On October 2, the U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS) released final guidance outlining the process for the second cycle of negotiations through the Medicare Drug Price Negotiation Program. This guidance provides additional information for manufacturer effectuation of negotiated prices for drugs, which the statute refers to as Maximum Fair Prices (MFPs). Within this guidance, CMS intends to ensure that individuals with Medicare can access drugs at negotiated prices from both cycles in 2026 and 2027.
Final Guidance for the Second Cycle Negotiations Overview
The second cycle of the Medicare Drug Price Negotiation Program aims to build on the first cycle. The first ten negotiated drug prices from the first cycle are expected to save Medicare enrollees approximately $1.5 billion under the standard benefit design, in addition to savings from other provisions in the Inflation Reduction Act, including a new cap on annual out-of-pocket costs for Medicare prescription drug coverage. Some new provisions introduced in the second cycle’s final guidance include (1) the introduction of patient focused roundtables; (2) revisions to the timing of negotiations; (3) additional price and data exchange opportunities; (4) requirements for payment facilitation and reporting; (5) MFP effectuation plan requirements; and (6) an established process for pharmacy self-identification.
Introduction of patient-focused roundtable events
CMS announced that it will host up to 15 patient-focused roundtable events and one town hall meeting to receive feedback from interested parties focused on patient-centered outcomes and clinically-oriented information related to the selected drugs. Through the inclusion of patient-focused feedback, CMS intends to prioritize engagement with all interested parties while also ensuring the process is as transparent and inclusive as possible.
Revisions to timing of negotiations
The final guidance includes revisions to the timing of negotiation meetings between CMS and participating drug companies. Normally, CMS will send an initial offer for each selected drug. This initial offer includes their proposal for the MFP and their justification for that price. Companies have 30 days to respond to the initial offer by accepting the offer or providing a counteroffer. Within this second cycle, the first optional negotiation will now occur after CMS issues the initial offer but prior to the deadline for a drug company to respond to CMS’ initial offer. Up to two additional meetings may occur after the deadline for the drug company’s response. This will allow CMS and the drug company to engage in the negotiation process sooner and at different intervals during the negotiation period.
Additional price and data exchange opportunities
CMS has announced additional opportunities for price negotiations with pharmaceutical companies. Following CMS rejecting a written counteroffer, both parties can now exchange written offers and counteroffers up until one week before the final offers are due. This period is not meant to be used as negotiation, but rather to allow parties to provide their justifications and context surrounding the offers or counteroffers and include rationale for their determinations.
In conjunction with the negotiation framework, CMS’s final guidance includes requirements for data exchange among pharmacies, drug companies, and the agency, facilitated through the Medicare Transaction Facilitator Data Module (MTF DM). This module is intended to streamline the flow of information, ensuring accurate capture and processing of claim-level data for individuals eligible for Medicare-funded programs (MFPs). Additionally, the MTF DM will support the generation of Electronic Remittance Advice (ERA) or paper check remittances for MFP refund payments.
Requirements for payment facilitation and reporting
The final guidance establishes a voluntary payment facilitation system through the MTF Payment Module (MTF PM) for drug companies to manage payments to pharmacies, including a credit/debit ledger system to track MFP refund adjustments. It also outlines the rules for drug companies making payments to pharmacies outside of the MTF PM, including what they need to report and how they should outline their plans to make MFPs available to these pharmacies.
MFP Effectuation Plan Requirements
CMS established the MFP Effectuation Plan as a process for ensuring that manufacturers provide the correct price for a drug to a patient who is eligible for an MFP discount. Within this second cycle, a drug company’s MFP Effectuation must aid pharmacies in managing cash flow issues caused by possible delays in MFP refunds, which are expected to be processed within 14 days.
Established process for pharmacy self-identification
The final guidance establishes a process for pharmacies to self-identify if they expect cashflow concerns at the beginning of the pricing period due to delays in MFP refunds. CMS would provide this information to drug companies to aid them in the development of MFP effectuation plans. Additionally, aspects of the complaint and dispute processes related to MFP effectuation will be revised.
Conclusion
In 2025, many new changes will be implemented as a result of the first cycle of the Medicare Drug Price Negotiation Program, including the $5 cap for each covered insulin product per month’s supply, free recommended adult vaccines in Medicare Part D, and the cap on what people with Medicare pay out-of-pocket for covered prescription drugs. In 2025, we expect to see updates on the second cycle of negotiations, including the list of drugs covered under part D, the list of participating companies, and the beginning of the CMS hosted patient and clinical-focused public engagement sessions.
Sources:
CMS.gov, HHS Releases Final Guidance for Second Cycle of Historic Medicare Drug Price Negotiation Program
CMS.gov, Medicare Drug Price Negotiation Program: Final Guidance
CMS.gov, Fact Sheet: Key Information on the Process for the First Round of Negotiations for the Medicare Drug Price Negotiation Program
KFF.org, FAQs about the Inflation Reduction Act’s Medicare Drug Price Negotiation Programs