---
kind: "section"
citation: "42 U.S.C. § 1320f–3"
title: "42"
title_heading: "The Public Health and Welfare"
number: "1320f–3"
heading: "Negotiation and renegotiation process"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/42/1320f-3"
units:
  - "Chapter 7 — Social Security"
  - "Subchapter XI — General Provisions, Peer Review, and Administrative Simplification"
  - "Part E — Price Negotiation Program To Lower Prices for Certain High-Priced Single Source Drugs"
---

# §1320f–3. Negotiation and renegotiation process

- (a) **In general—** For purposes of this part, under an agreement under [section 1320f–2 of this title](/usc/42/1320f–2.md) between the [Secretary](/usc/42/1301.md?p=a-6) and a manufacturer of a selected [drug](/usc/42/11851.md?p=4) (or selected [drugs](/usc/42/11851.md?p=4)), with respect to the period for which such agreement is in effect and in accordance with subsections [(b)](#b), [(c)](#c), and [(d)](#d), the [Secretary](/usc/42/1301.md?p=a-6) and the manufacturer—
  - (1) shall during the negotiation period with respect to such [drug](/usc/42/11851.md?p=4), in accordance with this section, negotiate a maximum fair price for such [drug](/usc/42/11851.md?p=4) for the purpose described in [section 1320f–2(a)(1) of this title](/usc/42/1320f–2.md?p=a-1); and
  - (2) renegotiate, in accordance with the process specified pursuant to [subsection (f)](#f), such maximum fair price for such [drug](/usc/42/11851.md?p=4) for the purpose described in [section 1320f–2(a)(2) of this title](/usc/42/1320f–2.md?p=a-2) if such [drug](/usc/42/11851.md?p=4) is a renegotiation-eligible [drug](/usc/42/11851.md?p=4) under such subsection.
- (b) **Negotiation process requirements—**
  - (1) **Methodology and process—** The [Secretary](/usc/42/1301.md?p=a-6) shall develop and use a consistent methodology and process, in accordance with [paragraph (2)](#b-2), for negotiations under [subsection (a)](#a) that aims to achieve the lowest maximum fair price for each selected [drug](/usc/42/11851.md?p=4).
  - (2) **Specific elements of negotiation process—** As part of the negotiation process under this section, with respect to a selected [drug](/usc/42/11851.md?p=4) and the negotiation period with respect to the initial price applicability year with respect to such [drug](/usc/42/11851.md?p=4), the following shall apply:
    - (A) **Submission of information—** Not later than March 1 of the year of the selected [drug](/usc/42/11851.md?p=4) publication date, with respect to the selected [drug](/usc/42/11851.md?p=4), the manufacturer of the [drug](/usc/42/11851.md?p=4) shall submit to the [Secretary](/usc/42/1301.md?p=a-6), in accordance with [section 1320f–2(a)(4) of this title](/usc/42/1320f–2.md?p=a-4), the information described in such section.
    - (B) **Initial offer by Secretary—** Not later than the June 1 following the selected [drug](/usc/42/11851.md?p=4) publication date, the [Secretary](/usc/42/1301.md?p=a-6) shall provide the manufacturer of the selected [drug](/usc/42/11851.md?p=4) with a written initial offer that contains the [Secretary](/usc/42/1301.md?p=a-6)’s proposal for the maximum fair price of the [drug](/usc/42/11851.md?p=4) and a concise justification based on the factors described in [subsection (e)](#e) that were used in developing such offer.
    - (C) **Response to initial offer—**
      - (i) **In general—** Not later than 30 days after the date of receipt of an initial offer under [subparagraph (B)](#b-2-B), the manufacturer shall either accept such offer or propose a counteroffer to such offer.
      - (ii) **Counteroffer requirements—** If a manufacturer proposes a counteroffer, such counteroffer—
        - (I) shall be in writing; and
        - (II) shall be justified based on the factors described in [subsection (e)](#e).
