CMS Issues Draft Guidance on Inflation Reduction Act (IRA) Drug Price Negotiation Program for 2027

CMS is seeking comment on this draft guidance for the drug price negotiation process for IPAY 2027, for which the next 15 Part D drugs will be selected by February 1, 2025. CMS also issued a proposed template MFP file, definitions document, and updated Information Collection Request (ICR) form for data submission for small biotech exemption and biosimilar delay requests. Comments on all these documents are due July 2, 2024. A proposed ICR on the negotiation factors data submission for IPAY 2027 is forthcoming in summer 2024.

This alert focuses on proposed changes (as compared to IPAY 2026) and new policies, including some that, by statute, are required to be implemented for the first time with respect to IPAY 2027. The key documents are as follows:

• The draft guidance
• The federal register notice
• The accompanying fact sheet
• The proposed ICR on small biotech exemption and biosimilar delay requests and associated federal register notice
• The proposed template MFP file and definitions document

For a refresher on the basics of the Drug Price Negotiation Program, the key documents are as follows:

• The text of the IRA
• Our alerts relating to the legislation
• Our alert on the IPAY 2026 draft guidance and final guidance

What are the most significant proposed changes to the IPAY 2026 Final Guidance for IPAY 2027?

• Access to the MFP.

  • IPAY 2026 Final Guidance: CMS specified that manufacturers have discretion to provide access to the MFP either as an up-front discount or as an after-the-fact rebate. Manufacturers would have to ensure that pharmacies and other dispensers are reimbursed for the difference between their acquisition costs and the MFP within 14 days, which clock starts from the date “of determining that the selected drug was dispensed to an MFP-eligible individual.” CMS stated that it was “exploring whether manufacturers could offer a standardized refund amount, such as the Wholesale Acquisition Cost (WAC) of the selected drug minus the MFP (WAC-MFP), in order to meet this obligation” and that it “intend[ed] to engage with a Medicare Transaction Facilitator . . . to facilitate the exchange of data between pharmaceutical supply chain entities to support the verification of an MFP-eligible individual who is dispensed a selected drug.”

  • Proposed Changes in IPAY 2027 Draft Guidance? Yes. CMS lays out in detail the proposed role and function of the MTF in supporting the availability of the MFP.

    • Role of the MTF: CMS intends to contract with an MTF vendor to obtain data from dispensing entities and manufacturers in order to verify that a selected drug was dispensed to an MFP eligible individual and access to the MFP was granted.

    • MFP payment mechanisms. Manufacturers may provide access to the MFP through one of two options by:

      • Prospectively offering the MFP to the dispensing entity (i.e., as an up-front discount), in which case the manufacturer must maintain “[i]nvoice documentation of the drug sold at or below MFP, or an agreement between the Primary Manufacturer and dispensing entity establishing prospective purchasing of the selected drug” as evidence of the discount, which information must be submitted to CMS on request.

      • Retrospectively offering the MFP (i.e., as an after-the-fact rebate/refund), in which case “[i]nvoices from the dispensing entity and proof of successful payment” must be maintained by the manufacturer and submitted to CMS on request. If the rebate/refund is not the Standard Default Refund Amount, described below, due to an alternative payment arrangement between the manufacturer and the dispensing entity, the manufacturer must provide evidence of that as well.

    • Mandatory manufacturer participation: CMS proposes to require that manufacturers of selected drugs register with the MTF so as to verify the MFP was effectuated in each instance, regardless of whether access to the MFP is to be facilitated as an up-front discount or after-the-fact rebate/refund and regardless of whether the manufacturer has negotiated an amount other than the Standard Default Refund Amount, described below, or was obligated to offer a lower 340B ceiling price.

    • Process: The following is a brief summary of the MTF data flow process for verifying eligibility for the MFP:

      • A plan sponsor approves a claim from a dispensing entity based on confirmation of beneficiary enrollment in Medicare and that the drug is covered.

      • The plan sponsor approving the claim submits data to CMS’s Drug Data Processing System (DDPS), which provides a second round of validation.

      • DDPS sends the data to the MTF, which prepares certain claims level data, described below, to be sent to the manufacturer.

