CMS Rolls up its Sleeves on Price Negotiations, Sets Agenda for 2026 Negotiated PricesJanuary 19, 2023
Last week, the Centers for Medicare & Medicaid Services (CMS) released a memorandum on how it intends to implement the Medicare Drug Price Negotiation Program, passed under the Inflation Reduction Act (IRA) (see our blog post and slide deck on IRA). The memorandum also introduced the Program’s spanking new logo.
The memorandum outlines CMS’s priorities and timeline for the Initial Price Applicability Year 2026. Recall that CMS is required to negotiate and publish the 2016 maximum fair price for 10 high expenditure, single source Part D drugs by September 1, 2024.
The memorandum is part of CMS’s efforts to engage with the public on the implementation of the Negotiation Program. These efforts also include national stakeholder calls, quarterly strategic meetings, and monthly technical calls with CMS staff. The memorandum sheds light on CMS’s most urgent priorities to implement the Negotiation Program. The Agency invites public comments at IRARebateandNegotiation@cms.hhs.gov.
Upcoming CMS Guidance
CMS provides a list of topics on which it plans to issue guidance. The Agency has promised it will provide comment periods for each guidance. The topics focus on issues relevant in the first three years of the Negotiation Program—2026 to 2028. They are:
- Terms and conditions of the manufacturer agreement, including each party’s responsibilities.
- Approach for considering (1) the manufacturer-reported data elements and (2) evidence about alternative treatments.
- Process for the offer and counteroffer exchange between the Secretary and manufacturers.
- Content of an explanation for the maximum fair price (MFP).
- Method for applying the MFP across different dosage forms and strengths of a selected drug.
- Dispute resolution process for specific issues that are not exempt from judicial review.
- Processes for compliance monitoring and imposition of civil monetary penalties for violations.
Information collection requests discussed below
CMS plans to propose three new information collection requests (ICR) to gather data in key areas related to the Negotiation Program. CMS will be asking for this data as early as this summer:
- Eligibility for Small Biotech Exception: To evaluate manufacturer eligibility for the small biotech exception, CMS reviews Medicare expenditure data for the manufacturer’s products. All persons treated as a single employer under the Internal Revenue Code will be treated as one manufacturer. CMS plans to collect information about how manufacturers aggregate as single employers to evaluate them for the exception. Businesses that reasonably believe they qualify for the exception will be asked to submit their data in the summer of 2023.
- Data for Negotiation Factors: The IRA requires CMS to consider several factors when negotiating the MFP. CMS will request information such as research and development costs, and whether federal grants subsidized those costs; production and distribution costs; existence of patents or exclusivity; and market data, revenue and sales volume data. This ICR will also collect voluntary data related to evidence about alternative treatments, including, among other things, comparative effectiveness of the drug and its therapeutic alternatives. CMS is proposing that all data submissions will be due by October 2, 2023.
- Offer and Counteroffer Data Exchange: CMS and manufacturers will exchange offers and counteroffers during negotiation (February to August of 2024 for 2026 prices). This ICR will outline the information that manufacturers must provide in any counteroffers.
Finally, the memorandum has a handy timeline of the key dates associated with the Initial Price Applicability Year 2026.