    - (D) **Response to counteroffer—** After receiving a counteroffer under [subparagraph (C)](#b-2-C), the [Secretary](/usc/42/1301.md?p=a-6) shall respond in writing to such counteroffer.
    - (E) **Deadline—** All negotiations between the [Secretary](/usc/42/1301.md?p=a-6) and the manufacturer of the selected [drug](/usc/42/11851.md?p=4) shall end prior to the first day of November following the selected [drug](/usc/42/11851.md?p=4) publication date, with respect to the initial price applicability year.
    - (F) **Limitations on offer amount—** In negotiating the maximum fair price of a selected [drug](/usc/42/11851.md?p=4), with respect to the initial price applicability year for the selected [drug](/usc/42/11851.md?p=4), and, as applicable, in renegotiating the maximum fair price for such [drug](/usc/42/11851.md?p=4), with respect to a subsequent year during the price applicability period for such [drug](/usc/42/11851.md?p=4), the [Secretary](/usc/42/1301.md?p=a-6) shall not offer (or agree to a counteroffer for) a maximum fair price for the selected [drug](/usc/42/11851.md?p=4) that—
      - (i) exceeds the ceiling determined under [subsection (c)](#c) for the selected [drug](/usc/42/11851.md?p=4) and year; or
      - (ii) as applicable, is less than the floor determined under [subsection (d)](#d) for the selected [drug](/usc/42/11851.md?p=4) and year.
- (c) **Ceiling for maximum fair price—**
  - (1) **General ceiling—**
    - (A) **In general—** The maximum fair price negotiated under this section for a selected [drug](/usc/42/11851.md?p=4), with respect to the first initial price applicability year of the price applicability period with respect to such [drug](/usc/42/11851.md?p=4), shall not exceed the lower of the amount under [subparagraph (B)](#c-1-B) or the amount under [subparagraph (C)](#c-1-C).
    - (B) **Subparagraph (B) amount—** An amount equal to the following:
      - (i) **Covered part D drug—** In the case of a [covered part D drug](/usc/42/1395w–151.md?p=a-2) (as defined in [section 1395w–102(e) of this title](/usc/42/1395w–102.md?p=e)), the sum of the plan specific enrollment weighted amounts for each [prescription drug plan](/usc/42/1395w–151.md?p=a-14) or [MA–PD plan](/usc/42/1395w–151.md?p=a-9) (as determined under [paragraph (2)](#c-2)).
      - (ii) **Part B drug or biological—** In the case of a [drug](/usc/42/11851.md?p=4) or biological product for which payment may be made under part B of subchapter XVIII, the payment amount under [section 1395w–3a(b)(4) of this title](/usc/42/1395w–3a.md?p=b-4) for the [drug](/usc/42/11851.md?p=4) or biological product for the year prior to the year of the selected [drug](/usc/42/11851.md?p=4) publication date with respect to the initial price applicability year for the [drug](/usc/42/11851.md?p=4) or biological product.
    - (C) **Subparagraph (C) amount—** An amount equal to the applicable percent described in [paragraph (3)](#c-3), with respect to such [drug](/usc/42/11851.md?p=4), of the following:
      - (i) **Initial price applicability year 2026—** In the case of a selected [drug](/usc/42/11851.md?p=4) with respect to which such initial price applicability year is 2026, the average non-Federal average manufacturer price for such [drug](/usc/42/11851.md?p=4) for 2021 (or, in the case that there is not an average non-Federal average manufacturer price available for such [drug](/usc/42/11851.md?p=4) for 2021, for the first full year following the market entry for such [drug](/usc/42/11851.md?p=4)), increased by the percentage increase in the consumer price index for all urban consumers (all items; [United States](/usc/42/1301.md?p=a-2) city average) from September 2021 (or December of such first full year following the market entry), as applicable, to September of the year prior to the year of the selected [drug](/usc/42/11851.md?p=4) publication date with respect to such initial price applicability year.
