Here Is What Is Happening With Medicare Price Negotiations

Late Wednesday night, the Centers for Medicare and Medicaid Services (CMS) issued new guidance clarifying the requirements for its recently given authority to negotiate medication pricing for Part D participants.

The capacity to negotiate stems from the Inflation Reduction Act (IRA) and is the second noteworthy step taken by the FDA this week, the first being the imposition of sanctions on pharma firms whose Medicare Part B medicine costs climbed faster than inflation.

It reiterates a lot of what was outlined in IRA in its 91-page document outlining new Part D drug guidance, including the definition of which drugs qualify, which excludes orphan drugs and drugs manufactured by smaller biotech firms.

But, there are also fresh specifics regarding the factors Medicare would examine when negotiating the maximum fair price (MFP). Medicines that are the original brands for biosimilars (a biologic medical product almost identical to a product developed by a separate business) will not be evaluated, nor will biosimilars themselves. Yet copies of synthetic medications, or generics, will be. It will be allowed to prolong a negotiation for specific reasons, and a dispute resolution procedure will be established.

The paper also specifies that the government will identify the top 50 most costly pharmaceuticals for Medicare and then narrow the list down to the top 10 based on the criteria outlined in the final guidelines.

In the memo, Dr. Meena Seshamani, Deputy Administrator of CMS and Director of Medicare, also highlighted a number of important dates. The FDA will disclose the initial ten pharmaceuticals to be negotiated in September. There will be a public comment period, with comments allowed through April 14.

Experts have differing opinions on the guidance, ranging from labeling it a White House public relations gimmick to being pleased by the guideline’s level of detail.

Assistant professor Joseph Levy of the Johns Hopkins Bloomberg School of Public Health says the guideline clarifies an ambiguous statute (IRA).

But, according to Levy, there is the possibility for misunderstanding because the established prices contain various elements, such as alternative medicines and their pricing, what other government agencies are paying, and the grouping of all doses and forms of medication.

Juliette Cubanski, the assistant director of Medicare policy at the Kaiser Family Foundation, stated that while she is still sifting through the 91-page paper, the guideline gives a more precise road map for businesses.

At the same time, CMS is seeking feedback on several aspects of this guidance, which may not be the final word on how the negotiation program will work for 2026, Cubanski added. Manufacturers and other stakeholders have ample opportunity to weigh in on elements of this guidance.

Seshamani has admitted publicly that she and her staff have met routinely with drug firms, advocacy organizations, patients, and pharmacy benefits managers (PBMs) to discuss advisory language. Analysts at SVB Securities termed the document a “bombshell,” predicting that the shares of affected businesses, including Johnson & Johnson, will come under pressure.

While having biosimilars appears to be a loophole for corporations to exploit — which should lead to a competitive market and cheaper pricing anyway — SVB believes that companies might engage in settlements with biosimilar makers to debut before the negotiating year. But, CMS may close the loophole in the final version of its guidance.

According to Levy, the biosimilar guidance is in response to mounting evidence that as more biosimilars enter the market, payers are becoming more aggressive in requiring the use of biosimilars, and the introduction of biosimilars reduces the net price of both the originator biologic and the biosimilar.

The analysts also noted that CMS might issue a list before September, even though the deadline is September 1, 2023.