CMS issues first proposed rule for the IRA’s Drug Price Negotiation Program, for IPAY 2029 and beyond

The Proposed Rule largely codifies CMS’s existing guidance for IPAY 2028 but does include a number of notable changes, including a narrowing of when fixed combination drugs can qualify as distinct qualifying single source drugs (QSSDs) and the establishment of an “adjusted” MFP ceiling for Small Biotech Drugs for IPAYs 2029 and 2030. CMS does not address Maximum Fair Price (MFP) effectuation for Part B drugs in the Proposed Rule, explaining that it intends to address MFP effectuation for IPAY 2028 in guidance and codify MFP effectuation requirements for IPAY 2029 and subsequent years in future rulemaking. IPAY 2029 will be the first year that the number of drugs selected for negotiation increases from 15 to 20, as required by the statute.

Additional documents relevant to this alert are as follows:

• CMS’s fact sheet
• CMS’s press release
• Information Collection Request (ICR) on selection (including the biosimilar delay form)
• ICR on negotiation (including the form to apply for the temporary MFP floor for Small Biotech Drugs)
• Our alert on the IPAY 2028 Final Guidance
• The relevant text of the IRA

As always, it is important that you carefully review the proposed regulations to identify issues relevant to your organization as well as possible opportunities to comment. We will monitor the implementation of the Final Rule and any additional guidance CMS issues with respect to the Drug Price Negotiation Program.

What drugs are eligible for selection for negotiation?

• Qualifying single source drug.
  • IPAY 2028 Final Guidance: CMS defined a QSSD as a Food and Drug Administration (FDA)-approved drug or biological product for which at least 7 years (drugs) or 11 years (biologics) have elapsed since approval/licensure, with no generic or biosimilar on the market, inclusive of all dosage forms and strengths with the same active moiety(ies)/active ingredient(s) and the same New Drug Application (NDA)/Biologics License Application (BLA) holder. Additional policies include:
    • Fixed combination drugs: CMS treated the distinct combination of active moieties/active ingredients (including co-packaged drugs) as one active moiety/active ingredient for purposes of identifying potential QSSDs.
    • Deemed biologics: Biological products previously marketed under NDAs but deemed to be approved BLAs on March 23, 2020 (pursuant to the Biologics Price Competition and Innovation Act of 2009) would not become potentially eligible for selection until 11 years after March 23, 2020.
    • Vaccines: CMS would identify a potential QSSD based on a vaccine's antigen component (as reflected in the labeling), treating vaccines with different antigen components as distinct QSSDs regardless of whether licensed under an original or supplemental BLA, using the earliest date of licensure for timing eligibility.
  • Proposed Rule: CMS proposes to codify its policy for the identification of QSSDs, inclusive of all dosage forms and strengths with the same active moiety(ies)/active ingredient(s) and the same NDA/BLA holder, subject to a significant policy modification for fixed combination drugs. CMS also proposes to codify its existing policy as to deemed biologics and vaccines noted above.
    • Fixed combination drugs: CMS proposes a new exception to the general fixed combination drug policy for identifying QSSDs. Starting in IPAY 2029, “[i]f CMS determines that a fixed combination drug with two or more active moieties, active ingredients, or, for a vaccine for infectious disease(s), antigen components shares one or more active moiety(ies), active ingredient(s), or antigen component(s) with another drug or biological product with the same NDA/BLA holder, and such products differ in active moiety(ies), active ingredient(s), or antigen component(s) due to the inclusion of an active moiety, active ingredient, or antigen component that creates a new formulation and enables an alternative route of administration for the co-administered active moiety(ies), active ingredient(s), or antigen component(s), CMS identifies a potential [QSSD] using all dosage forms and strengths of the drug or biological product with the shared active moiety(ies), active ingredient(s), or antigen component(s) and the same NDA/BLA holder.” CMS explains that it is proposing this change due to program integrity concerns where a manufacturer may avoid selection by marketing a new formulation with an alternative route of administration.

