CMS Issues New Guidance for the IRA Medicare Drug Price “Negotiation” Program: Next Cycle of “Negotiations,” Expansion to Part B, and Renegotiation

On May 12, 2025, the Centers for Medicare & Medicaid Services (CMS) released a new draft guidance document for the Inflation Reduction Act’s (IRA’s) Medicare Drug Price “Negotiation” Program (the Program), entitled “Medicare Drug Price Negotiation Program: Draft Guidance, Implementation of Sections 1191 – 1198 of the Social Security Act for Initial Price Applicability Year 2028 and Manufacturer Effectuation of the Maximum Fair Price in 2026, 2027, and 2028” (Guidance); see also Fact Sheet. This Guidance applies to “implementation of the Negotiation Program for initial price applicability year 2028,” including the renegotiation process for “maximum fair prices” (MFPs) taking effect January 1, 2028, as well as “manufacturer effectuation of the MFP in 2026, 2027, and 2028.” Comments on the Guidance are due in 45 days, on June 26, 2025. On May 13, CMS also published an information collection request (ICR) notice for “the Small Biotech Exception, the Biosimilar Delay, and the Selection of Renegotiation-Eligible Drugs for initial price applicability year 2028.” Comments on the ICR are due July 14, 2025. 

The Guidance was released on the same day as President Trump’s May 12 Executive Order “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients.” As discussed in our May 12 client alert, this Executive Order calls for “steps to end global freeloading” and allow access to “the most-favored-nation lowest price,” but does not include provisions addressing the Program. Both developments follow the Trump Administration’s April 15 Executive Order “Lowering Drug Prices By Once Again Putting Americans First” (Drug Pricing EO), which expressly addressed the Program by instructing HHS to “improve the transparency of the Medicare Drug Price Negotiation Program, prioritize the selection of prescription drugs with high costs to the Medicare program, and minimize any negative impacts of the [MFP] on pharmaceutical innovation within the United States.” The Trump Administration has signaled its intention to “eclipse the 22% in savings achieved in the program’s first year.”

The Guidance represents the Trump Administration’s first opportunity to shape the policy of the Program. The Guidance also implements two areas of expansion contemplated under the IRA: (1) the inclusion of negotiation eligible drugs payable under Medicare Part B, and (2) processes to allow for the renegotiation of MFPs for selected drugs. Select new and updated policies are summarized below. If you have any questions about how the Guidance will affect your company, please reach out to any of the authors of this alert.[1] 

Key Updates and Expansions in Initial Price Applicability Year (IPAY) 2028 Guidance 

The Guidance outlines policies for the selection of drugs into the Program, the process for setting the MFP, and the methods that manufacturers of selected drugs must use to provide Medicare beneficiaries access to selected drugs at the MFP. CMS notes in the Fact Sheet that the agency “continues to build on policies established for the first two cycles of negotiations and outlines new requirements for the third cycle of negotiations with a particular focus on increasing transparency in the Negotiation Program.”

The Guidance includes several updates CMS describes as related to “increased transparency,” including information and examples for “bona fide” generic marketing determinations, release of the list of up to 50 top negotiation-eligible drugs (including the selected drugs) ranked based on total expenditures under Part B and Part D, and approaches CMS will use in developing its initial offers including whether CMS should place greater emphasis on certain factors.

The Guidance also addresses topics related to drug selection, fixed combination products, the small biotech exception, the pause on selection of a reference product due to a high likelihood of biosimilar competition, and rebates owed when a biosimilar does not enter the market as expected. Notably, CMS includes new language addressing “deemed biologic” products, stating “for biological products whose applications were previously submitted as NDAs and approved under section 505 of the FD&C Act but subsequently deemed to be approved biologics license applications (BLAs) under section 351 of the PHS Act, effective March 23, 2020,” the agency “will consider March 23, 2020 to be the licensure date for purposes of identifying the time since licensure.” This language is consistent with CMS’s infographic on the IPAY 2027 selection process. CMS notes that it took a different approach for IPAY 2026, where it used the earliest NDA approval date for a “deemed licensed” product as the starting date for the selection clock.

In addition, CMS invites comment about its approach to aggregation with respect to certain fixed combination products.  CMS states “that there may exist fixed combination drugs for which one of the active ingredients or active moieties contained is not biologically active against the disease state(s) the drug is indicated for and thus does not result in a clinically meaningful difference.” CMS is seeking public comment on “on how CMS might consider grouping such fixed combination drug products with products containing at least one but not all of the active moiety(ies) / active ingredient(s) into the same potential qualifying single source drug for both drugs payable under Part B and/or covered under Part D, including input on terminology that could facilitate the effectuation of such a policy.” 

