December 2, 2025
ARC performed an analysis of premiums in the stand-alone Medicare prescription drug plan (PDP) market between 2023 and 2025 using a combination of publicly available information on plans, premiums, and enrollment and using Medicare prescription drug event (PDE) data via a data use agreement with CMS. In particular, the analysis was focused on quantifying the impact of the Inflation Reduction Act (IRA) on PDP premiums over the study period. This work was funded by Arnold Ventures.
Key ARC Findings:
- From 2023-to-2024, total PDP premiums went up by nearly 20% for basic plans offered by national carriers, by nearly 30% for their enhanced plans and by nearly 40% for enhanced plans offered by regional carriers. From 2024-to-2025, total PDP premiums for enhanced plans offered by national carriers increased an additional 25%, while all other PDP plan premiums decreased. The key drivers of the premium changes are outlined below.
- Standardized bids for PDPs grew faster than the overall national average monthly bid amount (NAMBA) in both 2024 and 2025 ($40 vs. $30 and $128 vs. $115, respectively). This led to larger basic premium increases in PDPs than MAPDs, as the standardized bids are used to determine member premium.
- In 2024, the increase in PDP standardized bids was partially driven by 2024 IRA changes and primarily driven by carrier-specific pricing components, which may have included some level of correction for adverse experience in 2023 relative to expectations.
- In 2025, the increase in PDP standardized bids was primarily driven by provisions of the IRA.
- Approximately two-thirds of the overall increase was driven by the IRA’s increase in plan liability in the catastrophic phase from 20% to 60%.
- Other key drivers include the IRA’s $2,000 beneficiary out-of-pocket cap (about one-quarter of the increase), CMS RxHCC risk score model changes, PDP-specific normalization factor, and carrier-specific decisions.
- Changes to the 2025 RxHCC model had opposite impacts on the standardized bids for basic and enhanced PDPs. For basic PDPs, standardized bids were approximately $25 lower under the new model than they would have been under the 2024 version and enhanced PDP standardized bids were approximately $32 higher.
- The five largest national carriers (Centene, UHG, CVS, Humana, and Cigna), with nearly 95% of the 2025 market share, each responded to the implementation of the IRA in different ways. For example, in 2025, CVS no longer offered enhanced plans and cross-walked members to its basic plans and UHG consolidated their high- and low- premium enhanced plans.
- Note the implementation of the Medicare Part D Premium Stabilization Demonstration capped the observable 2024-to-2025 premium increases in the data at $50, including a $15 reduction to the basic premium. More than 30 basic PDPs had capped premium increases, driven entirely by an increase in the standardized bid. Nearly 60 national carrier high-premium enhanced PDPs had their increases capped. The effects of the demonstration varied across PDPs.
The summary report can be viewed here.