Background

On August 15, the Centers for Medicare and Medicaid Services (CMS) released the maximum fair prices (MFPs) for the 10 Part D drug selected for Medicare drug price negotiation that will go into effect on January 1, 2026. As expected, the release came on the eve of the two-year anniversary of the passage of the Inflation Reduction Act (IRA).

A CMS fact sheet released the same day contains details on the MFPs, 2023 list prices, estimated savings to Medicare and beneficiaries, and further details about how the negotiation process unfolded for the first 10 selected drugs. CMS’s detailed rationale for each negotiated MFP is not expected until closer to the deadline of March 1, 2025, but manufacturers can begin to draw key insights from this MFP release to inform preparation for future years of the program.

MFPs vs.  2023 List Prices

• CMS Release: CMS compared negotiated 30-day MFPs to the 2023 30-day list prices, noting the percent discount achieved via the negotiation process for each drug. Savings range from 38% for Imbruvica to 79% for Januvia, with an average discount of approximately 63% (non-weighted).
• Avalere Perspective: This approach may overstate potential savings, as it does not reflect the rebates and other discounts that have been negotiated by Part D plans. Avalere estimates that negotiated MFPs for the 10 selected drugs compared to estimated 2023 net prices results in discounts ranging from less than 1% to approximately 40%, with an average discount of approximately 20% (non-weighted).

Expected Savings to Medicare

• CMS Release: The agency presented the total amount spent by Medicare for each drug in 2023. According to CMS, these drugs in total accounted for $56.2 billion (20%) of gross Part D spend in that year. CMS estimates that these MFPs would have saved Medicare $6 billion (22% lower net spending) if they had been in place in 2023.
• Avalere Perspective: CMS characterizes gross Part D spending on the 10 selected drugs in 2023 but reports savings as if MFPs had been in place in 2023 on a net Part D cost basis. The reported $6 billion in savings and 22% lower net spending implies approximately $27 billion in net spending for the 10 selected drugs in 2023, less than half the gross spending figure, once again highlighting significant existing discounts for these products. It also does not appear that CMS’s savings estimates account for any changes in utilization of the 10 selected products from 2023 to 2026. It is similarly unclear whether CMS accounted for other IRA negotiation provisions, such as the fact that the government is expected to pick up the financial liability for negotiated drugs under Part D redesign: 10% in the initial coverage phase and 20% in the catastrophic phase.

Expected Savings to Beneficiaries

• CMS Release: CMS presented the total number of beneficiaries on each drug and the amount spent on the selected drugs in 2023: 8.8 million Part D beneficiaries took at least one of the 10 selected drugs that year, corresponding with $3.9 billion in out-of-pocket (OOP) costs. When the MFPs take effect in 2026, CMS estimates that patients will save $1.5 billion in OOP costs under the projected defined standard benefit.
• Avalere Perspective: CMS characterizes patient OOP savings under the projected defined standard benefit in 2026, but actual patient savings will vary depending on benefit design and formulary structure. Beneficiaries could face coinsurance or copay amounts that vary from the standard 25% cost sharing in the pre-catastrophic phase, including nominal copay amounts paid by low-income beneficiaries). CMS’s estimates also don’t appear to account for any changes in utilization of the 10 selected drugs in 2026.

CMS’s Summary of the Negotiation Process

• CMS Release: The release includes new details on the negotiation process that has been underway for the past year. For half of the drugs, CMS and the manufacturer agreed to an MFP during a meeting. In four of those cases, CMS accepted a revised counteroffer from the manufacturer. For the other five products, the manufacturers accepted written offers from CMS.
• Avalere Perspective: CMS does not specify which drugs reached agreement in which manner. Interested manufacturers may consider conducting further analyses on the selected drugs and resulting MFPs to further assess how an MFP was arrived at for each, and to identify potential drivers of that result.

Implications for Future Years

While CMS does not explicitly speak to implications for future years and further details via the MFP rationale for each drug will not be released until 2025, the MFP release is a valuable opportunity to extract insights about how the negotiation process played out in the first year, and what this means for future years of the program. For example, estimated net savings for each product appears to be influenced by the therapeutic area and years on the market. Learnings that can be derived from further analyses include:

• Likely selection of therapeutic alternatives
• Differences by key product characteristics (e.g., therapeutic area, years on the market, available competitors, etc.)
• Drivers of MFP and potential weighting of negotiation factors
• Impact of multiple indications
• Consideration of external input

Next Steps for Manufacturers

Reflecting on the first round of the program, analyzing likely drivers of MFPs for each product, teasing out nuances, and assessing other implications is especially important for manufacturers anticipating potential selection in future years. In particular, manufacturers whose products may be selected for initial price applicability year (IPAY) 2027 will need to prepare their evidence package well before March 1 and should prioritize further analysis, as they will not have adequate time to integrate findings from the MFP rationale release ahead of submission.

The MFP announcement and the upcoming release of the 2025 Part D landscape and formulary files will also offer further insights into market access strategy, patient affordability, and therapeutic dynamics in Part D as stakeholders look ahead to CY 2026 Part D strategies. Manufacturers should continue to monitor how coverage, utilization and other access considerations for negotiated products and competitors shift as a result of the IRA in the penultimate year before the IPAY 2026 MFPs take effect.

A Trusted Partner for IRA Negotiation

The IRA will continue to have wide-reaching impacts across the prescription drug market. An effective IRA negotiation preparation and response strategy requires informed analysis. With expertise in policy, evidence strategy, and market access, Avalere’s multidisciplinary team can help manufacturers understand the nuance and complexities of these MFPs and interactions between the various IRA drug pricing provisions. Connect with us to learn more.