Newsletter · · Ashutosh Agarwal

Drug Price Deals Spread as Coverage Shrinks and Medicare Advantage Margins Turn - Healthcare Policy: Drug Pricing, IRA & Managed Care - Week of September 5, 2026

Healthcare policy for the week of September 5, 2026: Most Favored Nation deals now reach roughly 89% of branded drugs with almost no reported financial pain, the 2025 budget law is stripping millions off Medicaid and the exchanges, and Medicare Advantage insiders say the medical-cost bottom is finally in.

Healthcare Policy: Drug Pricing, IRA & Managed Care

Week of September 5, 2026: Drug Price Deals Spread as Coverage Shrinks and Medicare Advantage Margins Turn

Two things happened at once this week, and they pull in opposite directions.

On the drug-pricing side, the White House kept signing companies up to its "Most Favored Nation" pricing program, the idea that Americans shouldn't pay more for a medicine than people in other rich countries. The deals now reach roughly 89% of branded drugs sold in the U.S. Yet the people closest to it, including the CEO of Eli Lilly, keep saying the same surprising thing: so far, it barely stings.

On the coverage side, the mood is much darker. The big 2025 budget law is starting to bite. Millions of people are on track to lose Medicaid, Obamacare premiums have jumped sharply, and hospitals are already seeing more uninsured patients walk in the door.

And sitting in the middle, the health insurers who run Medicare Advantage quietly told their sales forces this week that the worst may be behind them. After two brutal years, medical costs are cooling and their profit margins are starting to heal.

TL;DR

  • Drug pricing: MFN deals now cover ~89% of branded drugs, but they've "faded into the background" because companies report little financial pain. The real fight moves next to a planned Medicare demonstration that would force those prices into Part B and Part D.

  • Managed care: Humana's own leaders told brokers the margin bottom is in. Medical costs are flattening, the 2026 rate increase let carriers "catch their breath," and 2027 is "moving in the right direction." But Star ratings and risk-adjustment changes are fresh threats to future funding.

  • Coverage: The 2025 budget law is cutting close to $1 trillion from Medicaid over a decade; ACA marketplace enrollment already dropped 13% (22M to 19M) as enhanced subsidies expired and average premiums to keep the same plan rose 114%.

What's new

1. MFN deals now cover ~89% of branded drugs, and the industry shrugged. On BioSpace, "Novartis' and BMS' paused CAR T trials, RevMed's approval, more MFN deals" (Sep 2), the hosts (pundits) laid out the state of play. Big drugmakers, Eli Lilly, Novo Nordisk, Amgen, Sanofi, Novartis and Bristol Myers Squibb, plus a fresh tier of mid-sized firms (Astellas, Boehringer Ingelheim, UCB, Teva), have struck deals with the White House to lower U.S. prices toward what other rich countries pay and to build manufacturing on U.S. soil, mostly to dodge tariffs. Collectively the new signers committed nearly $20 billion in U.S. manufacturing. The striking part:

"While MFN, most favored nation, was at one point considered a major overhang for the industry, it kind of has faded into the background as these big farmers have not reported significant impacts of these deals to their businesses."

Why it matters (pundit read): what was supposed to gut pharma margins has, so far, been absorbed. But the hosts flagged a catch: signing may take a company out of contention for an upcoming Medicaid demonstration that tries to do the same thing.

2. The next shoe is a Medicare demo, and it could hit the companies that didn't sign. On BioCentury This Week, "Ep. 385 – MFN deals, Lilly takeout, FDA pick Overton" (Sep 1), policy analyst Steve Usdin (pundit) recorded ten minutes after the White House press conference. He explained the two levers behind the deals: an exemption from Section 232 pharmaceutical tariffs due in September, and an exemption from mandatory MFN pricing the administration wants to roll out in Medicare Part B and Part D. Each company also agreed to give every state Medicaid program MFN prices. His forward look was the sharpest of the week:

"One of the things that we didn't see today was any kind of an announcement about the CMMI... demonstration projects that are intended to apply MFN pricing to Medicare Part D and Part B... Those are really important... The companies that are left behind, the ones that haven't done MFN deals and aren't able to do MFN deals, they can be collateral damage if those Medicare drug pricing demonstrations actually go into effect."

