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Health Affairs This Week places listeners at the center of health policy’s proverbial water cooler. Join editors from Health Affairs, the leading journal of health policy research, and special guests as they discuss this week’s most pressing health policy news. All in 15 minutes or less.
Hello and welcome to Health Affairs This Week. I'm your host, Jeff Byers. We are recording on 11/04/2025. In late September, CMS published its final guidance for the third cycle of the Medicare drug price negotiation, which would be applicable in 2028. It may have gotten a loss in the news shuffle over the news about Trump Rx and the administration's Pfizer deal.
Jeff Byers:So today on the program, we have Chris Fleming and Rachel Sachs from Washington University in Saint Louis discuss the latest of the drug pricing negotiation program. Chris and Rachel, welcome to the program.
Rachel Sachs:Thank you. Happy to be here.
Chris Fleming:Thanks, Jeff, and and welcome, Rachel. We're happy to have you back again. As Jeff mentioned, today we'll be discussing the Medicare drug price negotiation program and specifically a forefront piece that Rachel authored with Christy Martin of the Camber Collective on the final 2028 guidance for the program. We'll put the link, to the forefront piece in the show notes where you can also find Rachel and Christie's full bio, so I won't read those. But I'll just briefly mention they both served in health policy roles in the Biden administration.
Chris Fleming:Rachel, I'm excited, so let's get right into it. The document, that we just mentioned that was most recently released, on the price negotiation program was the final 2028 guidance. But, actually, as many listeners may know, but many may not, that's just the latest of the three years in the program that CMS is currently overseeing, including 2026 and 2027. Rachel, could you just, to start with, give our listeners a very brief description of what the Medicare drug price negotiation is and then talk about with each of these years, you know, what are the milestones that we can expect to see in the program in the near future?
Rachel Sachs:Of course, the Medicare drug price negotiation program was passed as one of the drug pricing reforms included in the Inflation Reduction Act of 2022 or the IRA. And the IRA did include other reforms including an inflation rebate program in Medicare and a redesign of the Medicare Part D program to increase its generosity for beneficiaries, but we're focusing on the negotiation program here. And what the IRA did was to permit Medicare itself to negotiate each year for certain costly drugs within the Medicare program. This authority is limited in a number of ways. So for example, negotiation is limited to a certain number of drugs each year.
Rachel Sachs:It doesn't apply until a product has been on the market for many years. And it only applies to products that don't have competing small molecule generics or biosimilars that have been FDA approved and marketed. As you know, there's a lot of moving pieces here right now. So this fall, CMS is working simultaneously on three different cycles of the program. For the 2026 cycle of the program, which is the first year for which negotiated prices are supposed to take effect under the statute, the IRA instructs CMS to negotiate the prices of 10 drugs that are covered under Medicare Part D.
Rachel Sachs:The negotiations for those products were completed last year, but CMS has been busy working on effectuating implementation of those negotiated prices for this upcoming January. For the 2027 cycle of the program where the IRA instructs CMS to negotiate the prices of 15 drugs that are covered under Part D, We've just passed the statutorily specified end of the negotiation period and CMS has until the November to publish any negotiated prices. For the 2028 cycle of the program where the IRA instructs CMS to negotiate the prices of 15 drugs that are either covered under Part D or payable under Part B, CMS has recently finalized its policy guidance for that third cycle of the program. That's a lot to do at once, and there's a team of very dedicated civil servants making this all happen.
Chris Fleming:Great. Thanks. So let's let's get right into the, the meat of this guidance that we mentioned that you and Christy address in your forefront article. There are a number of issues that are talked about that are very important. We'll try to get to as many of them as possible.
Chris Fleming:One of them is has to do with these so called combination drugs, drugs that have two or more ingredients. I'm hoping you can talk us through what the concern was with those drugs, how they might have allowed or might still allow drug manufacturers to circumvent the price negotiation process. There's a piece of this that involves HR one, also known as the one big beautiful bill act, how that changed landscape, and what did CMS end up doing with regard to this issue.