      • The MTF sending/manufacturer receiving the claims level data starts the 14-day prompt MFP payment window described below.

      • The manufacturer pays the MFP and submits payment-related data to the MTF within the 14-day prompt MFP payment window.

    • Data requirements:

      • The MTF will provide the manufacturer with certain claims level data to support verification of a claim as MFP eligible, including, but not limited to, the Medicare source of coverage (Part B or Part D); date of service; identifier for the service provider; a 340B identifier (if voluntarily provided by the dispensing entity); days supply; WAC and MFP at the time of dispensing; and the Standard Default Refund Amount (described below).

      • The MTF will collect payment-related data from the manufacturer to confirm the MFP payment was made, including the date/evidence to support that access to the MFP was given to the dispensing entity (using a payment element code, supported by evidence to be maintained by the manufacturer and submitted to CMS on request); method for determining how access to the MFP was given (i.e., up-front discount or after-the-fact rebate/refund); National Provider Identifier for the dispensing entity; quantity of the selected drug at issue; and amount of payment sent. Manufacturers must maintain documentation supporting why the manufacturer did not give access to the MFP, as when the manufacturer instead provided a lower 340B ceiling price.

    • The 14-day MFP prompt payment window: The 14-day MFP prompt payment window in which the manufacturer must pay the MFP starts with the MTF sending/manufacturer receiving the claims level data supporting the eligibility of a transaction for the MFP. Manufacturers must send payment data to the MTF within that window to demonstrate that access to the MFP was provided. CMS in indicates some cases that this window begins with the MTF sending the data, and in others that it starts when the manufacturer receives them.

    • MFP payment amount: CMS proposes to calculate a “Standard Default Refund Amount” equal to the difference between the WAC on the date of dispensing and the MFP and seeks comment on that proposal. CMS maintains that it would remain the manufacturer’s responsibility to “choose to refund an amount different than the Standard Default Refund Amount if the Primary Manufacturer determines some other amount is appropriate to make the MFP available . . . .”

    • Disputes: If a manufacturer believes there is an error in the data, the manufacturer can initiate a dispute resolution process laid out in the guidance. CMS does not explicitly address whether initiating a dispute will halt the running of the 14-day prompt MFP payment window (and thus the manufacturer’s obligation to provide access to the MFP). CMS is considering, and specifically soliciting comment on, how to address MFP claims adjustments and reversals.

    • Specific solicitations for comment: CMS is specifically soliciting comment on the following:

      • Whether it should engage with the dispensing entity to reconcile the manufacturer data of payment to the same.

      • Whether the 30-day timeline for Part D plan sponsors to pay a claim and submit data to DDPS should be shortened to seven days so that dispensing entities can more timely receive MFP payments from manufacturers.

      • Whether the MTF should also support a voluntary (for both manufacturers and dispensing entities) “payment facilitation” option, in addition to data facilitation, to effectuate the MFP, either through the MTF facilitating the sharing of banking information to support private transactions between the manufacturer and the dispensing entity or through the MTF passing through the payment of the MFP from the manufacturer to the dispensing entity. CMS states that “under no circumstances would federal funds be used to resolve or make payment related to disputes that may arise between parties participating in the MTF, including with respect to nonpayment or insufficient payment by a particular party.”

• Nonduplication of MFP and 340B ceiling price.

  • IPAY 2026 Final Guidance: CMS recognized the statutory requirement that manufacturers need offer only the lesser of the MFP or the 340B ceiling price to 340B covered entities, not both. CMS noted that it will “examin[e] options with respect to identification of 340B units in consultation with [the Heath Resources and Services Administration (HRSA)] and interested parties. In addition to any policies or procedures that CMS may adopt in this regard, CMS indicated that it would work with HRSA to ensure the MFP is made available where appropriate in a nonduplicated amount to the 340B ceiling price.”

  • Proposed Changes in IPAY 2027 Draft Guidance? Yes. CMS indicates that it will not assume responsibility for “deduplicating” the MFP and 340B ceiling price and instead suggests that it is the manufacturer’s responsibility to resolve any overpayments outside of the MTF process.