Although CMS anticipates that this exception would apply primarily to biologics, it has not proposed an explicit limitation. The preamble notes that co-packaged drugs will continue to be subject to the general policy, but that CMS will monitor this approach.

• Exclusions from QSSD and negotiation-eligible drug definitions.
  • IPAY 2028 Final Guidance:
    • Orphan drugs. The orphan drug exclusion originally covered drugs designated for only one rare disease or condition with only approved indications for that condition. Beginning with IPAY 2028, consistent with statutory changes enacted by the Working Families Tax Cuts Act, the exclusion would cover products designated for “one or more rare diseases or conditions” with only approved indications for “one or more such rare diseases or conditions” as defined by the Federal Food, Drug, and Cosmetic Act. The applicable 7- or 11-year period post-approval or licensure would begin on the first day after the date of approval or licensure that the product does not meet the statutory orphan drug exclusion criteria. For products that lose eligibility, CMS will use the earlier of (1) the date of approval of a non-orphan indication, or (2) the date on which an orphan drug designation is withdrawn (to the extent such withdrawal results in disqualification), when identifying potential QSSDs.
    • Plasma-derived products and low spend Medicare drugs. Certain plasma-derived products and low spend Medicare drugs for which total Parts B and D expenditures over a specified period are less than $200 million (increased over time by an inflation factor) were excluded.
    • Qualifying small biotech drugs. A drug was excluded from the definition of QSSD for IPAYs 2026, 2027, and 2028 if it is manufactured by a company for which total 2021 Part B or D drug expenditures constitute no more than 1 percent of total 2021 Part B or D expenditures for all manufacturers, and at least 80 percent of that manufacturer's total 2021 Part B or D drug expenditures. For IPAY 2028, CMS applies this exclusion on two tracks (Part B and Part D); a drug is excluded if it qualifies under either track.
  • Proposed Rule:
    • Orphan drugs. CMS proposes to codify its existing approach to orphan drugs from the guidance. CMS also clarifies that for products that lose eligibility due to the approval of a non-orphan indication, CMS would use such approval date for purposes of identifying QSSDs irrespective of whether the approval of the disqualifying indication is subsequently withdrawn. In the preamble to the proposed rule, CMS explained that “[w]e are aware that this proposal could result in a scenario where the 7- and 11- year periods . . . would not yet have elapsed between the last day that the drug most recently qualified for the orphan drug exclusion . . . and the selected drug publication date, but we believe this approach aligns best with statute given the requirement . . . to measure the 7- and 11-year periods starting from ‘the first day’ after the drug’s initial date of approval or licensure that such drug or biological product does not, or did not, meet the criteria for the orphan drug exclusion.” CMS also added “[w]e are not currently aware of any instances in which this scenario—wherein the 7- and 11-year periods would not yet have elapsed between the last day that the drug most recently qualified for the orphan drug exclusion and the selected drug publication date— would occur in practice and believe the chances of this scenario occurring in the future are low.”
    • Plasma-derived products and low spend Medicare drugs. No significant changes.
    • Qualifying small biotech drugs. By statute, QSSDs of a small biotech manufacturer that qualified for an exemption from selection for IPAYs 2026, 2027, and 2028, should also be eligible for a temporary MFP floor (discussed below) for the negotiation of the MFP for IPAYs 2029 and 2030, assuming the drugs do not lose that qualification by virtue of having been acquired by a manufacturer after 2021 that does not qualify as a specified manufacturer for purposes of the Part D manufacturer discount program. CMS proposes to require manufacturers that were eligible for the exemption to reapply for the temporary MFP floor, which application would require the submission of information about any acquisitions after 2021 of the small biotech manufacturer.