Beyond selection, the Guidance includes further policies on initial offer development, MFP effectuation, and Part D formulary inclusion of selected drugs and exclusion based on the “successor regulation.”  The Guidance also proposes to substantially change the methodology for reporting of research and development costs as part of the required data submission for a selected drug, and it adjusts other definitions related to Program data submissions. CMS solicits comments on whether the agency should collect additional, forward-looking “market data.”

New for IPAY 2028, CMS outlines policies for two significant areas of expansion for the Program: first, the Agency can now select negotiation eligible drugs payable under Medicare Part B for inclusion in the Program; second, CMS will have authority to “renegotiate” the prices set for drugs previously selected for the Program. The Guidance outlines CMS’s policies for implementing these new statutory authorities, which include the following:

Expansion to Part B.

• With the Program expansion to Part B starting with IPAY 2028, CMS sets forth its proposed process to identify eligible drugs, which will include “rank[ing] the list of negotiation-eligible drugs . . . by combined Total Expenditures under both Part B and Part D,” such that “the negotiation-eligible drug with the highest Total Expenditures under Part B and Part D will be listed first and the negotiation-eligible drug with the lowest Total Expenditures under Part B and Part D will be listed last,” with only “one ranking” for straddle products appearing on both high-spend lists. 
• CMS addresses ceiling calculations for Part B products as well as straddle products, for which CMS will “calculate a single amount across the payment amount under section 1847A(b)(4) of the Act and the sum of the plan-specific enrollment weighted amounts for all dosage forms and strengths of a selected drug that is payable under Part B and covered under Part D.” 
• CMS solicits comments on whether to consider health care services payable under Medicare Part A or Part B as potential therapeutic alternatives to the selected drug for future rulemaking, as well as alternative approaches for determining the starting point for a selected drug with one or more therapeutic alternatives.
• CMS solicits comments on how ceiling calculation and MFP effectuation should apply in cases where a selected drug is not paid under section 1847A of the Act.
• CMS addresses the calculation of payment amount for selected drug under a given Healthcare Common Procedure Code System (HCPCS) code, but notes the agency will “describe how the MFP will be effectuated for drugs payable under Part B (for example, whether all selected drugs will be granted a unique HCPCS code or Part B providers will bill for a selected drug using a combination of HCPCS code and claim modifier—or some other mechanism) in the future.”
• CMS does not set forth detailed policies regarding MFP effectuation for Part B drugs “at this time.” Rather, CMS “is soliciting comments on how the effectuation of MFP refund payments for drugs payable under Part B might differ from what is outlined for drugs covered under Part D.” CMS solicits comment related to facilitating MFP refund payments for Part B drugs using the Medicare Transaction Facilitator (MTF) and the standard default refund amount that would apply for Part B drugs, among other topics.

Renegotiation 

• For renegotiation starting with IPAY 2028, the Guidance proposes requirements to identify renegotiation-eligible drugs. CMS proposes a new, voluntary data collection for some drug manufacturers that were chosen for initial price applicability years 2026 and 2027 to inform renegotiation eligibility and selection.
• CMS states that all drugs that are eligible for renegotiation due to a change in monopoly status will be selected for renegotiation. Among the remaining renegotiation-eligible drugs, CMS will conduct a “holistic inquiry based on the totality of the information available and the circumstances of the renegotiation-eligible drug” that considers the likelihood that a renegotiated MFP would represent a “15 percent or greater change relative to the current MFP,” and whether the change in MFP is likely to have a significant effect on the Medicare program.
• CMS states that “CMS will review selected drugs from initial price applicability years 2026 and 2027 for renegotiation eligibility in initial price applicability year 2028,” and further that selected drugs for IPAY 2026 and 2027 with Part B utilization may be determined to be renegotiation-eligible drugs.
• CMS establishes that, for renegotiation, the policies and procedures under the negotiation process apply, except that CMS adopts a separate methodology for determining the ceiling price for renegotiation. For the renegotiation ceiling, CMS “will maintain the underlying data that was used to calculate the amounts considered for the ceiling at the time of negotiation” but adjust to (1) incorporate Part B data, (2) update the percent applied to the average non-federal average manufacturer price (average non-FAMP) to reflect the appropriate monopoly status, and (3) adjust the sum of plan-specific enrollment amounts and average non-FAMP amounts for inflation. CMS confirms that for drugs selected for renegotiation due to a change in monopoly status, the Agency is directed to apply the applicable statutory percentage for purposes of calculating the non-FAMP ceiling.

Next Steps 

Comments on the remaining sections of the draft guidance are due by 11:59 PM PT on June 26, 2025, and CMS commits to issuing final guidance “later this year.” The Guidance states that CMS intends to engage in rulemaking to address program policies related to implementation for IPAY 2029 and subsequent years. More broadly, CMS also must engage in other activities, including publication of ICRs related to the Program, release of final agreements for the MTF, review of manufacturer MFP effectuation plans, and other actions.