On March 15, 2023, CMS released initial guidance detailing the requirements and parameters on key elements of the new Medicare Drug Price Negotiation Program for 2026, which is the first year that negotiated prices will apply under the Inflation Reduction Act of 2022. The Inflation Reduction Act authorizes Medicare to directly negotiate drug prices for certain high expenditure, single source Medicare Part B or Part D drugs, meaning only those drugs for which there is no generic or biosimilar competition. The initial guidance explains how Medicare intends to use its new authority to negotiate with drug companies for lower prices on selected high-cost drugs.

The negotiation process will focus on key questions, including but not limited to, the selected drug’s clinical benefit, the extent to which it fulfills an unmet medical need, and its impact on people who rely on Medicare. In the initial guidance, CMS details the requirements and procedures for implementing the new Medicare Drug Price Negotiation Program for the first set of negotiations, which will occur during 2023 and 2024 and result in prices effective in 2026. Among other things, the initial guidance details how CMS intends to identify selected drugs, consider factors in negotiation, conduct the negotiation process, and establish the requirements for manufacturers of selected drugs.

In particular, the initial guidance describes how CMS intends to implement the Medicare Drug Negotiation Program for initial price applicability year 2026 (January 1, 2026 to December 31, 2026). It also specifies the requirements that will be applicable to manufacturers of Medicare Part D drugs that are selected for negotiation and the procedures that may be applicable to manufacturers of Medicare Part D drugs, Medicare Part D plans (both Prescription Drug Plans (PDPs) and Medicare Advantage Prescription Drug Plans (MA-PDs)), and providers and suppliers (including retail pharmacies) that furnish Medicare Part D drugs.

Key dates for implementation include the following:

• By September 1, 2023, CMS will publish the first 10 Medicare Part D drugs selected for initial price applicability year 2026 under the Medicare Drug Price Negotiation Program.
• The negotiated maximum fair prices for these drugs will be published by September 1, 2024, and prices will be in effect starting January 1, 2026.
• In future years, CMS will select for negotiation up to 15 more Part D drugs for 2027, up to 15 more Part B or Part D drugs for 2028, and up to 20 more Part B or Part D drugs for each year after that, as outlined in the Inflation Reduction Act.

CMS is seeking comment on several key elements in the initial guidance. Comments are due by April 14, 2023. CMS anticipates issuing revised guidance for the first year of negotiation in summer 2023.

Due to timing considerations, CMS is not soliciting comments on certain aspects of the initial guidance, including the identification of selected drugs for initial price applicability year 2026. CMS intends to publish the selected drug list for initial price applicability year 2026 no later than September 1, 2023. The list will include the ten (or all, if such number is less than ten) drugs selected for negotiation for initial price applicability year 2026.

The CMS fact sheet on the Medicare Drug Negotiation Program Initial Guidance is available here, and the full version of the initial guidance is available here.