Biosimilar delay provision

• IPAY 2028 Final Guidance: CMS set forth the process for delaying, by one (Initial Delay Request) or two (Additional Delay Request) years, selection for negotiation of a biologic that would otherwise be selected.
  • CMS would review an Initial Delay Request where the reference biological is an extended-monopoly drug to determine whether there is a “high likelihood” that the biosimilar will be licensed and marketed within two years of what would otherwise be the reference biological’s selection date, in addition to certain other requirements. A biosimilar manufacturer may satisfy the “high likelihood” standard by offering clear and convincing evidence demonstrating (1) that patents related to the reference drug are unlikely to prevent the biosimilar from being marketed; and (2) operational readiness to market the biosimilar, among other requirements.
  • CMS would review an Additional Delay Request to determine whether it demonstrates, by clear and convincing evidence, “that a significant amount of progress has been made by the Biosimilar Manufacturer towards licensure and marketing of the Biosimilar.” CMS would assess such progress “based on a holistic review” of documentation submitted with the Additional Delay Request, including “documentation in any follow-up requests.”
  • If an Additional Delay Request was denied, and a biosimilar Manufacturer chose not to submit an Additional Delay Request following a successful Initial Delay Request, or if a biosimilar was not licensed and marketed once an Additional Delay Request was granted and following a second year of delay, CMS generally will include the reference drug on the next selected drug list (unless the reference drug no longer meets the criteria to be a selected drug), and the reference manufacturer would owe a rebate "for the years that the manufacturer would have provided access to the MFP for the Reference Drug but for the delay.”
• Proposed Rule: No significant changes, however, CMS clarifies that delay requests are to be submitted “by no later than a date to be specified by CMS, which will be no later than the end of December of the calendar year prior to the selected drug publication date for such initial price applicability year for which the Biosimilar Manufacturer may submit a Biosimilar Delay Request.” CMS notes that no Initial Delay Requests were granted for IPAY 2028, so there will be no Additional Delay Requests for IPAY 2029.

What about the bona fide marketing standard?

• IPAY 2028 Final Guidance: Pursuant to statute, a drug/biological product may not be selected for negotiation where a generic/biosimilar product was “marketed" by the selected drug publication date or during the negotiation period. For purposes of determining when a product was “marketed,” CMS used a “bona fide marketing” standard under which it considered whether the totality of the circumstances, including Medicare Part D prescription drug event (PDE) data, average manufacturer price (AMP) data for a specified 12-month period, and four quarters of average sales price (ASP) data, established the drug as the subject of "bona fide marketing." CMS also indicated that it may review “Medicaid State Drug Utilization Data (SDUD) and/or data from nationally representative and commercially available databases” as part of its “bona fide marketing” standard analysis.
• Proposed Rule: No significant changes, but CMS proposes more specific timelines for evaluating bona fide marketing, including that ongoing monitoring for drugs previously not considered QSSDs would occur “periodically during each calendar year, including at least annually in January.” It also proposes that the data sources it may review as part of its “bona fide marketing” standard analysis may go beyond those listed above.

What about compounded drugs?

• IPAY 2028 Final Guidance: MFP refunds will not be required for PDE records for selected Part D drugs or Part B claims that were billed as compounds. CMS noted that it is “exploring operational changes to the PDE record layout that would provide CMS with visibility into data on the quantity dispensed for a selected drug when that selected drug is billed as a compound, at which point such PDE record may be used to allow for inclusion in the claim-level data elements that are included in the file transmittal.” For consistency, CMS will exclude PDE records with a compound code indicating the PDE record is for a compounded drug when calculating the low spend Medicare drug exclusion, the ranking of negotiation-eligible drugs, the total expenditures for the small biotech exception, the ceiling for the MFP, and the application of the MFP across dosage forms and strengths.
• Proposed Rule: No significant changes.

How will drugs be selected for negotiation?

