict: Protecting Medicare from Lifecycle Strategies
At the heart of this regulatory shift is the federal government’s attempt to exert greater control over Medicare spending for the nation’s most expensive therapies. With drug price negotiations already a reality for older, high-spend products, the 2029 cycle promises to be the most contentious yet.
The "loophole" in question relates to how Medicare treats different formulations of the same drug. Historically, manufacturers have argued that a new subcutaneous delivery method constitutes a distinct product, potentially exempting it from the price-negotiation status of the original IV version. By proposing that these transitions remain within the scope of price protection, CMS is effectively signaling that it will look at the "drug" rather than the "delivery device" when determining which products are eligible for negotiation.
Chronology: The Evolution of Medicare Price Negotiation
The path to the 2029 rule is rooted in a broader legislative and administrative timeline that began in the early 2020s.
- August 2022: The Inflation Reduction Act is signed into law, granting Medicare the historic authority to negotiate prices for certain high-cost, single-source drugs.
- 2024–2025: Initial rounds of negotiations begin, setting the stage for public-private friction regarding drug pricing transparency.
- 2026: The first round of negotiated prices officially goes into effect, marking a paradigm shift in how Medicare enrollees access life-saving treatments.
- February 1, 2027: CMS is scheduled to publish the official list of 20 drugs selected for the 2029 negotiation round.
- December 2028: Projected entry date for biosimilar competitors for industry titans like Opdivo and Keytruda.
- 2029: The year the new CMS proposed rule, if finalized, will govern the price negotiation landscape for selected drugs.
Supporting Data: The Multi-Billion Dollar Stakes
The financial scale of the drugs currently under the regulatory microscope is unprecedented. The two primary products analysts point to as potential targets for the 2029 round—Bristol Myers Squibb’s Opdivo and Merck’s Keytruda—are not merely successful; they are the pillars of the global oncology market.
In 2025, the combined global sales for these two drugs exceeded $41 billion. Their dominance is driven by their status as "broad-spectrum" therapies, meaning they are FDA-approved to treat a wide array of cancers. Because they are prescribed to a significant percentage of the Medicare population, they represent a massive slice of the Medicare Part B and Part D budgets.
For manufacturers, the strategy of moving patients to subcutaneous formulations serves two purposes:
- Patient Convenience: Reducing the time a patient spends in an infusion center—often from hours to minutes—improves the patient experience and adherence.
- Facility Efficiency: As infusion centers reach capacity, subcutaneous injections alleviate the bottleneck, allowing clinics to treat more patients per day.
However, from the perspective of federal regulators, these innovations also serve as a commercial bridge, allowing companies to retain market share even as their original, patent-protected IV formulations approach expiration.
Official Responses and Industry Outlook
The industry reaction to the CMS proposal has been one of calculated concern. While pharmaceutical trade groups have yet to release formal legal challenges, the sentiment among market analysts is that the government is tightening the net.
David Risinger, an analyst at Leerink Partners, highlighted the complexity of the current situation in a recent client note. He pointed to the specific issue of "deselection," noting that CMS has indicated that if a drug is subject to generic or biosimilar competition, it can be removed from the negotiation program.
"We don’t know if the arrival of biosimilars in late 2028 is soon enough to preclude CMS from selecting the subcutaneous versions of Opdivo and Keytruda," Risinger wrote. The uncertainty lies in the timing: if the biosimilars launch in December 2028, but the negotiation process for 2029 begins months earlier, the drugs might still be swept into the federal negotiation machinery.
Manufacturers contend that such interventions could stifle innovation. They argue that by penalizing companies for developing more convenient, patient-friendly delivery methods, the government may disincentivize the very R&D that makes modern cancer care more manageable for elderly patients.
Strategic Implications: What Happens Next?
The implications of this proposed rule extend far beyond Merck and Bristol Myers Squibb. They represent a fundamental change in how the pharmaceutical industry must approach the lifecycle management of "mega-blockbuster" drugs.
1. The End of "Product Hopping" as a Shield
If finalized, this rule effectively neutralizes one of the most effective strategies for maintaining high pricing. If a company knows that a subcutaneous version will be treated as part of the original drug’s negotiation status, the incentive to develop such a version solely for the purpose of extending high-price protection diminishes.
2. Market Uncertainty for Investors
Investors are currently pricing in the "patent cliff" of 2028. However, the 2029 CMS rule introduces a new variable. If these drugs are forced into price negotiations despite the impending arrival of biosimilars, the revenue trajectories for these companies could be significantly lower than initial projections.
3. Impact on Healthcare Delivery
Infusion centers, already stretched thin, may be forced to adapt their business models. If subcutaneous versions of drugs are subject to aggressive price negotiation, the availability and adoption of these more efficient delivery methods could be altered by federal pricing mandates, potentially impacting how clinics manage their overhead and patient flow.
4. The Path to February 2027
All eyes are now on the February 1, 2027, announcement date. The list of 20 drugs will serve as the first concrete indicator of how aggressively CMS intends to interpret its new powers. If Opdivo and Keytruda are on that list, it will confirm that the federal government is prioritizing the lowering of costs for high-spend oncology drugs over the potential disruption of pharmaceutical innovation cycles.
Conclusion
The 2029 Medicare rule proposal is a watershed moment in the relationship between the federal government and the pharmaceutical industry. By targeting the transition between IV and subcutaneous formulations, CMS is asserting that it will not allow administrative technicalities to shield the highest-revenue drugs from the price-negotiation mandate of the Inflation Reduction Act.
As the industry prepares for the next phase of these negotiations, the focus will shift to the legal definitions of "drug" and "formulation." For the millions of Americans on Medicare, the outcome could mean lower out-of-pocket costs for essential cancer treatments. For the pharmaceutical industry, it marks the end of an era where product innovation was a reliable tool for extending monopoly pricing. The next 18 months will be defined by intense lobbying, data modeling, and a high-stakes waiting game to see which drugs will define the first true test of the government’s expanded pricing authority.
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