CMS Sets Stage for 2028 Medicare Drug Price Negotiations — First Look at Negotiations for Part B

On May 12, 2025, the U.S. Centers for Medicare & Medicaid Services (CMS) released draft guidance for implementing the Medicare Drug Price Negotiation Program for the Initial Price Applicability Year (IPAY) 2028 (Draft Guidance). This Draft Guidance introduces several developments affecting manufacturers of drugs covered under both Medicare Part B and Part D, as 2028 is the first negotiation cycle that will include Medicare Part B drugs. Notably, CMS provided new commentary that may alter its treatment of fixed combination products as well as initial guidance on implementation of the renegotiation provisions of the Inflation Reduction Act (IRA).

While the Draft Guidance comes on the heels of President Donald Trump’s most-favored-nation drug pricing executive order (discussed here), it does not address how the executive order could be implemented through the IRA’s Drug Price Negotiation Program, including whether CMS may consider international pricing when establishing maximum fair prices (MFPs). Importantly, the statutory factors that CMS considers in the negotiation process do not explicitly include international prices, although the agency may evaluate market data, revenue, and sales volume for the drug in the United States.

CMS is soliciting comments on the Draft Guidance, which must be submitted by June 26, 2025.

Fixed Combination Products

Consistent with previous guidance, CMS states in the Draft Guidance that a fixed combination drug containing two or more active moieties or active ingredients will be considered distinct from a product containing only one of those active moieties or ingredients.

However, in the Draft Guidance, CMS now adds that “there may exist fixed combination drugs for which one of the active ingredients or active moieties contained is not biologically active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.”

This could suggest that CMS may exercise more discretion with respect to certain fixed combination drugs and treat a fixed combination drug as the same single-source drug as a product containing only one of the active moieties or ingredients, if the additional components are deemed “not biologically active against the disease state(s) the drug is indicated for.” CMS does not define “biologically active” but cites, as an example, the addition of an active moiety / ingredient that affects the bioavailability of other active moieties / ingredients but that is not therapeutically active against the disease state for which the product is indicated.

The new language goes on to state that:

CMS is soliciting comments on whether the addition of drugs payable under Part B may impact the fixed combination drug policy described in this draft guidance. In particular, CMS is soliciting comments 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.

The foregoing proposal could have a significant impact on development plans for critical products and create contradictions between IPAY guidance and Medicaid Drug Rebate Program rules. Stakeholders with combination drugs should strongly consider submitting comments.

Renegotiation of Selected Drugs

In the Draft Guidance, CMS lays out its proposed process for renegotiating the MFP of previously selected drugs beginning with IPAY 2028.

IRA Section 1194(f)(2) defines a “renegotiation-eligible drug” as a selected drug that meets any of the following four criteria:

(i) The drug receives a new indication from the FDA;
(ii) the drug’s status changes to an extended-monopoly drug;
(iii) the drug’s status changes to that of a long-monopoly drug; or 
(iv) the Secretary determines that there has been a material change in any of the factors (i.e., Section 1194(e)(1) or (e)(2) factors) considered during the original negotiation (e.g., clinical effectiveness, cost of production, or market dynamics). 

Drugs that become extended-monopoly drugs or long-monopoly drugs are automatically selected for renegotiation under the IRA. But the IRA provides CMS with discretion to select among the remaining drugs (i.e., those with new indications or those that had material changes to key factors) those for which CMS expects renegotiation is “likely to result in a significant change in the maximum fair price otherwise negotiated.” 

CMS states in the Draft Guidance that it plans to take a holistic approach to determining whether renegotiation is likely to result in a significant change in the MFP otherwise negotiated and adds that it plans to consider two criteria in particular:

(i) the likelihood that the new indication or material change will result in a 15% or greater change in the MFP
(ii) whether such a change will have a significant impact on the Medicare Program (e.g., on expenditures or beneficiary cost-sharing)

CMS notes that renegotiation eligibility and selection will begin approximately 15 months after the end of the negotiation period for IPAY 2026 selected drugs (August 1, 2024) and immediately after the end of the negotiation period for IPAY 2027 (November 2025). 