• IPAY 2028 Final Guidance: Consistent with the statute, for IPAY 2026 and 2027, CMS identified the 50 qualifying QSSDs with the highest total Part D expenditures over a specified 12-month period using PDE data, and ranked the drugs, highest to lowest. CMS then selected the 10 highest ranked drugs on this list for negotiation for IPAY 2026 and the 15 highest ranked drugs on this list for negotiation for IPAY 2027, unless a drug was removed from the list on account of a delay in the selection of a biological product for negotiation.
  • For IPAY 2028, CMS identified the 50 highest spend drugs under Part B and the 50 highest spend drugs under Part D. In identifying negotiation-eligible Part B drugs, CMS determined total expenditures by using Part B claims data for the applicable 12-month period prior to the selected drug publication date, to calculate total allowed charges (“meaning the amount that is inclusive of the beneficiary coinsurance and Medicare payment for the covered Part B item or service”). CMS then combined total expenditures under Part B and Part D for those 100 drugs, ranked them, from highest to lowest, and selected the top 15. If a drug appeared on both high spend lists, CMS ranked it only once for selection purposes, based on the combined total expenditures. CMS selected the 15 highest ranked drugs based on their combined Part B and Part D expenditures, unless removed from the list on account of a delay in the selection of a biological product for negotiation. CMS published a list of the up to 50 top negotiation-eligible drugs, including the up to 15 selected drugs, ranked by combined total expenditures under Part B and Part D.
  • Starting with IPAY 2028, CMS also included Medicare Advantage (MA) encounter data in the aggregation of Part B expenditures, except where typically payable as part of a bundled payment.
• Proposed Rule: CMS proposes to largely codify it existing approach to drug selection. CMS is proposing to continue, as a general rule, including certain MA expenditures when aggregating Part B expenditures for selection purposes and clarifies that it will not include MA expenditures where they are for services that are typically paid for as bundled under Part B “original” Medicare. CMS is also proposing to continue combining total expenditures under Part B and Part D for the top 50 high spend Part B drugs and top 50 high spend Part D drugs before ranking for purposes of selection. Unlike in IPAY 2028, when CMS published a list of up to 50 top negotiation-eligible drugs, CMS proposes to publish only the top 30 negotiation-eligible drugs for IPAY 2029 and subsequent years, including the up to 20 selected drugs, ranked by combined total expenditures under Part B and Part D.

How will the negotiated price be set?