He also predicted that if Democrats win a chamber in the midterms, they'll subpoena the deals, expect to find they "don't inflict a great deal of pain on the companies" and "probably don't result in major savings for the taxpayers," and then push for tougher international-reference-pricing rules on Medicare negotiation, which would mean lower negotiated prices than today.

Why it matters: the market has treated MFN as a resolved, low-pain story. Two live risks remain, a Medicare demo that lands hardest on non-signers, and a post-midterm push for something with real teeth.

3. Eli Lilly's CEO: tariffs are "not very much," and dropping obesity coverage is a false economy. On Squawk on the Street, "Exclusive Interviews with the CEOs of Goldman Sachs and Eli Lilly 8/31/26" (Aug 31), Dave Ricks, chairman and CEO of Eli Lilly (operator), spoke from the G20. On the 100% pharmaceutical tariffs, Lilly is exempt because it signed MFN and is building in the U.S.:

"Most companies have signed up for that, so not very much. The new tariffs are on generics, and they're pushed out a few years to allow for that reindustrialization of generic medicines. Nine out of ten prescriptions Americans fill are generic and very cheap, but they're mostly sourced from overseas."

On employers like PepsiCo dropping GLP-1 (weight-loss and diabetes drug) coverage because it's too expensive, he argued the net effect on Lilly is "about flat" and that dropping coverage is penny-wise, pound-foolish:

"You're already paying for obesity, whether you cover the drugs or not... we just published a study last week that showed for people who are using ZepBound, by year one, at 12 months, it was more than break even. So the smart financial move is to cover these medications."

On whether MFN is actually working, he was candid: "Probably too early to tell. We do know the U.S. prices have come down," but ex-U.S. prices have only risen in the U.K., with Canada talking about it, while Germany "gone the wrong direction." His warning to foreign governments resisting higher prices: "We won't be able to launch because we'll have to sacrifice the U.S. market to do so."

Why it matters (operator read): the company at the center of both the GLP-1 boom and the tariff fight says the policy pressure is, for now, manageable, and is leaning into arguments that obesity coverage saves money.

4. Managed care's quiet turn: Humana tells brokers the bottom is in. On The Broker Link, "2027 AEP Carrier Rollouts... Wellcare, UnitedHealthcare & Humana" (Sep 1), a broker relayed Humana leadership's 2027 plan presentation (operator and insider commentary). After two painful years, the tone flipped positive:

"2026 is starting to tell a different story on a positive note. And that's that the medical cost trends are flattening. MLRs are starting to look better... hopefully we've kind of hit the bottom and we're starting to recover... There's a light at the end of the tunnel."

The mechanics: elevated medical claims since 2023, and CMS handed out the lowest government payment increases in 2024 and 2025, which "drove a lot of this pinch in profitability." The new risk-scoring model (called V28) "took a couple of years for carriers to unpack." Then CMS "did give a significant rate increase in 26, which allowed carriers to kind of catch their breath," and the 2027 rate lands "right around the middle of 25 and 26." Long term, Medicare Advantage "is trying to operate in kind of a 3% plus margin," and the only ways to protect that margin are cutting benefits, exiting markets, or trimming costs (including agent commissions). Concrete scale of the retrenchment: between Humana and UnitedHealthcare, "over a million terminations," with Humana alone dropping ("plexing") 600,000 members this year.

Why it matters (operator read): the insurers themselves are signaling the medical-cost storm is easing. That's the most bullish managed-care data point of the week, but note the messenger is a sales channel, so treat the optimism accordingly.

5. Coverage is cratering as the 2025 budget law starts to bite. Two podcasts documented the damage. On Healthy Dialogue, "Everyone Will Feel the $1 Trillion Cut in Medicaid" (Sep 3), an academic host and a Medicaid policy expert (pundits, citing Harvard's David Cutler) explained that the One Big Beautiful Bill Act (signed July 4, 2025) cuts "nearly a trillion-dollar reduction in federal spending, or about a 15% annual reduction in the federal commitment to Medicaid," with about 7.5 million people losing coverage, mostly not through outright removal but through new work-reporting paperwork every six months that trips people up:

"A lot of people lose coverage, not because they're not being compliant with the community engagement requirement, but because they aren't able to complete the paperwork... So they're disenrolled for so-called procedural reasons."