    • CMS further indicates that it will provide “a process to identify applicable 340B-eligible claims through the reporting of payment elements to the MTF,” referring to the process through which the MTF will provide a 340B identifier to the manufacturer (if voluntarily supplied by the dispensing entity) and manufacturers will identify 340B claims to the MTF, as necessary, to support why the manufacturer did not pay the MFP. Under this process, manufacturers must maintain, “[a]t a minimum, either records from the Primary Manufacturer’s process for deduplicating 340B claims and the conclusion reached for the claim, or confirmation from a 340B covered entity, or any vendor the 340B covered entity employs to determine 340B status, that the claim was processed as 340B eligible” and evidence that the 340B ceiling price was less than the MFP.

    • CMS expressly states that it “is not charged with verifying or otherwise reviewing whether a particular drug claim is a 340B-eligible claim.” It indicates that it will coordinate with HRSA, as necessary, to facilitate compliance with the nonduplication requirements as between the MFP and the 340B ceiling price but otherwise assumes little responsibility for deduplication of the MFP and 340B ceiling price.

What drugs are eligible for selection for negotiation?

• Qualifying single source drug.

  • IPAY 2026 Final Guidance: A qualifying single source drug (QSSD) was defined as a Food and Drug Administration (FDA)-approved drug/biological product for which at least 7/11 years have elapsed since approval/licensure and for which there is no generic/biosimilar product on the market, inclusive of all dosage forms and strengths with the same active moiety/ingredient and the same New Drug Application (NDA)/Biologics License Application (BLA) holder. Fixed combination products with two or more active moieties/ingredients were to be treated as distinct from their individual components, such that each combination of active moieties/ingredients is a distinct qualifying single source drug, inclusive of all formulations of that combination offered by the same NDA/BLA holder.

  • Proposed Changes in IPAY 2027 Draft Guidance? No. CMS retains the single active moiety/ingredient standard but clarifies that it will investigate products with different trade names marketed under different NDAs/BLAs containing the same active moiety/active ingredient for purposes of identifying potential QSSDs.

• Exclusions from qualifying single source drug and negotiation-eligible drug definitions.

  • IPAY 2026 Final Guidance: CMS set forth standards implementing the statutory exclusions from the definition of QSSD for (1) certain orphan drugs, (2) low Medicare spend drugs, and (3) plasma-derived products. Among other things, CMS clarified that the orphan drug exclusion applies to drugs with one active orphan drug designation and for which the only active approved indications are for that disease or condition and that it will not consider withdrawn designations/indications in this analysis. CMS further clarified that, if a drug loses its orphan drug exclusion status, the agency will use the earliest date of approval/licensure to determine whether the product is a QSSD. On a related note, CMS also set forth its standards for the exclusion of small biotech drugs from negotiation-eligible drugs.

  • Proposed Changes in IPAY 2027 Draft Guidance? No, but some clarifications are proposed.

    • As to low Medicare spend drugs, CMS proposes to clarify that, for a single source drug or biological product assigned a shared billing and payment code, CMS would apportion the amount of spending specific to a selected drug under that code toward the low-Medicare spend drug threshold based on the proportion of the selected drug’s average sales price volume data relative to those of other drugs in the code.

    • As to small biotech drugs, manufacturers would be required to submit a small biotech drug exception request by mid-December 2024, to be eligible for consideration for the exclusion for IPAY 2027. CMS also proposes to clarify that it “will publish the number of drugs that applied for and received the [small biotech exception] for initial price applicability year 2026 as part of publishing the selected drug list on February 1, 2025.”

• Delay in selection of biological product on account of anticipated biosimilar product market entry.

  • IPAY 2026 Final Guidance: CMS set forth the process for delaying, by one (Initial Delay Request) or two (Additional Delay Request) years, selection for negotiation of a biologic that would otherwise be selected, where (1) the biologic would have been an extended-monopoly drug if selected, (2) the delay is requested by a biosimilar manufacturer, (3) the biosimilar manufacturer submits certain specified information, (4) CMS determines that there is a high likelihood that the biosimilar will be licensed and marketed within two years of what otherwise would be the selected drug publication date, and (5) certain disqualifying circumstances are not present.