• A single MFP.
  • IPAY 2028 Final Guidance: CMS would negotiate a single MFP, subject to a single MFP ceiling, across all dosage forms and strengths of the selected drug and based on a 30-day equivalent supply, converting Part B data as necessary given that the 30-day equivalent supply is a Part D concept. CMS had considered an alternative approach for negotiating the single MFP for Part B drugs based on a per-unit basis as opposed to a 30-day equivalent supply basis.
    • For selected drugs that are covered under Part D, CMS would rely on the “days’ supply” field in PDE records to calculate the 30-day equivalent supply for each PDE record associated with the selected drug.
    • However, because Part B data does not contain a similar “days’ supply field” as in the PDE records, CMS would calculate a “days between services” amount for each instance of Part B data associated with the selected drug to estimate the 30-day equivalent supply.
  • Proposed Rule: Notably, and consistent with past guidance, CMS would base the single price on the cost of the selected drug per 30-day equivalent supply (and not on a per-unit basis) for all formulations, including drugs payable under Part B, covered under Part D, or both, as applicable, weighted across dosage forms and strengths. And while CMS proposes to largely follow the IPAY 2028 guidance approach, CMS now proposes to “assign a value of ‘12’ for the 30-day equivalent supply for drugs typically administered one time (for example, some vaccines and cancer therapies).” CMS does not define how it will determine whether a drug is “typically administered one time.”
• MFP ceiling.
  • IPAY 2028 Final Guidance: CMS set forth a process for calculating a single MFP ceiling across all dosage forms and strengths of a drug, at the lower of (1) a specified percentage of an applicable average non-federal average manufacturer price (non-FAMP), which non-FAMP is the lower of the inflation-adjusted volume-weighted annualized non-FAMP for 2021 or the inflation-adjusted volume-weighted annualized non-FAMP for the year before selection, or (2) an amount calculated as follows:
    • For a selected drug covered under Part D but not payable under Part B, the sum of the plan-specific enrollment weighted amounts per a 30-day equivalent supply of a National Drug Code (NDC)-9.
    • For a selected drug payable under Part B but not covered under Part D, a weighted average of the section 1847A(b)(4) payment amount under Medicare Part B (i.e., the lesser of ASP or WAC), not adjusted for sequestration, for all quarters in the calendar year prior to the selected drug's publication date (i.e., an annualized section 1847A(b)(4) amount) per 30-day equivalent supply of an NDC-9. CMS also addressed how it intended to calculate the applicable payment amount in special circumstances, such as when a selected drug is payable under Part B but not paid based on section 1847A(b)(4), or when the reported ASP or WAC is negative, zero, or missing for one or all applicable NDC-11s assigned to a HCPCS code in one or more quarters within the calendar year.
    • For a selected drug payable under Part B and covered under Part D, an amount equal to the weighted average, per 30-day equivalent supply of each NDC-9, of the annualized section 1847A(b)(4) amount for Part B payment for the calendar year prior to the selected drug's publication date and the sum of the plan-specific enrollment weighted amounts (referred to as the “combined Part B and Part D amount”).
    • For a selected drug payable under Part B and covered under Part D but not paid under section 1847A, CMS calculated the MFP ceiling as though the selected drug were only covered under Part D, i.e., as the lower of the applicable average non-FAMP or the sum of the plan-specific enrollment weighted amounts. The MFP ceiling calculations incorporated the "inclusion and exclusion" criteria for data used to calculate total expenditures for purposes of identifying negotiation-eligible drugs, as well as the methodology for including MA utilization.
    • A suggestion of error process is applied to the MFP ceiling, using the same process as for the applied MFP ratios described below.
  • Proposed Rule: No significant changes. CMS proposes to codify the guidance summarized above, except in the case of a selected drug subject to the temporary MFP floor, in which case CMS proposes to calculate and apply an “adjusted” MFP ceiling price in specified circumstances, as discussed below.
• Temporary MFP floor and application of MFP ceiling to selected drugs of small biotech manufacturers.
  • IPAY 2028 Final Guidance: CMS did not address the application of the temporary MFP floor, calculated according to the statute as 66 percent of same annualized average of non-FAMP as that used for purposes of identifying the MFP ceiling for non-small biotech manufacturer selected drugs above but indicated that it would address this floor as part of the rulemaking for IPAYs 2029 and 2030.
  • Proposed Rule: CMS proposes to apply the temporary MFP floor to Small Biotech Drugs, consistent with the statute but CMS also proposes to apply an “adjusted” MFP ceiling when the statutory MFP ceiling calculates to an amount that is lower than the temporary MFP floor.
    • CMS proposes calculating the temporary MFP floor based on the same applicable non-FAMP as is used to calculate the generally applicable MFP ceiling described previously.
    • CMS proposes to apply the MFP ceiling calculated above to Small Biotech Drugs. However, whenever that MFP ceiling is below the temporary MFP floor, CMS proposes to calculate an “adjusted” MFP ceiling as follows:
      • CMS applies the statutory MFP ceiling, i.e., the ceiling calculated according to the statutory formula, to the selected drug, such that, wherever that MFP ceiling is higher than the temporary MFP floor, the negotiated MFP would have to be between the MFP floor and MFP ceiling.
      • Where the statutory MFP ceiling is below the temporary MFP floor, CMS calculates and applies an “adjusted” MFP ceiling for the selected drug. The adjusted MFP ceiling is the same as the statutory MFP ceiling described above except that it does not include the calculation of the MFP ceiling described above based on 2021 non-FAMP data. This should mean that the “adjusted” MFP ceiling would be calculated as the lower of (1) the applicable percentage of the volume-weighted annualized non-FAMP for the year before selection or (2) the Part D or Part B amounts described previously.
      • Where the “adjusted” MFP ceiling is still below the temporary MFP floor for the selected drug, CMS sets the adjusted MFP ceiling as equal to the temporary MFP floor.
    • A suggestion of error process is applied to the temporary MFP floor and adjusted MFP ceiling, using the same process as for the applied MFP ratios described below.
• Manufacturer-submitted information.
  • IPAY 2028 Final Guidance: By statute, CMS is required to consider certain information submitted by the manufacturer in negotiating the MFP, including information regarding research and development costs; production and distribution costs; federal financial support for discovery and development; pending and approved patents, FDA exclusivities, and FDA applications; and market, revenue, and sales volume data. Manufacturers are obligated to "timely report certain updates to data submissions," including for restatement of applicable government pricing data. Manufacturers must report the ASP and ASP units for the last two sales quarters in calendar year 2025 so that CMS has the most recent ASP.
  • Proposed Rule: No significant changes, but CMS proposes to codify the information a manufacturer would be required to submit for purposes of negotiating the MFP.
• Initial offer: identification and pricing of therapeutic alternatives.
  • IPAY 2028 Final Guidance: CMS clarified how it develops an initial offer using prices for identified therapeutic alternatives. Specifically, CMS uses “the lower of Part D total gross covered drug cost (TGCDC) net of DIR and [Coverage Gap Discount Program (CGDP)] payments . . . for the therapeutic alternative(s), and/or the ASP for the therapeutic alternative(s) that is covered under Part B, or the MFP for initial price applicability year 2026 selected drugs that are therapeutic alternatives to determine a starting point for developing an initial offer . . . .” (emphasis added). CMS also indicated it will share redacted evidence on alternative treatments with the Primary Manufacturer during negotiations, when feasible.
    • For Part D alternatives, CMS uses the lowest of Net Part D Plan Payment and Beneficiary Liability, MFP, or WAC and considers non-CGDP Manufacturer Discount Program payments. For Part B alternatives, CMS uses the lower of ASP or WAC to align with section 1847A(b)(4) payment methodology. For therapeutic alternatives covered under both Parts B and D, CMS considers therapeutic alternatives within each indication and weights such prices by utilization or other patterns of use.
  • Proposed Rule: No significant changes, however, for products with Part B alternatives that have a negotiated MFP, CMS adds that that MFP could be the foundation for an initial offer. Previously, CMS had only included the MFP for Part D alternatives, likely because the only MFPs available were for Part D alternatives for earlier years of the program.