They flagged West Virginia as the hardest hit, a projected ~20% drop in Medicaid coverage (RAND), and warned of rural hospital closures as uninsured ER visits rise and states are forced to cut provider payments toward Medicare rather than commercial rates.

On Unf*cking The Republic, "Merchants of Death" (Sep 5), the host (pundit) put hard numbers on the Obamacare side, citing KFF: marketplace enrollment "dropped 13% between 2025 and 2026... from a record 22 million people down to 19 million," possibly falling toward 17 million by year-end. The cause was the expiry of enhanced premium tax credits:

"The average enrollee trying to keep their exact same plan saw that their premium payment went up 114%."

He added that a median 2027 marketplace premium increase of 15% is proposed, on top of 18% this year, and that Georgetown found "nearly two and a half million children have lost Medicaid or CHIP coverage since January of 2025." His Medicaid figures (roughly $900B and 10M+ off by 2034, with the AMA estimating 11.8M) differ from Healthy Dialogue's because they cover different windows and scorekeepers, but both point the same direction.

Why it matters: this is the demand side of the insurer and hospital story. Fewer covered lives, more uninsured ER visits, and a squeeze on the Medicaid managed-care and exchange businesses.

The debate

Debate 1: Is MFN a real cost to pharma, or theater?

The "it's manageable" side (mostly operators): Lilly's Dave Ricks says tariffs are hitting the company "not very much" because it signed on, and the BioSpace hosts note that big pharma "has not reported significant impacts." The deals reportedly protect signers from tariffs and future Medicare pricing rules while requiring modest give, a good trade for certainty.

The "this is a precedent that grows teeth" side (pundits): BioCentury's Steve Usdin argues the important thing isn't the current deals, which he expects to prove nearly painless, but the precedents they set: ad hoc price negotiation with the White House, and international reference pricing as the benchmark. Both, he says, are "not going away." The next Medicare Part B and Part D demonstration could inflict real pain on companies left outside, and a future Democratic Congress could weaponize reference pricing into much lower negotiated Medicare prices. In his framing, today's calm is the setup, not the resolution.

Both sides agree on the facts (deals are wide, pain is currently low). They disagree on the trajectory: a resolved overhang, or a slow-building regime.

Debate 2: Has Medicare Advantage really turned the corner?

The "bottom is in" side (operators, via The Broker Link): medical cost trends are flattening, MLRs are improving, the 2026 rate reset restored breathing room, and 2027 rates are moving the right way. The product keeps growing, with the Medicare-eligible population heading to ~70 million by 2030 from 64 million today.

The "funding threats ahead" side (also surfaced in the same operator briefing): a court ruling in the Clover case struck down 20 Star-ratings measures, likely forcing a program overhaul and near-term instability in the quality-bonus money. CMS put out a request for information to modernize risk adjustment, which "ultimately will just allow the carriers to brace for more funding threats ahead." And carriers are still shedding hundreds of thousands of members to protect margin. So even the optimists concede the recovery is fragile and policy-dependent.

The names in play

  • Eli Lilly (LLY): operator commentary from CEO Dave Ricks, tariff-exempt via MFN and U.S. builds, framing obesity coverage as a money-saver. Also the week's most acquisitive name, buying Merida for up to ~$2.9B (its 13th takeout of the year, ~$31.5B spent on deals year-to-date, per BioCentury).

  • Novo Nordisk (NVO), Amgen, Sanofi, Novartis, Bristol Myers Squibb (BMY): named as MFN signers (BioSpace). Separately, Novartis and BMS quietly paused CAR-T autoimmune trials after safety events that the companies did not disclose directly (BioSpace).

  • Teva, Astellas, Boehringer Ingelheim, UCB, Alcon, CSL, Sun Pharma, Kyowa Kirin: the mid-sized and non-U.S. tier of new MFN signers (BioCentury, BioSpace).

  • Humana (HUM): operator briefing, 3%+ target margin, improving MLRs, ~600,000 members dropped, market retrenchment into priority states (The Broker Link).

  • UnitedHealth (UNH): flagged by peers for prior-authorization "access barriers," and part of the "over a million terminations" alongside Humana (The Broker Link).

  • CVS Health / Aetna (CVS): two operator appearances, COO Katrina Garez on a cost panel and technology chief Nathan Frank on prior-auth automation (see Read-throughs).