  • Proposed Changes in IPAY 2027 Draft Guidance? No. CMS is soliciting comment regarding the types of documentation that may constitute “clear and convincing evidence” that the manufacturer has satisfied the high likelihood standard. CMS is also soliciting comment on the date by which CMS should inform the biosimilar manufacturer of a successful Initial Delay Request. CMS notes that it is considering making Initial Delay Request determinations for IPAY 2027 by late 2025 to allow for sufficient notice to the biosimilar manufacturer prior to publication of the selected drug list for IPAY 2028.

What about the bona fide marketing standard?

• IPAY 2026 Final Guidance: CMS stated that a drug/biological product may not be selected for negotiation where a generic/biosimilar product was “marketed” by the selected drug publication date or during the negotiation period. In addition, a selected drug generally would cease to be subject to the MFP at the start of the year that begins at least 9 months after a generic/biosimilar product “is marketed.” CMS stated that it considers a drug to be marketed when the totality of the circumstances, including Medicare Part D prescription drug event (PDE) data and average manufacturer price (AMP) data for a specified 12-month period, establish that a generic/biosimilar product is the subject of “bona fide marketing.” Where a selected drug was not subjected to an MFP on account of this exception, CMS indicated that it would continue to monitor the drug/biological product to ensure that the bona fide marketing standard continues to be satisfied.

• Proposed Changes in IPAY 2027 Draft Guidance? No. CMS will continue to apply the bona fide marketing standard to its determination of whether a generic/biosimilar product is marketed and will continue to employ a totality of the circumstances approach to determine whether that standard is satisfied.

How will drugs be selected for negotiation?

• IPAY 2026 Final Guidance: For IPAY 2026, CMS identified the 50 qualifying single source drugs with the highest total Part D expenditures over a specified 12-month period using PDE data. CMS then ranked these drugs, highest to lowest, and selected the 10 highest ranked drugs on this list for negotiation, unless removed from the list on account of a delay in the selection of a biological product for negotiation.

• Proposed Changes in IPAY 2027 Draft Guidance? No, except that, consistent with the statute, CMS will select the 15 highest ranked drugs on the list for negotiation for IPAY 2027, unless removed on account of a delay in the selection of a biological product for negotiation.

How will the negotiated price be set?

• Negotiation of a single MFP.

  • IPAY 2026 Final Guidance: CMS stated that it will negotiate a single MFP, subject to a single MFP ceiling, across all dosage forms and strengths of the selected drug and based on a 30-day equivalent supply.

  • Proposed Changes in IPAY 2027 Draft Guidance? No.

• MFP ceiling.

  • IPAY 2026 Final Guidance: CMS stated that the MFP must be capped at the lower of a specified percentage of an applicable average non-federal average manufacturer price (non-FAMP) or an amount reflecting the sum of the enrollment-weighted Part D negotiated prices. For IPAY 2026, CMS stated that the MFP may not exceed the lower of:

1. A specified percentage (discussed below) of average non-FAMP for 2021 (or, where there is no non-FAMP for 2021, the average non-FAMP for the first full year following market entry), increased by an inflation factor from September 2021 (or December of the first full year following market entry) to September of the year prior to the selected drug publication date.
   • • • The specified percentage was to be determined by the length of time the drug has been on the market prior to the start of the IPAY.
         • For long-monopoly drugs, for which at least 16 years have elapsed since approval or licensure (excluding vaccines), 40 percent.
         • For short-monopoly drugs, which encompass all other drugs, 75 percent.
2. The sum of the plan-specific enrollment-weighted amounts, which was to be calculated using the enrollment-weighted amount of the Part D negotiated price of the selected drug under each Part D prescription drug plan or Medicare Advantage prescription drug plan net of price concessions received by such plan or its pharmacy benefit manager.

• • Proposed Changes in IPAY 2027 Draft Guidance? No, except to address the statutory requirement that, for the first time, two different average non-FAMP figures will be considered when setting the MFP ceiling, among other technical changes.

