U.S. Drug Pricing Year in Review: Reflections on 2025 and Getting Ready for 2026

In 2025, legal pressures on federal drug pricing policy escalated to a fever pitch. The Trump administration resurrected a version of its most-favored-nation (MFN) drug pricing policy from President Donald Trump’s first term and continued implementation of Maximum Fair Price (MFP) requirements under the Inflation Reduction Act (IRA). At the same time, the Centers for Medicare & Medicaid Services (CMS) surprised the industry by tightening pricing rules on physician-administered medicines, such as essential oncology and immunology therapies. Amidst these changes, Congress weighed in by expanding the orphan drug exclusion to the Medicare Drug Price Negotiation Program, a move lauded as offering targeted and necessary relief to preserve incentives for rare disease innovation. 

Together, these developments underscore that no single policymaker is steering the national debate over drug costs. Rather, policy is emerging from a tangle of executive actions, highly technical and complex agency rulemaking, and targeted congressional action. For manufacturers, the result is a more complex environment that demands constant vigilance and strategic planning.

I. Most Favored Nation Policy Initiatives

The concept of MFN drug pricing has been circulating in federal policy circles for years, but its trajectory has been anything but steady.

In the final weeks of the first Trump administration, the Centers for Medicare & Medicaid Innovation (CMMI) sought to implement a last-minute MFN pricing model through an interim final rule for certain high-cost Part B drugs. The rule, which was ultimately enjoined by courts and rescinded by President Joe Biden, would have tied Medicare Part B reimbursement rates to the lowest per capita gross domestic product (GDP)–adjusted price in any Organisation for Economic Co-operation and Development (OECD) country with a GDP per capita at least 60% of the United States’. 

Upon returning to the White House for a second term, President Trump and his administration doubled down on the policy beginning with an executive order in May 2025 directing drug manufacturers to “offer American consumers the most-favored-nation lowest price” and quickly expanding into a broader set of initiatives. 

First, the White House entered into agreements with several major manufacturers to offer MFN prices on certain existing and future products across defined government and direct-to-consumer channels. 

Second, the administration unveiled a new voluntary CMMI payment model, the Medicaid GENEROUS Model, with a sweeping premise: Manufacturers would “provide supplemental rebates to state Medicaid programs that result in [MFN] international pricing for a manufacturer’s Covered Outpatient Drugs (CODs).” Under the five-year model, the MFN price is set at the “second lowest country-specific manufacturer-reported net price, adjusted by gross domestic product per capita using a purchasing power parity method” in G7 countries (other than the United States) plus Denmark and Switzerland.

In parallel, the United States and the United Kingdom announced a framework agreement aimed at stabilizing cross-border pharmaceutical pricing in exchange for relief from U.S. tariffs on pharmaceuticals.

The year’s end may bring even more developments, as the Office of Information and Regulatory Affairs at the Office of Management and Budget has publicly disclosed that it is reviewing two additional proposed rules entitled the “Guarding U.S. Medicare Against Rising Drug Costs (GUARD) Model” and the “Global Benchmark for Efficient Drug Pricing (GLOBE) Model.” Their content is unknown, but there is speculation that these proposed rules – if issued at all – would seek to establish CMMI MFN payment models for Medicare Parts B and D.

The administration has not yet articulated a plan to implement MFN pricing through legislation on a permanent, non-CMMI basis. Nevertheless, this year’s MFN initiatives have placed international reference pricing squarely back on the agenda for U.S. drug pricing policy.  

II. Medicare Part B Reimbursement for Physician-Administered Products

While the administration’s MFN efforts drew the most political attention, a quieter but meaningful shift unfolded through CMS’ CY 2026 Physician Fee Schedule Final Rule (Final Rule), released in October 2025. Under the Final Rule, CMS implemented several technical revisions to Medicare Part B regulations governing bona fide service fees (BFSF) that have the potential to significantly affect drug pricing and market access strategy for physician-administered medicines.

BFSFs are fees that drug manufacturers pay to third parties, such as distributors, for legitimate services. Under existing law, these fees are excluded from a drug’s average sales price (ASP) if the fees “represent fair market value for a bona fide, itemized service actually performed on behalf of the manufacturer that the manufacturer would otherwise perform (or contract for) in the absence of the service arrangement, and that are not passed on in whole or in part to a client or customer of an entity.”

Citing questions from a single manufacturer, CMS tightened the rules around BFSFs in the Final Rule, including in ways that may be potentially susceptible to legal challenge.