Additional Topics

CMS addresses several other important topics in the Draft Guidance, particularly those related to the selection and management of Part B drugs, which will be eligible for negotiation for the first time in IPAY 2028.

• Identification and Selection of Negotiation-Eligible Part B Drugs: The Draft Guidance outlines CMS’s planned process for identifying the 50 negotiation-eligible single-source Part B drugs. Under the Draft Guidance, CMS will use claims data to calculate each drug’s Part B total expenditures, apportioning expenditures among products that share a HCPCS code using average sales price (ASP) sales-volume ratios. Expenditures for drugs or biologicals bundled into the payment for another service, as well as compounded drugs, will be excluded. As with Part D drugs, CMS will remove products that qualify for the small biotech exception or that have already been selected for negotiation in prior cycles (IPAY 2026 or 2027). The remaining single-source drugs will be ranked by Part B total expenditures to select the top 50 negotiation-eligible, high-spend Part B drugs. CMS will then combine and rank all negotiation-eligible Parts B and D drugs by their total expenditures. If a drug is eligible for negotiation under both Part B and Part D, it will appear only once on the combined list. From this list, CMS will select the 15 highest-spend drugs for the IPAY 2028 negotiation cycle.

• Biosimilar Delay Request: The Draft Guidance updates the process for requesting a biosimilar delay, which allows a biosimilar manufacturer to request delayed selection of a reference product for negotiation in cases where there is a high likelihood that a biosimilar will be licensed and marketed before the applicable deadline. The main update under the Draft Guidance is the establishment of a detailed process for requesting an additional year of delay. After confirming that the biosimilar was not licensed and marketed during the initial delay period, CMS will review the same statutory requirements as for the initial delay request but will also require clear and convincing evidence that the biosimilar manufacturer has made significant progress toward licensure and marketing since the initial request.

• Generic/Biosimilar “Bona Fide Marketing”: The Draft Guidance reiterates that drugs with a generic or licensed biosimilar that are determined to be engaged in bona fide marketing will not be subject to price negotiation. Consistent with prior IPAY guidance, CMS states in the Draft Guidance that it will review prescription drug event data and average manufacturer price data and that its determination of whether a generic drug or biosimilar is marketed on a bona fide basis “will be a holistic inquiry based on the totality of the circumstances.” CMS identifies certain sources of data that “will be informative for that inquiry” but emphasizes that the “determination will not necessarily turn on any one source of data.”

The Draft Guidance identifies certain new and “[a]dditional relevant factors” that CMS may consider, and CMS states that it is considering reviewing ASP, Medicaid state drug utilization data, and data from a nationally representative and commercially available database. CMS is seeking comments on additional data sources that may provide timely utilization data for these drugs.

• Small Biotech Exception: The small biotech exception (SBE) excludes certain small biotech drugs from the negotiation program if they meet specific criteria. Beginning with IPAY 2028, the SBE will also apply to Part B drugs. CMS states in the Draft Guidance that it will evaluate whether a qualifying single-source drug meets the SBE based on total expenditures under Part B or Part D, making separate determinations for each. 

• Orphan Drug Exception: The Draft Guidance does not alter CMS’s prior guidance on the IRA’s orphan drug exclusion. However, the House Energy and Commerce Committee recently advanced its portion of the fiscal year 2025 reconciliation bill and included a provision that would (i) allow drugs to have one or more orphan drug indications while still being exempt from the Drug Price Negotiation Program and (ii) revise the start of the timeline in which a manufacturer would be eligible for negotiation until an orphan drug receives its first nonorphan indication. The status of the reconciliation bill is still very much in flux, but the inclusion demonstrates some congressional appetite for the change.

Sidley continues to monitor and advise clients on the implementation of the IRA and its impact on the Medicare Drug Price Negotiation Program.