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In 2026, the maximum fair prices (MFPs) for the first set of selected drugs under the Medicare Drug Price Negotiation Program will go into effect. Additionally, on January 17, 2025, the Centers for Medicare & Medicaid Services (CMS) released the list of the next 15 drugs selected for negotiation for the 2027 plan year.

The Inflation Reduction Act outlines general parameters for selecting drugs for negotiation and setting MFPs but leaves the details of methodology and implementation to CMS. In guidance, CMS has established the methodologies for selecting and negotiating these products for the 2026 and 2027 initial price applicability years. CMS’s current approach for establishing a single MFP weights the utilization of different indications for a drug and its therapeutic alternative(s). However, this utilization-based weighting approach may undervalue newer indications, as peak drug utilization typically occurs several years post-launch and newer uses may offer different patient benefits and warrant diverse pricing strategies. Undervaluing these newer uses may disincentivize manufacturer development of additional uses for a product, particularly later in a product’s lifecycle. This change in incentives may impact treatments commonly used by Medicare beneficiaries, such as those for chronic diseases, which often have multiple product uses.

This white paper explores three potential alternative approaches that CMS could consider for setting MFPs across products with multiple indications, including weighting different product uses based on:

• Medicare prevalence
• Clinical input
• Unmet patient needs

While not an exhaustive list of potential options, these approaches aim to balance incentives for continued innovation with the goals of improving patient access and addressing treatment gaps. As the number of drugs selected for Medicare negotiation grows in future years and more drugs with varied uses are selected for negotiation, CMS’s methodology for determining MFPs will play an increasingly critical role in shaping patient access, increasing development incentives, and meeting the evolving needs of the Medicare population.

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