CMS’s Interpretation of “Qualifying Single-Source Drugs” in Medicare Negotiation

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CMS’s definition of a “qualifying single-source drug” in the Medicare Drug Price Negotiation Program may impact manufacturers’ investment strategies.

The drug development process is complex and involves continued learning about a product’s safety and efficacy in potential new patient populations. Using continued learnings about a product after original approval, manufacturers may seek to develop new uses for a drug, which requires additional clinical trials and resource investments. When conducting post-approval research into new uses and treatments areas, manufacturers must weigh the risks associated with resource investments against the potential benefits of gaining approval to treat new patient populations.

The Inflation Reduction Act’s (IRA) Medicare Drug Price Negotiation Program establishes maximum fair prices (MFPs) beginning in 2026 and introduces new factors that manufacturers will need to incorporate into their cost-benefit analyses when making investment decisions. While the IRA sets broad parameters for the selection of drugs for negotiation, the specific methodology and other program implementation decisions are left to CMS.

In June 2023 guidance on the implementation of the Medicare Drug Price Negotiation Program for the 2026 plan year, CMS adopted a broad interpretation of the definition of a qualifying single-source drug. To identify qualifying single-source drugs and rank them for negotiation selection, CMS is aggregating expenditures from all forms and strengths of approved drugs with the same active moiety/ingredient, including across different New Drug Applications (NDAs) or Biologics License Applications (BLAs). This will impact products with additional approvals for new uses that are pursued after the original NDA or BLA approval.

This white paper features case studies of real products to illustrate how post-approval research of existing products to new patient populations and treatment areas can occur under new licenses, often several years after a product’s original approval. If the IRA had been in effect for the entirety of the lifecycle in these case study products, the aggregation of multiple license approvals may have influenced manufacturer investment decisions for post-approval research, potentially impacting patient access for various patient populations.

Click here to access the white paper.

Funding for this research was provided by Novo Nordisk. Avalere retained full editorial control.

Webinar | A Closer Look at Patient Support On June 6 at 2 PM ET, Avalere experts will explore how potential implications of the Inflation Reduction Act (IRA)’s out-of-pocket cap, in addition to other key regulatory and policy activities shaping benefit design and patient cost-share (e.g., EHB), could impact patient commercial and foundation assistance. Learn More
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