  • Molina (MOH), Centene (CNC): surfaced only at the edges. A small-practice operator noted "Passport Molina" in Kentucky cut behavioral-health Medicaid reimbursement to 80% of the fee schedule on The Mental Health Evolution, "Ep 54: Building Collective Power with Nicole Sartini" (Sep 3). Treat as anecdote, not disclosure.

Read-throughs

  • PBMs (pharmacy middlemen): The loudest theme from insiders was "cut out the middleman." Lynn Garbee, a 10-year veteran of a Blue Cross plan now at Judi Health (operator), pushed direct contracting between employers and providers on The Astonishing Healthcare Podcast, "AH116" (Sep 4), describing a legacy system where any small change "takes 18 to 24 months, Lynn, and that's going to cost you one and a half to $3 million." Directional pressure on PBM economics.

  • Generics and biosimilars: Ricks (operator) framed the new tariffs as aimed squarely at generics, 9 of 10 U.S. prescriptions, "mostly sourced from overseas," with a multi-year runway to reshore. A stick-not-carrot policy that could reshape generic supply chains and, potentially, pricing.

  • Ex-U.S. and GLP-1 pricing: On Daybreak, "India got cheap Ozempic" (Sep 1), an analyst (pundit) noted the U.S. capped brand-name GLP-1s at $245/month under a federal program and launched a Medicare pilot near $50/month, helping drive Ozempic to ~$12B of U.S. sales in 2025 and a 1-in-5-household adoption rate (PwC), a reminder of how much U.S. policy and coverage, not just demand, built the GLP-1 market.

  • Medicaid and exchange insurers: Falling Medicaid rolls (7.5M+) and ACA enrollment (down to ~19M, heading toward 17M) shrink the covered-lives base for Medicaid managed-care and exchange plans. States being forced to pay providers closer to Medicare rates squeezes provider economics inside those networks (Healthy Dialogue, Unf*cking The Republic).

  • Optum-style services and cost management: On Tradeoffs, "Beyond Finger Pointing" (Sep 3), Aetna COO Katrina Garez (operator) described placing nurses on-site in 24 hospitals, cutting readmissions "upwards of 15%," and named the three cost drivers to watch: specialty drugs, complex conditions like oncology and autoimmune, and behavioral health, with autism spend at "$460 billion" today, projected to "600 billion" by 2030. On Becker's Payer Issues, "Nathan Frank on Aetna's AI Strategy" (Sep 1), Aetna's tech chief (operator) said the insurer already does "real-time approvals at 82% for prior authorizations, and 95% of eligible PAs are approved in 24 hours" across 27 million members, the services-and-automation lever insurers are pulling to defend margin.

  • Hospitals: Rising uninsured volumes (already showing up per both coverage podcasts) plus lower state Medicaid payments raise closure risk, especially rural. Harvard's David Cutler (pundit) noted administrative costs run "over a trillion dollars" in a $5 trillion system, and Amazon Pharmacy's John Love said 27% of prescriptions go unpicked-up, "$300 billion of costs to the U.S. health system" (Tradeoffs).

  • GLP-1 cost exposure: Garbee (operator) warned that "with gene therapies and GLP-1s," the concentration of cost among a small group of high-cost claimants "has become even more exacerbated," the utilization pressure insurers are still absorbing even as overall trend flattens.

What changed

  • MFN went from overhang to background. A year ago this was framed as an existential threat to pharma margins; this week both operators and pundits agree the current deals are nearly painless, while pundits warn the precedent and a coming Medicare demo are the real story.

  • The Medicare Advantage narrative flipped. After two years of "the pinch," insiders are now saying the medical-cost bottom is in and margins are recovering, a genuine change in tone, tempered by fresh Star-ratings and risk-adjustment threats.

  • A new CMS lever appeared: enrollment caps. On The Seven Figures Or Bust Podcast, "Ep. 268: Breaking Down The Medicare Advantage Enrollment Cap Proposal" (Aug 31), agent-host Christian Brindle (pundit and practitioner) explained that CMS now lets carriers write hard enrollment caps into their bids, a "front door" version of a rarely used mechanism that existed since 2009. A carrier can cap a plan (say, 30,000 members) and then close it to all channels. He read it as a cleaner replacement for today's "non-commissionable" and hidden plans (now ~10 to 15% of plans, up from ~1% a few years ago) and a tool carriers will use to steer away from unprofitable enrollment.