Rachel Sachs:We could easily spend the whole episode talking about this issue, so I'm gonna do my best to keep it brief, and I apologize in advance for anything I may oversimplify. So one key question in the operation of the negotiation program is how to define a drug. And the statute tells CMS to use data that is aggregated across dosage forms and strengths of the drug, including new formulations of the drug such as an extended release formulation. This makes sense if you think Congress was worried about something like product topping where the concern is that a manufacturer could reformulate an existing product like as an extended release version to try to reset its period of being excluded from the negotiation program. So CMS has defined the scope of the drug to be selected as all dosage forms and strengths with the same active moiety and the same holder of an NDA or BLA analogously.
Rachel Sachs:So far, CMS has treated fixed combination drugs. These are drugs with two or more active moieties or ingredients as a separate product for the purpose of identifying potential qualifying drugs for the negotiation program. They're not aggregated with a product containing only one of the active moieties. But this term combination drugs isn't referenced in the statute and there are concerns that manufacturers might try to create combination versions of their products to avoid eligibility like with concerns around product topping. One reason CMS may have thought it was important to address this issue in advance of the 2028 cycle of the program was that analysts had projected that both Keytruda and Opdivo would be eligible for a selection.
Rachel Sachs:And those products either have already or are in the process of reformulating into a subcutaneous version with hyaluronidase. This is its own active ingredient that serves to improve the absorption, the dispersion of the other active ingredient. And CMS had specifically requested comment in the draft guidance, which came out in May on whether CMS should change its policies where there's a fixed combination drug, as they said, for which one of the active moieties is not biologically active against the disease states the drug is indicated for. You could think that describes what's going on in the hyaluronidase example. As you noted in July in the reconciliation law, there's a provision that expands the IRA's existing orphan drug exemption.
Rachel Sachs:And that provision delays the selection of Keytruda and Opdivo. So they're not currently expected to be selected for 2028. So in the final guidance, CMS stated that it's not going to change its combination drug policy at this time. There's also less pressure for them to do so. But they did say that they intended to address what they call a program integrity risk and consider it for rulemaking for 2029.
Rachel Sachs:So this may come back. And for people who want more detail on this topic, Stacy Dussetsina, Thomas Huang, I wrote a piece in, JAMA in July about this issue.
Chris Fleming:That was admirably succinct and also explanatory. I'm I'm very impressed. Let me move on to, what hopefully will be a little bit of an easier issue to talk through. The guidance also talked about how CMS should weight the various factors that it considers in determining the appropriate price for a particular drug, and also how precise the agency should be about what weight it would give to each factor. Can you talk about what issues are involved here and, where the guidance came down?
Rachel Sachs:In previous cycles of the program, CMS had employed what it called a qualitative approach to looking at the factors that Congress tells CMS to consider as part of the negotiation program. CMS has said this allows them to consider nuanced differences between drugs. It gives them more flexibility in considering the negotiation factors that wouldn't otherwise be available if they had pre specified the quantitative weights to be given to each of these factors. But CMS has also been criticized by stakeholders who would like the negotiation to be more predictable, more determinate. They want to see this type of pre specified approach to how much each of these factors matters.
Rachel Sachs:So CMS did specifically solicit comments on this emphasis question on whether the agency should put greater weight on some factors rather than others. But ultimately, as it had in the previous cycles of the program, CMS decided to retain its prior policy of this qualitative approach, emphasizing these nuanced differences, this importance of maintaining flexibility.
Chris Fleming:Thanks. And let's move on then to a third issue that the guidance deals with, which is the determining the appropriate price for Part B drugs, which I think we mentioned earlier for the first time will be eligible for selection in 2028. There was a question, I think, with regards to the methodology, whether the information that would be used for determining the prices would omit important information from Medicare Advantage, which, as many listeners will know, now comprises the majority of Medicare enrollees. Can you elaborate on this?
Rachel Sachs:Here, I have to try to avoid getting too far into the weeds again. So as you noted, I'll I'll direct people who would like more detail to our piece describing both the draft and final guidance. And so as we've discussed, the 2028 cycle of the program is the first time it includes negotiation for drugs payable under Part B. So this is CMS' first chance to articulate the policies involved in that expansion. And in the 2026 and 2027 cycles of the program, which were specific to Part D, CMS had used a data source that includes data from both standalone Part D plans and Medicare Advantage prescription drug plans.