    • With respect to the calculation of the specified percentage of average non-FAMP, and consistent with the statute, starting with IPAY 2027, CMS will calculate the specified percentage, as described above, of each of two average non-FAMPs: the inflation-adjusted average non-FAMP for 2021 (or the first full year following market entry if a 2021 average non-FAMP is not available) and the average non-FAMP for the year prior to the selected drug publication date, which, for IPAY 2027, is 2024. CMS will then choose as the MFP ceiling the lowest of the two average non-FAMP figures and the sum of the plan specific enrollment weighted amounts.

      • CMS will use only NDC-11s for purposes of these average non-FAMP calculations, not including NDC-11s for samples, for which there are non-FAMP data in at least one calendar quarter in 2021 or 2024 respectively and for which CMS observes PDE days’ supply and quantity dispensed during 2021 or 2024 respectively.

    • With respect to calculating the sum of the plan-specific enrollment-weighted amounts, CMS will use only NDC-11s of the Primary Manufacturer (or marketed by a Secondary Manufacturer), not including NDC-11s associated with samples, that show up in a PDE record that is considered final action at more than $0 for a covered Part D drug and for which CMS observes Direct and Indirect Remuneration (DIR) amounts for calendar year 2023.

• Manufacturer-submitted information.

  • IPAY 2026 Final Guidance: In negotiating the MFP, CMS stated that it is required to consider certain information submitted by the manufacturer, including information regarding research and developments costs; production and distribution costs; federal financial support for discovery and development; pending and approved patents, FDA exclusivities, and FDA applications; and market, revenue, and sales volume data. CMS defined data elements in the IPAY 2026 final guidance and the accompanying Negotiation Data Elements ICR.

  • Proposed Changes in IPAY 2027 Draft Guidance? Yes. CMS proposes to clarify that manufacturers are obligated to “timely report certain updates to data submissions.”

    • Specifically, manufactures must submit updates if “the data was restated due to requirements of the government entity that initially receives and oversees processing of such data” (e.g., revisions to the “best price” reported for purposes of the Medicaid Drug Rebate Program (MDRP)).

    • The guidance states that the updates must be “timely” submitted to CMS via the IRA Mailbox but does not specify a deadline. CMS does not address whether there would be penalties for noncompliance with the expectation to submit these updates.

• Initial offer: identification and pricing of therapeutic alternatives.

  • IPAY 2026 Final Guidance: CMS addressed the evidence regarding alternative treatments to be collected, including the extent to which the selected drug represents a therapeutic advancement; the costs of therapeutic alternatives; FDA-approved prescribing information for the selected drug and therapeutic alternatives; the comparative effectiveness of the selected drug and the therapeutic alternatives; and the extent to which the selected drug and the therapeutic alternatives address unmet medical needs. In identifying the prices of identified therapeutic alternatives to use as the basis for the initial offer, CMS indicated that it starts with “the Part D net price for the therapeutic alternative(s) that is covered under Part D and/or the Average Sales Price (ASP) for the therapeutic alternative(s) that is covered under Part B.”

  • Proposed Changes in IPAY 2027 Draft Guidance? Yes. CMS elaborates on the initial offer and signals that there may be proposed changes to the questions related to evidence about therapeutic alternatives in the forthcoming proposed Negotiation Data Elements ICR for IPAY 2027.

    • CMS indicates that, in identifying the prices of therapeutic alternatives for purposes of developing the initial offer, it will use “the lower of Part D total gross covered drug cost (TGCDC) net of DIR and [Coverage Gap Discount Program (CGDP)] payments . . . for the therapeutic alternative(s), and/or the Average Sales Price (ASP) for the therapeutic alternative(s) that is covered under Part B, or the MFP for initial price applicability year 2026 selected drugs that are therapeutic alternatives to determine a starting point for developing an initial offer . . . .” (emphasis added).

    • CMS notes that, in the forthcoming proposed ICR, it may propose to group certain questions together within certain categories—manufacturer input, patient or caregiver experience, clinical experience, and health research—to improve the data collection process.

    • CMS is specifically soliciting comment on how to improve patient-focused listening sessions as part of the negotiation process and the number and format of manufacturer opportunities to engage with CMS (which CMS is considering reducing given the increased number of drugs to be selected for IPAY 2027).

In addition to the providing access to the MFP, what will happen after the MFP is set?

• Publication of the MFP.