      - (ii) **Initial price applicability year 2027 and subsequent years—** In the case of a selected [drug](/usc/42/11851.md?p=4) with respect to which such initial price applicability year is 2027 or a subsequent year, the lower of—
        - (I) the average non-Federal average manufacturer price for such [drug](/usc/42/11851.md?p=4) for 2021 (or, in the case that there is not an average non-Federal average manufacturer price available for such [drug](/usc/42/11851.md?p=4) for 2021, for the first full year following the market entry for such [drug](/usc/42/11851.md?p=4)), increased by the percentage increase in the consumer price index for all urban consumers (all items; [United States](/usc/42/1301.md?p=a-2) city average) from September 2021 (or December of such first full year following the market entry), as applicable, to September of the year prior to the year of the selected [drug](/usc/42/11851.md?p=4) publication date with respect to such initial price applicability year; or
        - (II) the average non-Federal average manufacturer price for such [drug](/usc/42/11851.md?p=4) for the year prior to the selected [drug](/usc/42/11851.md?p=4) publication date with respect to such initial price applicability year.
  - (2) **Plan specific enrollment weighted amount—** For purposes of [paragraph (1)(B)(i)](#c-1-B-i), the plan specific enrollment weighted amount for a [prescription drug plan](/usc/42/1395w–151.md?p=a-14) or an [MA–PD plan](/usc/42/1395w–151.md?p=a-9) with respect to a [covered Part D drug](/usc/42/1395w–151.md?p=a-2) is an amount equal to the product of—
    - (A) the negotiated price of the [drug](/usc/42/11851.md?p=4) under such plan under part D of subchapter XVIII, net of all price concessions received by such plan or pharmacy benefit managers on behalf of such plan, for the most recent year for which data is available; and
    - (B) a fraction—
      - (i) the numerator of which is the total number of individuals enrolled in such plan in such year; and
      - (ii) the denominator of which is the total number of individuals enrolled in a [prescription drug plan](/usc/42/1395w–151.md?p=a-14) or an [MA–PD plan](/usc/42/1395w–151.md?p=a-9) in such year.
  - (3) **Applicable percent described—** For purposes of this subsection, the applicable percent described in this paragraph is the following:
    - (A) **Short-monopoly drugs and vaccines—** With respect to a selected [drug](/usc/42/11851.md?p=4) (other than an extended-monopoly [drug](/usc/42/11851.md?p=4) and a long-monopoly [drug](/usc/42/11851.md?p=4)), 75 percent.
    - (B) **Extended-monopoly drugs—** With respect to an extended-monopoly [drug](/usc/42/11851.md?p=4), 65 percent.
    - (C) **Long-monopoly drugs—** With respect to a long-monopoly [drug](/usc/42/11851.md?p=4), 40 percent.
  - (4) **Extended-monopoly drug defined—**
    - (A) **In general—** In this part, subject to [subparagraph (B)](#c-4-B), the term “extended-monopoly [drug](/usc/42/11851.md?p=4)” means, with respect to an initial price applicability year, a selected [drug](/usc/42/11851.md?p=4) for which at least 12 years, but fewer than 16 years, have elapsed since the date of approval of such [drug](/usc/42/11851.md?p=4) under [section 355(c) of title 21](/usc/21/355.md?p=c) or since the date of licensure of such [drug](/usc/42/11851.md?p=4) under [section 262(a) of this title](/usc/42/262.md?p=a), as applicable.
    - (B) **Exclusions—** The term “extended-monopoly [drug](/usc/42/11851.md?p=4)” shall not include any of the following:
      - (i) A vaccine that is licensed under [section 262 of this title](/usc/42/262.md) and marketed pursuant to such section.
      - (ii) A selected [drug](/usc/42/11851.md?p=4) for which a manufacturer had an agreement under this part with the [Secretary](/usc/42/1301.md?p=a-6) with respect to an initial price applicability year that is before 2030.
