This week our In Focus section reviews the Centers for Medicare and Medicaid Services’ (CMS) announcement of initial guidance for the new Medicare Drug Price Negotiation Program for 2026. This initial guidance is one of many steps CMS described in the Medicare Drug Price Negotiation Program timeline for the first year of negotiation.
The Drug Price Negotiation Program was approved as part of the Inflation Reduction Act (IRA) (P.L. 117- 169) in August 2022. As discussed in our previous In Focus, the IRA includes several other policies aimed at addressing cost, affordability and access to prescription drugs within the Medicare program.
The Drug Negotiation Program allows the U.S. Department of Health and Human Services (HHS) to negotiate maximum fair prices (MFPs) for Part D drugs. Negotiations between HHS and prescription drug manufactures will begin in 2023 and continue into 2024 before negotiated prices go into effect Jan. 1, 2026.
For Medicare payment in 2026, HHS can negotiate prices for up to 10 Part D drugs that do not have generic or biosimilar competition. CMS can increase the number of Part D drugs selected for price negotiation each subsequent year. Starting in 2028, the agency can annually add up to 20 new Part B or Part D drugs to the program.
The published guidance describes CMS’ approach for identifying the drugs selected for the initial year of the program. However, CMS is finalizing these policies as announced for the initial drug negotiation year.
The initial guidance also details the requirements and procedures for implementing the process for the first set of negotiations. For example, the guidance details aspects related to the offer-counter-offer exchange process, confidentiality terms following an agreement, penalties for violations, and the dispute resolution process.
Key Considerations
The drug negotiation program presents numerous operational and policy questions for CMS, manufacturers, and the healthcare sector broadly. The program is expected to have a direct impact on prices and affordability for the Medicare program and its beneficiaries. Additionally, other public and commercial payers will want to consider the potential downstream impacts on their costs. Ongoing monitoring of HHS’ implantation of the drug negotiation program and the pharmaceutical industry’s response to the drug negotiation program will help health plans, providers, and other interested stakeholders navigate this new landscape.
What’s Next
In the short-run, CMS will benefit from feedback from stakeholders about the outstanding policy and operational issues the agency has identified. Comments can be submitted until April 14, 2023
CMS anticipates issuing revised guidance for the first year of negotiation in Summer 2023. By September 1, 2023, CMS plans to publish the first 10 Part D drugs selected for the initial program year. The negotiated maximum fair prices for these drugs will be published by September 1, 2024 and prices will be in effect starting January 1, 2026.
HMA and HMA companies will continue to analyze this and subsequent guidance. We have analytical capabilities and expertise to assist with tailored analysis for manufacturers, providers, patient groups, health plans, and other stakeholders. HMA has the ability to model policy impacts of the drug negotiation program, support the drafting of feedback to CMS as the program is designed and implemented, and provide technical assistance in considering how this new program may interact with other Medicare and Medicaid initiatives.
If you have questions about the Drug Negotiation Program or other aspects of the Inflation Reduction Act and how it will affect manufacturers, Medicare providers, Medicaid programs and patients, contact Kevin Kirby ([email protected]), Amy Bassano ([email protected]) or Andrea Maresca ([email protected]).