  • IPAY 2026 Final Guidance: The MFP and explanation of the MFP were to be published on the CMS website by the applicable statutory deadlines. CMS clarified that the published explanation “[is to] contain the single MFP for a 30-day equivalent supply of the selected drug, the NDC-9 per unit price, and NDC-11 per package price and will be updated annually to show the inflation-adjusted MFP for the selected drug.” The explanation was to include, subject to the confidentiality policy, “any data or circumstances that may be unique to the selected drug” and “redacted information regarding . . . data received, exchange of offers and counteroffers, and the negotiation meetings, if applicable.”

  • Proposed Changes in IPAY 2027 Draft Guidance? No. CMS is requesting comment on the MFP publication file layout to be posted on its website.

• Application of the MFP.

  • IPAY 2026 Final Guidance: CMS indicated that it will cap the single MFP per 30-day equivalent supply only at the drug level, which will then be converted into an as-applied MFP at the unit or package level. CMS stated that it would permit manufacturers 30 days to submit a suggestion of error to CMS where they believe there has been an error in calculating the MFP ceiling or the as-applied MFP. Where an NDC was new, but there were not sufficient WAC or PDE data from 2022 to calculate an as-applied MFP, “CMS w[ould] determine whether there [wa]s an existing, comparable NDC to which the MFP for the selected drug has been applied” and “impute” the data necessary to calculate the as-applied MFP for the new NDC by reference to the data for the comparable NDC.

  • Proposed Changes in IPAY 2027 Draft Guidance? No, but CMS proposes to clarify that it will calculate the as-applied MFP only for a drug with a non-zero WAC in a calendar quarter in 2024. Drugs for which CMS does not calculate the as-applied MFP would be treated as new NDCs. CMS also proposes to reduce the number of days a manufacturer has to submit a suggestion of error for calculating the MFP ceiling or as-applied MFP from 30 to 21 days.

What is the timeline for the IPAY 2027 negotiation process?

The IPAY 2027 timeline largely mirrors that of IPAY 2026, with the exception that the statutory period between the deadline for execution of the negotiation agreement and the end of the negotiation period is one month shorter than that for IPAY 2026, which causes certain phases of the process to be marginally shorter.

• Fall 2024: CMS intends to issue the IPAY 2027 Final Guidance.
• Mid-December 2024: Proposed deadline for requests for the small biotech exemption and for the biosimilar delay.
• February 1, 2025: Deadline for CMS to publish the list of selected drugs for negotiation for IPAY 2027.
• February 28, 2025: Deadline for manufacturers of selected drugs to sign negotiation agreements.
• March 1, 2025: Deadline for manufacturers of selected drugs to submit required data.
• Post-March 1, 2025: Patient-focused listening sessions and other opportunities to engage with CMS.
• June 1, 2025: Deadline for CMS to send initial MFP offers to manufacturers.
• July 1, 2025: Deadline for manufacturers to accept the initial MFP offer or propose a counteroffer.
• Summer 2025: CMS must respond to counteroffers within 30 days of receipt of the counteroffer or within 60 days of the initial MFP offer, whichever is later.
• October 31, 2025: Deadline for manufacturers to accept or reject CMS’s final MFP offer.
• November 30, 2025: Deadline for CMS to publish MFPs for IPAY 2027.
• March 1, 2026: Deadline for CMS to publish an explanation of the MFPs for IPAY 2027.

Other topics

• Confidentiality.

  • IPAY 2026 Final Guidance: CMS stated that it does not intend to publicly discuss the negotiation process, but, if a manufacturer makes any details of the process public, CMS may do likewise. Similarly, CMS stated that it does not intend to disclose proprietary information of the manufacturer, but, if a manufacturer discloses such information, CMS will deem it no longer proprietary.

  • Proposed Changes in IPAY 2027 Draft Guidance? No.

• Monitoring for compliance.

  • IPAY 2026 Final Guidance: CMS stated that it intends to monitor manufacturer compliance with the Drug Price Negotiation Program. CMS stated that it will provide manufacturers with reminder letters prior to deadlines with warnings of potential applicability of excise taxes or civil monetary penalties (CMPs), written requests for corrective action, and written notification that a manufacturer may be subject to enforcement action and/or written confirmation that a manufacturer may no longer be subject to enforcement action, as applicable.