    - (C) **Clarification—** Nothing in [subparagraph (B)(ii)](#c-4-B-ii) shall limit the transition of a selected [drug](/usc/42/11851.md?p=4) described in [paragraph (3)(A)](#c-3-A) to a long-monopoly [drug](/usc/42/11851.md?p=4) if the selected [drug](/usc/42/11851.md?p=4) meets the definition of a long-monopoly [drug](/usc/42/11851.md?p=4).
  - (5) **Long-monopoly drug defined—**
    - (A) **In general—** In this part, subject to [subparagraph (B)](#c-5-B), the term “long-monopoly [drug](/usc/42/11851.md?p=4)” means, with respect to an initial price applicability year, a selected [drug](/usc/42/11851.md?p=4) for which at least 16 years have elapsed since the date of approval of such [drug](/usc/42/11851.md?p=4) under [section 355(c) of title 21](/usc/21/355.md?p=c) or since the date of licensure of such [drug](/usc/42/11851.md?p=4) under [section 262(a) of this title](/usc/42/262.md?p=a), as applicable.
    - (B) **Exclusion—** The term “long-monopoly [drug](/usc/42/11851.md?p=4)” shall not include a vaccine that is licensed under [section 262 of this title](/usc/42/262.md) and marketed pursuant to such section.
  - (6) **Average non-Federal average manufacturer price—** In this part, the term “average non-Federal average manufacturer price” means the average of the non-Federal average manufacturer price (as defined in [section 8126(h)(5) of title 38](/usc/38/8126.md?p=h-5)) for the 4 calendar quarters of the year involved.
- (d) **Temporary floor for small biotech drugs—** In the case of a selected [drug](/usc/42/11851.md?p=4) that is a qualifying single source [drug](/usc/42/11851.md?p=4) described in [section 1320f–1(d)(2) of this title](/usc/42/1320f–1.md?p=d-2) and with respect to which the first initial price applicability year of the price applicability period with respect to such [drug](/usc/42/11851.md?p=4) is 2029 or 2030, the maximum fair price negotiated under this section for such [drug](/usc/42/11851.md?p=4) for such initial price applicability year may not be less than 66 percent of the average non-Federal average manufacturer price for such [drug](/usc/42/11851.md?p=4) (as defined in [subsection (c)(6)](#c-6)) for 2021 (or, in the case that there is not an average non-Federal average manufacturer price available for such [drug](/usc/42/11851.md?p=4) for 2021, for the first full year following the market entry for such [drug](/usc/42/11851.md?p=4)), increased by the percentage increase in the consumer price index for all urban consumers (all items; [United States](/usc/42/1301.md?p=a-2) city average) from September 2021 (or December of such first full year following the market entry), as applicable, to September of the year prior to the selected [drug](/usc/42/11851.md?p=4) publication date with respect to the initial price applicability year.
- (e) **Factors—** For purposes of negotiating the maximum fair price of a selected [drug](/usc/42/11851.md?p=4) under this part with the manufacturer of the [drug](/usc/42/11851.md?p=4), the [Secretary](/usc/42/1301.md?p=a-6) shall consider the following factors, as applicable to the [drug](/usc/42/11851.md?p=4), as the basis for determining the offers and counteroffers under [subsection (b)](#b) for the [drug](/usc/42/11851.md?p=4):
  - (1) **Manufacturer-specific data—** The following data, with respect to such selected [drug](/usc/42/11851.md?p=4), as submitted by the manufacturer:
    - (A) Research and development costs of the manufacturer for the [drug](/usc/42/11851.md?p=4) and the extent to which the manufacturer has recouped research and development costs.
    - (B) Current unit costs of production and distribution of the [drug](/usc/42/11851.md?p=4).
    - (C) Prior Federal financial support for novel therapeutic discovery and development with respect to the [drug](/usc/42/11851.md?p=4).
