AARP Warns of Widening U.S. Medicare Drug Price Gap as Federal Subsidy Expires

American seniors pay dramatically more for brand-name prescription drugs than patients in 19 comparable countries, and the gap continues to widen each year, according to a new AARP report.

The study examined 25 top-selling brand-name drugs that account for more than $100 billion in annual Medicare spending. The findings arrive at a pivotal moment: a federal subsidy program that has held down premiums for standalone Medicare drug plans is set to expire after 2026, adding financial pressure on roughly 25 million Americans enrolled in Medicare Part D coverage.

The report also bolsters the case for drug price negotiation, a policy authorized under the Inflation Reduction Act of 2022 that began delivering results in 2026 with the first ten Medicare-negotiated medications. The pharmaceutical industry mounted multiple legal challenges to the negotiation program before those prices took effect, though courts declined to block implementation. For retirees and those approaching Medicare eligibility, the pricing landscape and upcoming premium changes will be critical factors in enrollment decisions this fall.

U.S. Brand-Name Drug Prices Rose 81% While Falling Abroad

U.S. prices for the 25 brand-name drugs studied climbed 81% on average after their initial market launch, AARP's press release showed. In the same period, prices for those medications fell 13% on average across 19 comparable countries. The divergence reflects fundamentally different pricing structures: most peer nations rely on government-negotiated rates or regulatory price controls, while the U.S. has historically allowed manufacturers to set launch prices with limited direct negotiation.

Enbrel, a widely prescribed treatment for rheumatoid arthritis, showed the most extreme divergence. Its U.S. price surged 873% after launch while declining 27% internationally — a gap costing Medicare beneficiaries billions each year. Januvia, a common diabetes medication, rose 126% domestically while dropping 40% in the comparison countries.

Bill Sweeney, AARP's senior vice president of government affairs, said seniors already struggle with healthcare expenses despite hard-won drug pricing reforms. "Older Americans are already stretched thin by rising health care costs," Sweeney said. "AARP fought hard to create Medicare Part D, to win Medicare the power to negotiate drug prices and to cap out-of-pocket costs for people in Part D." That cap, which limits annual Part D out-of-pocket spending to $2,000 per beneficiary, took effect in 2025 as part of the same Inflation Reduction Act provisions.

Medicare could save nearly $200 billion over five years on its ten highest-cost brand-name drugs by requiring manufacturers to match their lowest international prices, the full AARP report found. The 25 drugs in the study collectively affected nearly 15 million Medicare beneficiaries, concentrating the cost burden on treatments for some of the program's most common conditions.

A separate AARP report published in February found that retail prices for brand-name drugs widely used by older Americans have increased faster than inflation nearly every year since 2004, according to the organization's Rx Price Watch series. AARP researcher Leigh Purvis said Medicare drug price negotiation "is successfully reducing costs for millions of seniors" but called for expanding the program's scope.

Federal Subsidy Expiration Will Push Part D Premiums Higher in 2027

The Centers for Medicare and Medicaid Services announced it will end the Part D Premium Stabilization Demonstration after 2026, eliminating a $9.8 billion support program. That initiative had subsidized standalone prescription drug plans to keep monthly premiums below market rates, NPR reported.

The 2027 national average monthly bid amount will rise to $296.05 — a 24% increase reflecting both drug cost growth and the subsidy removal.

Standalone drug plan enrollees currently pay about $36 per month on average and could lose roughly $16 in monthly subsidies, a KFF analysis found. Juliette Cubanski, vice president and director of the Program on Medicare Policy at KFF, noted that losing $16 on a $36 premium represents "a large proportional change" for affected beneficiaries.

CMS administrator Mehmet Oz said premiums "will go up by less than $10 for most Medicare recipients," framing the increase as manageable for the majority. Medicare Advantage plans with built-in drug coverage charge roughly $8 per month on average, making the gap between plan types more pronounced after the subsidy ends, Forbes contributor Jesse Pines reported.

Negotiated Prices and New Protections Offer Partial Relief

Medicare began paying negotiated prices on ten high-cost drugs in January 2026, including Eliquis, Jardiance, and Entresto, the Medicare Rights Center confirmed. Another 15 medications are scheduled to receive negotiated rates starting in 2027, expanding the program across additional therapeutic categories, eMedicare's tracking list showed.

The Trump administration separately announced most-favored-nation agreements with 17 drugmakers, projecting $529 billion in savings over a decade. That approach operates outside the IRA negotiation framework and ties U.S. payment rates to the lowest prices paid by other developed countries.

AARP advises seniors with standalone Part D plans to use the October 15 through December 7 open enrollment period to compare their existing coverage against Medicare Advantage options that bundle drug benefits at lower average premiums. Whether those agreements and the expanding negotiation program can fully offset the premium increases from the subsidy expiration remains an open question heading into 2027.

What 2027 Premium Changes Mean for Beneficiaries

CMS will publish final plan-specific premiums in mid-to-late September, giving enrollees roughly two months before open enrollment closes on December 7. Standalone Part D holders paying $36 today could see that figure rise by $16 or more once the subsidy disappears, while Medicare Advantage drug coverage averages $8.

AARP has urged beneficiaries to compare standalone plans against Medicare Advantage alternatives during open enrollment, noting that coverage networks, provider access, and formulary differences carry as much weight as the premium figure itself. The negotiated prices rolling out in 2027 will lower costs on 15 additional drugs, though the extent to which those savings reach individual prescriptions depends on plan-level decisions beneficiaries make during enrollment.

This story was originally published by TheStreet on August 12, 2026.