The Centers for Medicare & Medicaid Services’ (CMS) Medicare Negotiation Initial Program Guidance for initial price applicability year 2026 outlines requirements for manufacturers of Part D drugs selected for Medicare price negotiation under the Inflation Reduction Act (IRA). Manufacturers selected for negotiation will be required to provide access to the maximum fair price (MFP) for any MFP-eligible individual, pharmacy, mail order service, or other drug dispenser. According to CMS’s initial program guidance, manufacturers may provide this access either prospectively (i.e., ensuring that the price paid by dispenser upon drug acquisition is no more than the MFP) or retrospectively (i.e., providing reimbursement of the difference between the acquisition cost and MFP). CMS’s decision to permit manufacturers to establish their own approach to providing access to the MFP will create complexities for all stakeholders in the drug supply chain, especially pharmacies.

Currently, no single entity can access all the data necessary to implement MFP agreements between a manufacturer and all eligible dispensers of negotiated drugs. The proprietary and decentralized nature of the pricing and acquisition data elements may conflict with CMS’s requirement that manufacturers who retrospectively provide access to the MFP reimburse dispensers within 14 days. Further, the program guidance states that manufacturers must pay the lower of the MFP or the 340B ceiling price on 340B claims for negotiated drugs which will present further operational difficulties. For instance, the 340B status of prescriptions is not known at the point of sale, which presents concerns about manufacturers paying duplicate discounts (e.g., MFP and 340B price) given the short deadline for retrospective reimbursement.

Key Questions for Stakeholders

CMS gives manufacturers broad latitude to design their own ways to provide access to a selected drug’s MFP, which leads to several operation questions for all stakeholders along the drug flow chain to consider:

In what circumstances would it make sense for manufacturers to implement a prospective versus retrospective arrangement?

*Alternatively, the drug could be purchased at MFP. Under that scenario, there would be no chargeback payment to the wholesaler from the manufacturer.
PBM: Pharmacy Benefit Manager. WAC: Wholesale Acquisition Cost. OOP: Out of Pocket.

What is the impact on pharmacies of manufacturers’ choice to provide MFP prospectively or retrospectively?

Pharmacies may need to manage multiple processes across manufacturers of selected drugs.

What are the implications of centralized versus decentralized data and financial transactions used to provide access to the MFP?

To operationalize the MFP, several data are needed. Examples include the pharmacy acquisition price for the negotiated drug and knowledge of the patient’s coverage type (e.g., Medicare, commercial) and patient cost sharing for the negotiated drug. In the current drug supply chain, no entity can access all relevant data.

How will manufacturers ensure accuracy and timeliness for retrospective reimbursement?

The program guidance sets requirements for manufacturers to reimburse the difference between the acquisition cost and MFP within 14 days. Manufacturers may need to implement new internal processes to ensure compliance.

How will the manufacturer of a negotiated drug assess 340B eligibility of a claim while ensuring provider payment within 14 days?

Currently, manufacturers often do not know whether a drug was dispensed to a 340B patient within 14 days. The IRA is clear that manufacturers are not required to provide an MFP discount when the 340B ceiling price is below MFP, and that manufacturers need not provide duplicate discounts when the MFP is below the ceiling price.

Although it is unclear whether CMS’s final guidance will fully address these questions, the considerations outlined above will likely require CMS to hold several discussions with stakeholders in the drug supply chain before identifying the best solution.

Connect With Us

For more details, join Avalere experts Omar Hafez, Matt Kazan, and Kelsey Lang at Asembia 2023 in Las Vegas, Nevada, where they will discuss similar questions in their presentation, “Key Considerations to Prepare for Implementation of the IRA’s Drug Pricing Policies.”

Additionally, Avalere experts in policy, market access, and evidence and strategy can help you understand what IRA provisions mean for your organization and weigh in on key implementation decisions. To better prepare for and shape the changing healthcare landscape in 2023 and beyond, connect with us.