    - (D) Data on pending and approved patent applications, exclusivities recognized by the Food and [Drug](/usc/42/11851.md?p=4) [Administration](/usc/42/1301.md?p=a-10), and applications and approvals under [section 355(c) of title 21](/usc/21/355.md?p=c) or [section 262(a) of this title](/usc/42/262.md?p=a) for the [drug](/usc/42/11851.md?p=4).
    - (E) Market data and revenue and sales volume data for the [drug](/usc/42/11851.md?p=4) in the [United States](/usc/42/1301.md?p=a-2).
  - (2) **Evidence about alternative treatments—** The following evidence, as available, with respect to such selected [drug](/usc/42/11851.md?p=4) and therapeutic alternatives to such [drug](/usc/42/11851.md?p=4):
    - (A) The extent to which such [drug](/usc/42/11851.md?p=4) represents a therapeutic advance as compared to existing therapeutic alternatives and the costs of such existing therapeutic alternatives.
    - (B) Prescribing information approved by the Food and [Drug](/usc/42/11851.md?p=4) [Administration](/usc/42/1301.md?p=a-10) for such [drug](/usc/42/11851.md?p=4) and therapeutic alternatives to such [drug](/usc/42/11851.md?p=4).
    - (C) Comparative effectiveness of such [drug](/usc/42/11851.md?p=4) and therapeutic alternatives to such [drug](/usc/42/11851.md?p=4), taking into consideration the effects of such [drug](/usc/42/11851.md?p=4) and therapeutic alternatives to such [drug](/usc/42/11851.md?p=4) on specific populations, such as individuals with disabilities, the elderly, the terminally ill, children, and other patient populations.
    - (D) The extent to which such [drug](/usc/42/11851.md?p=4) and therapeutic alternatives to such [drug](/usc/42/11851.md?p=4) address unmet medical needs for a condition for which [treatment](/usc/42/11851.md?p=11) or diagnosis is not addressed adequately by available therapy.

    In using evidence described in [subparagraph (C)](#e-2-C), the [Secretary](/usc/42/1301.md?p=a-6) shall not use evidence from comparative clinical effectiveness research in a manner that treats extending the life of an elderly, disabled, or terminally ill individual as of lower value than extending the life of an individual who is younger, nondisabled, or not terminally ill.

- (f) **Renegotiation process—**
  - (1) **In general—** In the case of a renegotiation-eligible [drug](/usc/42/11851.md?p=4) (as defined in [paragraph (2)](#f-2)) that is selected under [paragraph (3)](#f-3), the [Secretary](/usc/42/1301.md?p=a-6) shall provide for a process of renegotiation (for years (beginning with 2028) during the price applicability period, with respect to such [drug](/usc/42/11851.md?p=4)) of the maximum fair price for such [drug](/usc/42/11851.md?p=4) consistent with [paragraph (4)](#f-4).
  - (2) **Renegotiation-eligible drug defined—** In this section, the term “renegotiation-eligible [drug](/usc/42/11851.md?p=4)” means a selected [drug](/usc/42/11851.md?p=4) that is any of the following:
    - (A) **Addition of new indication—** A selected [drug](/usc/42/11851.md?p=4) for which a new indication is added to the [drug](/usc/42/11851.md?p=4).
    - (B) **Change of status to an extended-monopoly drug—** A selected [drug](/usc/42/11851.md?p=4) that—
      - (i) is not an extended-monopoly or a long-monopoly [drug](/usc/42/11851.md?p=4); and
      - (ii) for which there is a change in status to that of an extended-monopoly [drug](/usc/42/11851.md?p=4).
    - (C) **Change of status to a long-monopoly drug—** A selected [drug](/usc/42/11851.md?p=4) that—
      - (i) is not a long-monopoly [drug](/usc/42/11851.md?p=4); and
      - (ii) for which there is a change in status to that of a long-monopoly [drug](/usc/42/11851.md?p=4).