Rachel Sachs:In the draft guidance for the 2028 cycle, CMS was proposing to use Part B claims data to identify Part B high spend drugs. And the concern was that the claims data only included data from fee for service Medicare Part B and not data from Medicare Advantage plans. There's potential concerns around distorting the negotiation program as a result. So if you're comparing all expenditures under Part D to roughly half of expenditures under Part B, we're underestimating systematically spending on Part B. And you would also think it wouldn't apply equally to all drugs given differential patterns of use.
Rachel Sachs:So systematically, this would make Part B drugs less likely to be selected. CMS did make a change in the final guidance to account for this. So CMS is now planning to use Medicare Advantage data in calculating the total expenditures. There are some complex operational issues and how they're going to do this. I won't go into those in the interest of time, but they have made this change.
Chris Fleming:Thanks. And also in the interest of time, I'll mention, so our listeners know very briefly, the guidance contains some provisions regarding the treatment of vaccines for influenza and other infectious diseases with regard to price negotiation. It also covers renegotiating prices of drugs where there's been a material change in circumstances. We don't have time to get into them in detail. Rachel, if you wanna mention a sentence or two about one or both of those, feel free.
Chris Fleming:But I also wanted to open it up to you a little bit more. You know, we've talked about some of the specific provisions in the guidance, but you have lived and breathed this stuff. What do you see as the main challenges for the drug price negotiation program going forward? Maybe some that we haven't talked about, and what should CMS be doing to meet those challenges?
Rachel Sachs:As a law professor, I'm very interested in the renegotiation program. It includes a lot of terms that seem to give discretion to the secretary around things like whether there's a material change in a statutory factor, whether the secretary expects a significant change to a negotiated price. For people who are interested, Richard Frank and I have a commentary at Brookings that we posted back in January about some of the legal and operational decisions facing CMS as part of that program. There are a number of challenges that CMS is facing, but some of them are not internal to the IRA itself. And in the interest of time, I'll just note two.
Rachel Sachs:One is that right now there's a lot of pressure on civil servants and government capacity in general. So many people who would be contributing to the function of the negotiation program have been fired or have been given the opportunity to leave the government even if people housed within the Center for Medicare itself have been relatively insulated from some of these reductions in force, a lot of people who support their work have not been and that makes their jobs more difficult. You could imagine a significant loss of agency expertise that not only affects the IRA but also the broader functioning of the Medicare program as a whole. And second, there are questions around the interaction between the IRA and other priorities of this administration. So we're hearing a lot about a push for most favored nation pricing.
Rachel Sachs:In the first Trump administration, we had seen a policy to do that in Part B, although it ultimately wasn't implemented. But now the IRA exists. And so how do the IRA's authorities impact, if at all, efforts by this administration to push forward international reference pricing? Reporters have said that there are two models sitting at OIRA that are mandatory part b and part d international reference pricing models, and so we're waiting to see what those actually include.
Chris Fleming:You know, Rachel, as you mentioned, we could talk about parts or there's so many moving parts, could talk about any one of them for hours on end. But I think that's all the time we have for today. So thank you very much for being with us today.
Rachel Sachs:Thank you. I always enjoy the conversation.
Chris Fleming:Well, before we close, let me once again recommend Rachel and Christy's forefront piece for listeners. It goes into more detail than we could today on all of this. And if you want to read more about the Medicare drug price negotiation and the IRA, we have a whole dedicated web page on the Health Affairs site, iOnTheIRA, featuring content from Health Affairs Journal, Forefront, podcasts, other channels, as well as our stakeholder advisory group, the IRA Observatory. And Jeff, I'll turn it back over to you to close.
Jeff Byers:Chris Fleming, Rachel Sacks, thanks for joining us today on Health Affairs This Week. If you like this episode, send it to the voter in your life. Thanks, and we'll see you next week.