In addition to the requirement to provide access to the MFP, what will happen after the MFP is set?

• Publication of the MFP.
  • IPAY 2028 Final Guidance: The MFP and explanation of the MFP are published on the CMS website by the applicable statutory deadlines. The published explanation will include the single MFP for a 30-day equivalent supply of the selected drug and the NDC-9 per unit price calculated to the sixth decimal place and will be inflation-adjusted annually.
  • Proposed Rule: No significant changes. CMS also proposes to publish whether an MFP was not agreed upon for a selected drug and whether a drug ceases to be a selected drug and the reason for that change.
• Application of the MFP.
  • IPAY 2028 Final Guidance:
    • CMS capped the single MFP per 30-day equivalent supply at the drug level, which is then converted into an as-applied MFP at the unit or package level using WAC price ratios at the NDC-9 level, and further converted to the NDC-11 level. The single MFP would also be converted into an MFP per Part B billing unit. CMS adjusted the WAC ratios based on updated PDE data and Part B claims data where the original data was incomplete.
    • CMS would send the proposed MFP ceiling and as-applied MFP to manufacturers of selected drugs for review during the negotiation process. Manufacturers have 21 days to submit a suggestion of error for calculating the MFP ceiling or as-applied MFP. As feasible, CMS intended to provide manufacturers with information on certain calculations during and after the negotiation period, including updates to its computation for applying the MFP across dosage forms and strengths on account of new NDCs.
  • Proposed Rule: CMS proposes to reduce the time for a manufacturer to submit a suggestion of error from 21 days to 10 days.

