On June 30, 2023, CMS issued revised guidance, Medicare Drug Price Negotiation Program: Revised Guidance, Implementation of Sections 1191-1198 of the Social Security Act for Initial Price Applicability Year 2026.

ADVI will provide an in-depth analysis of the guidance with retainer clients in the near term; below is an overview of the topline highlights.

Bona Fide Marketing: Notably, CMS did not meaningfully expand on how the agency will determine if “bona fide marketing” of a generic or biosimilar has occurred, thus exempting the innovator product from negotiation. CMS states it will review PDE and AMP claims data along with the “totality of the circumstances” to determine if bona fide marketing has occurred. The agency did not specify a percentage of generic or biosimilar PDE or AMP claims utilization required as part of a bona fide marketing definition and noted that the determination “will be a holistic inquiry”. This ambiguity makes it unclear whether drugs with low generic or biosimilar competition (e.g., Revlimid, Humira) will be selected for Initial Price Applicability Year (IPAY) 2026.
Note: We are in the process of updating our ADVI Target Drug List Projection (2026 – 2031) based on today’s guidance parameters and the most recent non-public Medicare spending data obtained by our analytics team. Our list includes several scenarios for how CMS may ultimately address the bona fide marketing analysis. Please reach out to your Account Manager for more information.
Therapeutic Alternatives: Regarding how drugs selected for negotiation will be compared to “therapeutic alternatives,” CMS noted the following:
Patient-focused listening sessions will be held, in which members of the public can share input on potential therapeutic alternatives.
For IPAY 2026, CMS will only consider therapeutic alternatives that are drugs, biologics, generics, or biosimilars covered under Medicare Part D or Part B.
For therapeutic alternatives covered under Part B, CMS may use an alternative methodology to calculate the price per 30-day equivalent supply.
Prices of generic and biosimilar therapeutic alternatives will be considered in the range of Part D net prices and/or ASPs to determine an initial offer, if clinically appropriate.
The definition of unmet medical need is revised to align with FDA’s “Guidance for Industry Expedited Programs for Serious Conditions – Drugs and Biologics”, to address drugs with therapeutic alternatives that do not adequately address the condition.
Orphan Drug Exclusion: CMS noted it will only consider active designations and active approvals when evaluating a drug for the Orphan Drug Exclusion; withdrawn designations or approvals will not disqualify a drug from the exclusion. This clarification means orphan designation withdrawals, like Actelion’s March 2023 withdrawal for one of Uptravi’s non-approved indications, are likely to succeed in exclusion from government negotiation.
Cell and gene therapies: CMS maintains its initial approach to identify excluded plasma-derived products. While it confirms that cellular and gene therapies are “not categorically ineligible” for the exclusion, it notes they will be assessed in the same manner as other biological products to verify a product is “derived from human whole blood or plasma”. Given this distinction, it is unlikely that cell or gene therapy products would qualify for the plasma-derived exclusion.
Part D Formulary Placement of Selected Drugs: The revised guidance includes new oversight for Part D plans to ensure adoption/access of Selected Drugs.
CMS will assess instances where Part D sponsors:
place Selected Drugs on non-preferred tiers
place Selected Drugs on higher tiers than non-Selected Drugs in the same class
require stepping through a non-Selected Drug before accessing a Selected Drug
impose more restrictive utilization management (step therapy, prior authorization) for Selected Drugs than non-Selected Drugs
CMS will require Part D sponsors to “provide a reasonable justification” during the annual bid review process to support the plan design that includes any of the above practices.
Combined or Distinct Expenditures: For IPAYs 2028 onward, CMS did not address whether the selection of negotiation-eligible drugs will be based on distinct Part B or Part D expenditures, or combined Part B and Part D expenditures. CMS confirms that the $200 million low-spend exclusion is based on combined Part B and Part D expenditures and specifies that the Small Biotech Exception for IPAY 2026 is based only on total expenditures for Part D only during 2021.
MFP Ceiling Eligibility: CMS clarifies that the ceiling price determination with respect to extended-monopoly or long-monopoly status is based on the amount of time between a drug’s date of approval and the start of the applicable IPAY (for IPAY 2026: January 1, 2026).
Small Biotech Exception: CMS clarifies that a Small Biotech Exception determination for 2026 does not mean the drug will qualify for IPAYs 2027 and 2028. Manufacturers must resubmit requests through a process that will be addressed in future guidance. CMS states it will publish the number of drugs that applied for and received the exception for IPAY 2026 along with the Selected Drug List on September 1, 2023.
Expedited Exit for Non-Participation in CGDP/MDP: The revised guidance includes new language that provides a process for a manufacturer to expedite its departure from the Coverage Gap Discount Program and Manufacturer Discount Program, by automatically granting termination requests. Departing the CGDP/MDP would allow a manufacturer that chooses not to engage in negotiation to avoid excise taxes, as these penalties are suspended when all of a manufacturer’s drugs are no longer covered by such agreements. This revision addresses coercion arguments raised in IRA lawsuits that the nature of the negotiation process is not voluntary due to the untenable penalties and inability to exit in a timely manner.
Comment Process: Though the guidance is referred to as revised versus final, there is no comment opportunity. CMS received more than 7,500 comment letters in response to the March 15 initial guidance, which will be made public in “July 2023”.

ADVI will continue monitoring developments and next steps. This is a delayed release. ADVI Instant content is distributed in real time for retainer clients. Get in touch to learn more about how we can support your commercialization, market access, and policy needs.