Five things to watch for as the first “maximum fair prices” for select drugs are announced | Manatt, Phelps & Phillips, LLP

The Centers for Medicare & Medicaid Services (CMS) must publish by September 1 the “maximum fair prices” (MFPs) that CMS sets for the first ten drugs subject to the Medicare Drug Price Negotiation Program (Negotiation Program) under the Inflation Reduction Act of 2022. These drugs are the single-source Part D-qualified drugs with the highest Medicare expenditures. The prices set by CMS will not apply to Medicare sales until 2026.

Because President Biden has called the negotiating program a major achievement of his administration, we expect he will make the price announcement a major public event. President Biden and Vice President Harris are scheduled to appear in Maryland on Thursday, August 15, “to discuss the progress they are making in reducing costs for the American people.” Although the White House has not released details, the event could be related to the release of the prices of these drugs.

Here are some key points Manatt will look for each time it releases its prices:

The prices. Of course, prices are the first thing everyone sees. But because CMS doesn't provide context, it will be difficult for the administration to take credit for the price reduction. Because the prices that manufacturers currently negotiate for Part D plans are not public and CMS is not allowed to disclose them, CMS will presumably have to provide other price benchmarks to provide public context for the negotiated prices.

CMS may choose to use list prices for such comparisons because they are the most affordable. It will be worth watching whether CMS cites other benchmarks such as Federal Supply Schedule prices, prices available in other countries, or independent estimates of net prices for the drugs in Part D or on the commercial market. The relationship between the MFPs of drugs with similar therapeutic profiles could be instructive.

Reason. It will be worth watching to see if and how CMS explains the negotiated prices. CMS is not required to publish a rationale for its MFP decisions based on certain statutory factors until March 2025. Although CMS has committed to publishing this public explanation sooner than next March, CMS may publish the MFP without a public explanation and possibly without any explanation at all. If they simply publish the prices without any explanation other than that they were negotiated, they could face criticism from those who believe the prices are too high (or too low).

Effects on the patient. Given the political nature of the timing of these announcements, CMS and the White House will likely want to emphasize the savings that retirees will realize through the negotiation process. However, justifying this may be quite difficult because most of the savings from the negotiation program will only indirectly benefit beneficiaries, whose costs are determined by the cost-sharing design of their Part D plans.

While Part D plans are required to include certain drugs in their drug lists, some members of Congress, the pharmaceutical industry, and patient advocacy groups have expressed concern that CMS has taken limited steps to ensure that patients actually have access to the drugs and do not face adverse tiering or utilization management. These stakeholders, and Part D plans themselves, will be watching to see if CMS announces further monitoring of drug list and utilization management practices for select drugs. What options CMS may have to ensure patient access were addressed in a recent white paper from Manatt Health.

What other shoes could fall. The administration could use the MFPs announcement as a forum to announce or highlight further steps to limit prescription drug costs. For example, CMS still has not issued a final rule to amend the Medicaid Drug Rebate Program, which, as first proposed in May 2023, would include a new drug price verification survey designed to determine the manufacturer's costs of developing, producing and marketing certain high-cost drugs. Some have also urged the administration to change drug prices by using so-called march-in rights under the Bayh-Dole Act, which critics of drug pricing believe empower the government to cap drug prices. The administration issued a draft framework for exercising march-in rights along these lines earlier this year, which has not yet been finalized.

Media and Trump’s reaction. Since the Biden-Harris administration hopes to gain the most political advantage from releasing the MFPs, it will be worth watching the extent to which the media adopts the administration's claims about the program's impact. In addition, it will be interesting to see if and how the Trump campaign responds. It's possible that, particularly if prices are higher than those available in other countries, the Republican campaign will criticize the prices and claim they are doing better. How stakeholders respond to these prices could affect future MFP negotiations (the selection of the next 15 Part D drugs subject to the negotiating program will be announced by February 1, 2025).