  • Proposed Changes in IPAY 2027 Draft Guidance? No.

• Enforcement and termination of negotiation agreement.

  • IPAY 2026 Final Guidance: The statute subjects manufacturers to significant CMPs for:

    • Failing to offer the MFP with respect to a Medicare beneficiary.

    • Violating the terms of the negotiation agreement, including the requirement to submit the requisite information to CMS.

    • Knowingly providing false information with respect to certain aggregation rules concerning the small biotech exception and the biosimilar delay provisions. CMS defines “knowingly” as when a manufacturer “(1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information. No proof of specific intent to defraud is required.”

CMS stated that a manufacturer that does not wish to enter into an agreement may issue a notice of decision not to participate in the program to CMS and a request to expeditiously terminate its MDRP, Medicare CGDP, and Manufacturer Discount Program agreements, which CMS would grant for good cause. CMS established a similar process to terminate an executed agreement.

• • Proposed Changes in IPAY 2027 Draft Guidance? Yes. To the listed substantive violations, CMS proposes to add a “Failure to meet the MTF reporting requirements.”

• Part D plan requirements.

  • IPAY 2026 Final Guidance: CMS stated that Part D plans will be required to include selected drugs on their formularies, as required by statute. CMS clarified that the formulary requirement extends to all dosage forms and strengths to which the MFP applies. CMS indicated that it would implement a formulary review process “to assess: (1) any instances where Part D sponsors place selected drugs on non-preferred tiers, (2) any instances where a selected drug is placed on a higher tier than non-selected drugs in the same class, (3) any instances where Part D sponsors require utilization of an alternative brand drug prior to a selected drug with an MFP (i.e., step therapy), or (4) any instances where Part D sponsors impose more restrictive utilization management (i.e., step therapy and/or prior authorization) for a selected drug compared to a non-selected drug in the same class.”

  • Proposed Changes in IPAY 2027 Draft Guidance? No, but CMS signals that changes may be coming once it has information on Part D plan formularies for 2025.

• Reasonable assumptions.

  • IPAY 2026 Final Guidance: CMS stated that it will not allow manufacturers to rely on, and/or submit, statements of reasonable assumptions along with their data submissions.

  • Proposed Changes in IPAY 2027 Draft Guidance? No. CMS does not discuss reasonable assumptions.

• Interaction with inflation rebates.

  • IPAY 2026 Final Guidance: CMS offered guidance on how to apply Part D inflation rebates to selected drugs but reserved doing so as to Part B inflation rebates until a future year.

  • Proposed Changes to IPAY 2026 Draft Guidance? No.

• Excise tax.

  • IPAY 2026 Final Guidance: CMS indicated that the Internal Revenue Service would issue guidance regarding the excise tax penalty for failing to (1) timely enter into a negotiation agreement, (2) timely agreeing to and MFP, or (3) timely submitting the requisite information to CMS. CMS indicates this tax will apply to sales of selected drugs.

  • Proposed Changes to IPAY 2026 Draft Guidance? No. CMS states that it “understands the Department of the Treasury is in the process of rulemaking to establish regulations that govern the administration of the excise tax.” As a result, CMS is not soliciting comment on administration of the excise tax.

What’s next?

We will learn more about CMS’s proposals regarding data submission for IPAY 2027 when CMS publishes the proposed ICR with respect to that process in the coming months. Any manufacturer that anticipates selection of a drug/biological product for negotiation for IPAY 2027 or a future year should consider commenting on the draft guidance and related proposed ICRs and other documents. Again, comments are due by July 2, 2024.

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We will monitor the implementation of this guidance, and any additional guidance CMS issues with respect to the Drug Price Negotiation Program. As always, it is important that you carefully review all such guidance to identify issues relevant to your organization.

Authored by Alice Valder Curran, Ken Choe, Susan Cook, Joy Sturm, Allison Pugsley, Kathleen Peterson, Samantha Marshall, Lindsey Johnson, Mahmud Brifkani, Katie Kramer, and Rianna Modi