Although the initial set of drugs included for negotiations was limited to ten, the scope of this program will expand over time<\/a>. In 2025, CMS will select another 15 Part D drugs for negotiations that will take effect in 2027. In 2026, CMS will select up to 15 additional Part B or Part D drugs for negotiations that take effect in 2028, and up to 20 additional drugs every year thereafter (Part B covers physician-administered drugs, including infusions of complex biologics). CMS is targeting those therapies with the greatest Medicare spending, although therapies meeting certain criteria (e.g., drugs more recently approved by the FDA, those with an orphan drug designation for a single indication, or those facing current or looming biosimilar threat) can escape negotiations.<\/p>\n Set to take effect Jan. 1, 2026, the MFPs negotiated<\/a> between CMS and drug manufacturers for the initial ten Part D drugs represented on average a 59% discount from their list prices on the dates when the MFPs were published. The discounts ranged from 15% for NovoLog\u00ae FlexPen\u00ae to 80% for JANUVIA\u00ae. The limited discount for NovoLog likely reflects Novo Nordisk\u2019s decision to cut prices by 75% effective Jan. 1, 2024, following an IRA provision<\/a> capping patients\u2019 out-of-pocket costs at $35 per month.<\/p>\n Figure 1: 30-day price of selected drugs for Part D price negotiations<\/p>\n Source: Red Book, accessed August 13, 2024; CMS<\/p>\n The IRA ordered CMS<\/a> to consider the extent to which manufacturers have recouped R&D expenses, current production and distribution costs, government support for the drug\u2019s development, and revenue and volume data in its calculations. CMS also weighed evidence regarding alternative treatments to assess therapeutic advancement provided by the drug, comparative effectiveness, and the degree to which the therapy addresses an unmet medical need \u2014 attributes also leveraged by the private sector in driving formulary decision-making as reported by surveyed pharmacy and medical directors<\/a> in Clarivate Access & Reimbursement reports (Fig. 2).<\/p>\n Figure 2: Factors influencing formulary placement and reimbursement of biologic or oral targeted therapy for SLE and\/or LN<\/p>\n <\/p>\n Source: Clarivate Access & Reimbursement report on systemic lupus erythematosus; survey data collected in April 2024<\/p>\n The commonality between the factors CMS was examining and what private plans already used drew CMS to begin recruiting<\/a> health economists and others with experience in price negotiations from drug companies and pharmacy benefit managers.<\/p>\n Top-line differences between list price and MFP obscure the impact of discounts and rebates that PBMs and MCOs can secure from manufacturers in exchange for coverage or preferred access. In highly competitive categories like diabetes, net price could be half of the list price. For example, an A&R report for migraine<\/a> found rebates of up to 30% off list price were common among contracting payers (Fig. 3).<\/p>\n Figure 3: Average rebate ranges for key migraine preventive brands<\/p>\n Source: Clarivate Access & Reimbursement reports, migraine treatments; survey data collected in February, 2024<\/p>\n Payers use these rebates to shape current reimbursement, and an analysis of formulary placement using Clarivate Fingertip Analytics<\/a> suggest Part D plans were already extracting sizeable rebates for several of these therapies \u2013- plans covering 95% or more standalone Part D beneficiaries had access to ELIQUIS\u00ae, JARDIANCE\u00ae, XARELTO\u00ae, JANUVIA, and ENTRESTO\u00ae on a preferred tier, pointing to active contracting between manufacturers and Part D plans. Plans covering 46% and 80% of Part D lives offered similar preferred access to NovoLog FlexPen and FARXIGA\u00ae, respectively. The only exceptions were ENBREL\u00ae, IMBRUVICA\u00ae, and STELARA\u00ae, whose high monthly costs \u2014 exceeding the threshold of $950 for a 30-day equivalent<\/a> allowed in calendar year 2024 \u2014 allow Part D plans to place them on the specialty tier resulting in patient coinsurance.<\/p>\n Figure 4: Coverage status of key drugs in standalone Part D plans<\/p>\n Source: Clarivate, Fingertip Analytics; data accessed on July 1, 2024<\/p>\n These MFPs partly represent the rebate agreements that already existed between manufacturers and private payers under Medicare Advantage, possibly with even greater discounts. With the MFP in place, the rebates likely will no longer flow at the same level to Part D plan sponsors, which could drive them to change these therapies\u2019 reimbursement status. Payers may consider increased contracting with competitors of the ten selected drugs for preferred access while shifting them to a less-favorable tier, increasing patient out-of-pocket costs.<\/p>\n Figure 5: Coverage status of key drugs in Medicare Advantage plans<\/p>\n Source: Clarivate, Fingertip Analytics; data accessed July 1, 2024<\/p>\n The reported MFP discounts suggest CMS can obtain comparable or better terms than individual Part D or Medicare Advantage plan sponsors. As additional drugs are added to the program, private Medicare payers will lose rebate funding for Medicare-covered drugs and will need to adjust, placing greater attention on products not subject to price negotiations and adjusting reimbursement strategies accordingly. Pharmas may choose to accept these discounts as a standard business cost or revise their strategies to mitigate the risk of being selected for price negotiations.<\/p>\n November\u2019s elections could shape the future direction of drug price negotiations in the U.S. Vice President Harris has indicated she would pursue further policies to lower the burden of drug costs on patients<\/a>, while former President Trump and his supporters have expressed opposition to the IRA, citing concerns over the climate-related initiatives included in the legislation.<\/p>\nInitial MFPs released show sharp discounts<\/h3>\n
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<\/a><\/p>\nThe road ahead for stakeholders<\/h3>\n