As the rule stands today, manufacturers will face more stringent documentation and certification obligations to prove that fees paid to service providers meet the BFSF criteria and are eligible for exclusion from ASP. Two key changes take effect on January 1, 2026:

1. First, manufacturers must obtain a “certification or warranty” from service providers receiving fees under “prospective” or “new” contracts for the manufacturer to classify such fees as BFSFs. The certification or warranty must state that such fees will not be passed on to a client or customer of the entity and be submitted by the manufacturer along with quarterly ASP data, creating a new reliance on third-party attestations and introducing potential friction into contract negotiations.

2. Second, manufacturers must also submit documentation of the methodology used to determine whether fees are consistent with fair market value (FMV). FMV documentation will not be due quarterly, but all FMV determinations for current contracts will be due by April 30, 2026. CMS also stated that “[t]o reduce administrative burden, [CMS] will accept well-detailed summaries of FMV methodologies that clearly describe the data sources, assumptions, and rationale supporting the documentation.”

These requirements, though technical, are burdensome and disruptive to the efficient execution of commonplace commercial arrangements and may reshape how manufacturers structure service arrangements across the pharmaceutical supply chain. They also demonstrate CMS’s willingness to shape pricing outcomes through regulatory mechanisms that indirectly influence ASP rather than through more visible policy levers.

III. Medicare Drug Price Negotiation Program

In a separate development, Congress took its own action to influence drug pricing. As part of the One Big Beautiful Bill Act, lawmakers expanded the scope of the orphan drug exclusion to the Medicare Drug Price Negotiation Program.

The exclusion previously applied only to drugs and biologics with a single orphan indication. But now, the exclusion applies more broadly to drugs and biologics with multiple rare disease indications. Specifically, products with more than one orphan designation and more than one approved indication are excluded from the Medicare Drug Price Negotiation Program if each approved indication is for a rare disease or condition. These changes will apply to Initial Price Applicability Year 2028 and subsequent years. The amendment also favorably clarifies how the negotiation eligibility clock is calculated for products that lose orphan drug exclusion status. 

Although several additional drug pricing bills were introduced in Congress in 2025, including proposals to codify MFN-style policies, none has gained meaningful traction. Their existence, however, underscores continued congressional interest in federal price controls even where legislative consensus remains elusive. 

Drug makers have filed numerous lawsuits challenging the constitutionality of the Drug Price Negotiation Program. These lawsuits have not reached final resolution and will be an area the industry must closely monitor in 2026. 

IV. 340B Drug Pricing Program

The 340B Drug Pricing Program also continued to experience volatility in 2025, driven by unresolved contract pharmacy litigation, the rollout of a new rebate model, and growing political pressure for structural reform. With key lawsuits pending and legislative proposals on the table, stakeholders face ongoing uncertainty about how the 340B program will be administered.

V. What’s Next in 2026

Individually, the foregoing developments would have been notable. Together, they signal that federal drug pricing policy is entering a more complex phase.

In some respects, formal lawmaking and traditional rulemaking have taken a back seat to executive dealmaking, as illustrated by the recent MFN deals. Yet in other respects, executive agencies have signaled a willingness to shape pricing outcomes through technical revisions to longstanding regulatory regimes, such as the BFSF provisions in the CY 2026 Physician Fee Schedule Final Rule. At the same time, Congress has continued to advance its own agenda, including the expansion of the orphan drug exclusion to the Medicare Drug Price Negotiation Program, through traditional lawmaking.

For 2026, we expect the White House to continue to focus on drug pricing and will be closely monitoring for the release of CMMI proposed and final rules. We also expect agency reforms or resolution of litigation that will affect the drug pricing landscape, including closely watching the Drug Price Negotiation Program and 340B lawsuits. We would not be surprised if CMS evaluates the BFSF provisions introduced in Medicare Part B for inclusion in Medicaid price reporting.  And multinational pharma and biotech companies will need to watch EU and UK reforms closely, as detailed here and here.

For manufacturers, this means that pricing, contracting, regulatory planning, and lifecycle planning cannot be managed in commercial isolation. Such planning must be coordinated against a federal landscape that is using diverse levers to influence cost outcomes. Strategic opportunities remain, and as 2026 approaches, the key will be anticipating to the extent possible how these pricing levers and any proposed or potential changes affect development-stage regulatory planning decision. We believe this is the new normal.