What is the timeline for the IPAY 2029 negotiation process?

• IPAY 2028 Final Guidance: Although the IPAY 2027 timeline largely mirrored that of IPAY 2026, CMS shortened the negotiation meeting period for IPAY 2028, such that manufacturers would have only six weeks, compared to two months for previous years, between CMS’s rejection of the manufacturer’s statutory written counteroffer and the deadline for negotiation meetings to conclude. Among other things, changes to IPAY 2027 from the IPAY 2026 timeline included patient focused roundtable events, a timeline for manufacturer meetings with CMS, and additional opportunities to exchange written offers. CMS also set forth the process for delaying, by one (Initial Delay Request) or two (Additional Delay Request) years, selection for negotiation of a biologic that would otherwise be selected.
• Proposed Rule: No significant changes. CMS’s proposed timeline for IPAY 2029 and subsequent IPAYs largely follows the timeline and shortened negotiation period established for IPAY 2028.

Renegotiation

• Identification of drugs for renegotiation.
  • IPAY 2028 Final Guidance: CMS will identify renegotiation-eligible drugs based on a change in monopoly status (i.e., a drug becomes an extended- or long-monopoly drug); newly added indications, including off-label use identified in evidence-based clinical practice guidelines; and material changes in any section 1194(e) of the Act factor. All drugs eligible due to a change in monopoly status must be selected; for the remainder of eligible drugs, CMS must select those for which renegotiation is expected to result in a 15 percent or greater change relative to the current MFP and would have a significant impact on the Medicare Program, based on a holistic inquiry. For drugs that seek to be renegotiation-eligible for IPAY 2028 due to a newly added indication, the indication must be added to FDA-approved labeling on or before November 30, 2025. If bona fide marketing of a generic or biosimilar existed prior to publication of the renegotiation selected drug list, the drug is no longer eligible. CMS stated that drugs selected in IPAY 2026 or 2027 with Part B utilization were likely to be renegotiation-eligible, and once renegotiated prices are set, the renegotiated MFP would apply beginning in IPAY 2028 to both Part B and Part D claims across all formulations, dosage forms, and strengths; absent renegotiation, manufacturers will not have to provide access to the MFP on Part B utilization for drugs selected for IPAYs 2026 and 2027.
  • Proposed Rule: CMS proposes to largely follow the IPAY 2028 guidance approach for identifying renegotiation-eligible drugs and selecting drugs for renegotiation, with several clarifications intended to maintain consistency across negotiation and renegotiation processes as much as practicable, as required by the statute.
    • CMS clarifies that it may review off-label use for purposes of determining whether such off-label use is a “new indication” for renegotiation eligibility determinations only if voluntarily submitted by the Primary Manufacturer. Off-label use for a previously indicated disease or condition would not qualify as a “new indication” but may be considered as part of a “material change” analysis.
    • CMS proposes that for renegotiation eligibility based on a newly added indication, the indication must be added to FDA-approved labeling on or before a time specified by CMS, which CMS explains in the preamble is March 1 of the year of the selected drug publication date for which the drug would be selected for renegotiation (a shift from the November 30 deadline used for IPAY 2028).
• Timing of selection for renegotiation.
  • IPAY 2028 Final Guidance: Renegotiation eligibility and selection analysis, for IPAY 2026 selected drugs, began approximately 15 months after the end of the negotiation period for such drugs (August 1, 2024), and for IPAY 2027 selected drugs, immediately after the end of the negotiation period for such drugs (November 2025). The deadline for selection and for the updated MFP to become available would be the same as for drugs otherwise selected for negotiation for IPAY 2028. CMS published the renegotiation selected drug list on January 27, 2026.
  • Proposed Rule: No significant changes.
• Process of renegotiation.
  • IPAY 2028 Final Guidance: CMS will collect new data from manufacturers and interested parties as to all section 1194(e)(1) factors (manufacturer-specific data) and solicit feedback on section 1194(e)(2) factors (evidence about alternative treatments).
  • Proposed Rule: No significant changes. CMS explains that it will collect and consider the existing MFP as a data point within the section 1194(e)(1) renegotiation factors (specifically, “market data and revenue and sales volume data”) when developing the initial offer during renegotiation.

