By Alison LaPidus, Director, Policy & Regulatory Affairs
With the Medicare Part D Premium Stabilization Demonstration coming to an end this year, the Centers for Medicare & Medicaid Services (CMS) has an opportunity to build on what worked and pursue durable reforms that protect patients, strengthen competition, and help keep the program stable. At its core, the demonstration was a temporary Band-Aid addressing short-term market shock, but did not address fundamental structural issues in Part D, which left unaddressed, could result in further destabilization of Part D and ultimately higher costs for seniors.
For the last two decades, plans and their pharmacy benefit managers (PBMs) have helped make Medicare Part D one of the most successful examples of public-private partnership in health care. Through negotiations with manufacturers, promotion of lower-cost generics and biosimilars, formulary management, and other private-sector tools, PBMs partner with plans to manage costs and help seniors and people with disabilities access affordable prescription drug coverage.
This is why PBMs are urging policymakers to offer solutions that preserve affordability and choice for 56 million Medicare beneficiaries who rely on the Part D program. As policymakers consider the program’s next phase, PBMs can be a strategic partner in helping Part D remain competitive and sustainable.
Significant Policy Changes Are Reshaping the Balance Between Part D and Medicare Advantage
The Part D market looks very different today than it did when the program began. Recent years have brought some of the most significant policy and market changes in the program’s history, including Part D redesign under the Inflation Reduction Act (IRA) and new requirements under the Consolidated Appropriations Act, 2026 (CAA), making fundamental changes to how Part D functions and how PBMs operate. While to CAA has yet to be implemented, plans and PBMs are busy adapting to these shifts in financial risk, benefit design, operational obligations, and growing pressure from high-cost therapies like GLP-1s and specialty drugs.
These changes are especially challenging for stand-alone Part D prescription drug plans (PDPs). While Medicare Advantage prescription drug plan (MA-PD) payment parameters allow MA-PDs to utilize rebate dollars to lower drug plan premiums and deductibles, standalone PDPs can only rely on financing from member premiums and government funding. Beneficiaries should be able to pick the coverage option that works best for them and their priorities. Therefore, it is important to support and maintain an affordable Part D market and choice of plans for Medicare beneficiaries.
Since the IRA was enacted, the Part D marketplace has undergone significant shifts. The number of standalone PDP options has declined steadily, dropping by about 30% in the first full year after Part D redesign, and in 2026 offering half of the PDP options that were available in 2024. As coverage options continue to change, beneficiaries need meaningful choices that fit their prescription drug needs and support a healthier Medicare marketplace.
That is why the Part D Premium Stabilization Demonstration mattered. CMS used its innovation authority to smooth the transition as redesigned Part D benefits took effect, limiting near-term disruption, reducing the risk of abrupt premium increases, and giving patients, plans, and the broader market time to adjust.
Premium Stabilization Parameters are Temporary Stabilizer, Not a Permanent Solution
The demonstration worked as intended, in concert with the policy in law to cap the growth in the Base Beneficiary Premium to 6% annually through 2030, to help stabilize year-over-year PDP premium increases and prevent substantial enrollment changes for PDP plan enrollees in the initial years after IRA enactment. According to MedPAC, premium subsidies reduced average annual PDP premiums by approximately $300 in 2025 and $200 in 2026.
The challenge now is what comes next. As the temporary demonstration ends at the end of 2026 and the 6% cap on growth in the base beneficiary premium ends after 2029, the support that helped absorb near-term disruption will no longer be available.
Rather than relitigating recent Part D policy changes, policymakers should recognize what the demonstration revealed: Part D needs durable tools to manage volatility, preserve competition, and protect beneficiaries from sudden cost increases.
PBMs Stand Ready to Be Partners to Ensure Durable Stability
The Part D Premium Stabilization Demonstration helped protect Medicare patients as CMS and Part D plan sponsors navigated a difficult transition, but the end of the demonstration should not be the end of efforts to maintain Part D affordability. CMS has already shown that targeted innovation can protect beneficiaries during periods of major transition. So, the next challenge is for policy makers to build on that experience with structural reforms that strengthen the Part D market and are predictable, administrable, and sustainable over time.
Drug spending continues to grow, and Part D needs reforms that better account for high-priced therapies, improve payment and risk adjustment methodologies, reduce avoidable administrative burden, and give plans and PBMs enough time and clarity to implement new requirements responsibly. A key part of increasing stability in PDP plans will be ensuring that the Part D Risk Adjustment model appropriately accounts for and compensates for the costs of current diagnosis and therapies. Reforms are needed in risk adjustment so that it can more accurately predict costs for high-cost beneficiaries.
As we think about this next chapter, PBMs are ready to work with policy makers, plans, pharmacies, and other stakeholders to permanently stabilize the market and keep the program strong for seniors and disabled individuals who depend on it. The goal should be a more resilient Part D program that can absorb policy and market changes while preserving beneficiary choice, encouraging competition, and maintaining access to affordable prescription drug coverage.