    - (D) **Material changes—** A selected [drug](/usc/42/11851.md?p=4) for which the [Secretary](/usc/42/1301.md?p=a-6) determines there has been a material change of any of the factors described in paragraph [(1)](#e-1) or [(2)](#e-2) of subsection (e).
  - (3) **Selection of drugs for renegotiation—** For each year (beginning with 2028), the [Secretary](/usc/42/1301.md?p=a-6) shall select among renegotiation-eligible [drugs](/usc/42/11851.md?p=4) for renegotiation as follows:
    - (A) **All extended-monopoly negotiation-eligible drugs—** The [Secretary](/usc/42/1301.md?p=a-6) shall select all renegotiation-eligible [drugs](/usc/42/11851.md?p=4) described in [paragraph (2)(B)](#f-2-B).
    - (B) **All long-monopoly negotiation-eligible drugs—** The [Secretary](/usc/42/1301.md?p=a-6) shall select all renegotiation-eligible [drugs](/usc/42/11851.md?p=4) described in [paragraph (2)(C)](#f-2-C).
    - (C) **Remaining drugs—** Among the remaining renegotiation-eligible [drugs](/usc/42/11851.md?p=4) described in subparagraphs [(A)](#f-2-A) and [(D)](#f-2-D) of paragraph (2), the [Secretary](/usc/42/1301.md?p=a-6) shall select renegotiation-eligible [drugs](/usc/42/11851.md?p=4) for which the [Secretary](/usc/42/1301.md?p=a-6) expects renegotiation is likely to result in a significant change in the maximum fair price otherwise negotiated.
  - (4) **Renegotiation process—**
    - (A) **In general—** The [Secretary](/usc/42/1301.md?p=a-6) shall specify the process for renegotiation of maximum fair prices with the manufacturer of a renegotiation-eligible [drug](/usc/42/11851.md?p=4) selected for renegotiation under this subsection.
    - (B) **Consistent with negotiation process—** The process specified under [subparagraph (A)](#f-4-A) shall, to the extent practicable, be consistent with the methodology and process established under [subsection (b)](#b) and in accordance with subsections [(c)](#c), [(d)](#d), and [(e)](#e), and for purposes of applying subsections [(c)(1)(A)](#c-1-A) and [(d)](#d), the reference to the first initial price applicability year of the price applicability period with respect to such [drug](/usc/42/11851.md?p=4) shall be treated as the first initial price applicability year of such period for which the maximum fair price established pursuant to such renegotiation applies, [including](/usc/42/1301.md?p=b) for applying [subsection (c)(3)(B)](#c-3-B) in the case of renegotiation-eligible [drugs](/usc/42/11851.md?p=4) described in paragraph (3)(A) of this subsection and [subsection (c)(3)(C)](#c-3-C) in the case of renegotiation-eligible [drugs](/usc/42/11851.md?p=4) described in paragraph (3)(B) of this subsection.
  - (5) **Clarification—** A renegotiation-eligible [drug](/usc/42/11851.md?p=4) for which the [Secretary](/usc/42/1301.md?p=a-6) makes a determination described in [section 1320f–1(c)(1) of this title](/usc/42/1320f–1.md?p=c-1) before or during the period of renegotiation shall not be subject to the renegotiation process under this section.
- (g) **Clarification—** The maximum fair price for a selected [drug](/usc/42/11851.md?p=4) described in subparagraph (A) or (B) of paragraph (1)[^1] shall take effect no later than the first day of the first calendar quarter that begins after the date described in subparagraph[^2] (A) or (B), as applicable.

## Footnotes

[^1]: So in original. Probably means subparagraph (A) or (B) of paragraph (1) of section 1320f–1(e) of this title.
[^2]: So in original. Probably should be preceded by “such”.

## Source credit

(Aug. 14, 1935, ch. 531, title XI, § 1194, as added Pub. L. 117–169, title I, § 11001(a), Aug. 16, 2022, 136 Stat. 1843.)