Other topics

• Enforcement and termination of the negotiation agreement.
  • IPAY 2028 Final Guidance: The statute subjects manufacturers to significant civil monetary penalties (CMPs) for: (1) failing to offer the MFP with respect to a Medicare beneficiary, (2) violating the terms of the negotiation agreement, including the requirement to timely submit the requisite information to CMS, and (3) knowingly providing false information with respect to certain aggregation rules concerning the small biotech exception and the biosimilar delay provisions. CMS adopted additional grounds for assessing CMPs. Under the guidance, CMS will provide manufacturers with an opportunity for corrective action in the event CMS determines an information submission is incomplete or inaccurate.
  • Proposed Rule: CMS proposes to largely codify its CMP authority for reporting violations, false information, and unpaid biosimilar delay rebates consistent with its existing policy guidance. However, CMS proposes that where a manufacturer fails to comply with an information submission, it may choose to “not issue a request for corrective action and instead send a notice of violation to the Primary Manufacturer and impose a CMP.” In addition, CMS proposes that “depending on the circumstances, in accordance with enforcement priorities, we may determine that, even if a Primary Manufacturer complies with a request for corrective action, it remains appropriate to issue a violation notice and impose a CMP for the initial violation.” CMS proposes to codify in future rulemaking its policies for assessing CMPs for failure to provide MFP access in IPAY 2029 and beyond.
• Part D plan requirements.
  • IPAY 2028 Final Guidance:
    • Consistent with the statute, Part D plans must include selected drugs on their formularies. CMS implemented a formulary review process “to assess: (1) any instances where Part D sponsors place selected drugs on non-preferred tiers, (2) any instances where a selected drug is placed on a higher tier than non-selected drugs in the same class, (3) any instances where Part D sponsors require utilization of an alternative brand drug prior to a selected drug with an MFP (i.e., step therapy), or (4) any instances where Part D sponsors impose more restrictive utilization management (i.e., step therapy and/or prior authorization) for a selected drug compared to a non-selected drug in the same class.” CMS indicated it would continue to monitor compliance and could consider new requirements if Part D sponsors were not providing beneficiaries with meaningful access to selected drugs.
    • The statute also specifies that plan sponsors may remove selected drugs from formulary if removal is permitted by regulation. CMS cited to 42 C.F.R. § 423.120(e)(2)(i), which allows plan sponsors to remove a selected drug and replace it with a new generic or interchangeable biological product of the selected drug if the plan sponsor meets notice and timing requirements.
  • Proposed Rule: CMS proposes to codify the existing policies from its guidance in regulation. CMS also proposes to codify the requirement that Part D plan sponsors also include on their formularies any authorized generic of a brand name drug, or unbranded biological product marketed under the same BLA as a brand name biological product, that is part of a selected drug for which an MFP is in effect, because such products are considered part of the selected drug under the statute. Further, CMS provides operational details on the timing requirements for immediate substitutions.

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Authored by Alice Valder Curran, Beth Roberts, Melissa Bianchi, Maura Calsyn, Samantha Marshall, Kathleen Peterson, Mahmud Brifkani, Katie Kramer, Caroline Farrington, Caroline Farrington, Xochitl Halaby, Sydney Fay, and Viraj Paul.