The Centers for Medicare & Medicaid Services (CMS) is required to make public by September 1 the “maximum fair prices” (MFP) that CMS is setting for the first ten drugs subject to the Medicare Drug Price Negotiation Program (Negotiation Program) under the Inflation Reduction Act of 2022. These drugs are those Part D qualifying single-source drugs with the most Medicare spending. The prices set by CMS will not apply to Medicare sales until 2026.
As President Biden has cited the Negotiation Program as a significant achievement of his Administration, we expect that he will make the announcement of the prices a major public event. President Biden and Vice President Harris are scheduled to appear in Maryland on Thursday, August 15 “to discuss the progress they are making to lower costs for the American people.” While the White House has not released details, the event could be tied to the publication of these drugs’ prices.
Here are some important points Manatt will be watching whenever the prices are released:
The prices. Of course, the first thing everyone will see are the prices themselves. However, in the absence of any context that CMS may provide, it will be difficult for the Administration to take credit for bringing prices down. Because the prices manufacturers currently negotiate with Part D plans are not public and CMS is prohibited from disclosing them, CMS will presumably need to cite other price benchmarks in order to provide the public context for the negotiated prices.
CMS may choose to use list prices for such comparisons as they would be the most favorable. It will be worth watching to see if CMS cites other benchmarks such as Federal Supply Schedule pricing, the prices available in other countries or independent estimates of the net prices for the drugs in either Part D or the commercial market. The relationship between the MFPs of drugs with similar therapeutic profiles could be revealing.
Rationale. It will be worth watching whether and how CMS explains the negotiated prices. CMS is not required to publish an explanation of the rationale for their MFP decisions based on certain statutory factors until March 2025. While CMS has committed to release this public explanation earlier than next March, CMS may release the MFP without a public explanation and, potentially, without any explanation at all. If they simply publish the prices without any explanation other than that they were negotiated, they may be vulnerable to criticism by those who may believe the prices are too high (or too low).
Patient impact. Given the political nature of the timing of these announcements, CMS and the White House will presumably want to highlight the savings that seniors will realize from the negotiation process. However, making that case may be quite difficult, as most of the savings from the Negotiation Program will only indirectly benefit beneficiaries, whose costs are determined by the cost sharing design of their Part D plans.
In addition, while Part D plans are required to put selected drugs on their formularies, some in Congress, the drug industry, and patient organizations have expressed concern that CMS has taken limited steps to ensure patients can actually access the drugs, and not face adverse tiering or utilization management. These stakeholders, and the Part D plans themselves, will be watching to see if CMS announces further oversight of formulary and utilization management practices for selected drugs. Options CMS may have to ensure patient access were addressed in a recent Manatt Health white paper.
What other shoes may drop. The Administration could use the announcement of the MFPs as a forum to announce or highlight other steps to limit prescription drug costs. For example, CMS has still not released a final rule making changes to the Medicaid Drug Rebate Program, that, as first proposed in May 2023, would include a new drug price verification survey that seeks to determine the manufacturer’s cost of developing, manufacturing and marketing certain high-cost drugs. Some have also pressed the Administration to address drug prices by using the so-called march-in rights under the Bayh-Dole law that drug pricing critics believe authorizes the government to limit drug prices. The Administration issued a draft framework for exercising march-in rights along these lines earlier this year, which they have not yet finalized.
Media and Trump reaction. As the Biden-Harris Administration will hope to gain the most political advantage from the release of the MFPs, it will be worth watching to what extent the media adopts the Administration’s claims about the impact of the program. In addition, it will be interesting to see whether and how the Trump campaign reacts. It is possible that, especially if the prices exceed those available in other countries, the Republican campaign will criticize the prices and claim that they will do better. How stakeholders respond to these prices could influence future MFP negotiations (the selection of the next 15 Part D drugs subject to the Negotiation Program will be announced by February 1, 2025).