CMS used the publication of the Final Guidance to also issue a number of related issuances: a revised template MFP file, a definitions document, and updated Information Collection Request (ICR) forms for data submission for small biotech exception and biosimilar delay requests. CMS is soliciting comment on the updated ICR forms, with comments due on November 1, 2024. CMS plans to release updated ICR forms regarding the negotiation data elements and the drug price negotiation process at a later date, which will be subject to a 30-day comment period.

The Final Guidance clocks in at just over 300 pages, so this alert necessarily focuses on only key policy changes and announcements. The documents relevant to this alert are as follows:

• The IPAY 2027 Final Guidance

• CMS’s fact sheet

• CMS’s press release

• The IPAY 2027 Draft Guidance (Draft Guidance)

• Our alert on the IPAY 2027 Draft Guidance

• The updated ICR forms for data submission for small biotech exception and biosimilar delay requests

• The revised template MFP file and definitions document

Need a refresher on the basics of the Drug Price Negotiation Program? Key documents that may be helpful are as follows:

• The relevant text of the IRA

• Our alerts relating to the legislation

• Our alert on the IPAY 2026 draft guidance and final guidance

MFP Effectuation.

• IPAY 2026 Final Guidance: CMS indicated that manufacturers have discretion to provide access to the MFP either through an up-front discount or through an after-the-fact rebate, but that manufacturers must ensure that dispensing entities are reimbursed for the difference between their acquisition cost and the MFP within 14 days. CMS did not otherwise meaningfully elaborate on access to the MFP in its guidance for IPAY 2026.

• Draft Guidance: CMS laid out in detail in the IPAY 2027 Draft Guidance the proposed function of the MTF in supporting the availability of the MFP. The distinctions between the IPAY 2027 Draft and Final Guidance with respect to each key element of the MTF are outlined below.

• Role of the MTF.

  • Draft Guidance: CMS proposed to contract with an MTF vendor to obtain data from dispensing entities and manufacturers in order to verify that a selected drug was dispensed to an MFP-eligible individual and that access to the MFP was granted. CMS also solicited comment as to whether the MTF should, in addition to data facilitation, support voluntary (for both manufacturers and dispensing entities) “payment facilitation” to effectuate the MFP, either through the MTF facilitating the sharing of banking information to support private transactions between the manufacturer and the dispensing entity or through the MTF passing through the payment of the MFP from the manufacturer to the dispensing entity. CMS stated that, “under no circumstances would federal funds be used to resolve or make payment related to disputes that may arise between parties participating in the MTF, including with respect to nonpayment or insufficient payment by a particular party.”

  • Final Guidance: CMS expanded the role of the MTF to include payment facilitation. The MTF will facilitate the exchange of data between manufacturers and dispensing entities for verifying a given dispensed prescription’s eligibility for the MFP—via the MTF Data Module (MTF DM), enrollment in which will be mandatory for manufacturers and dispensing entities alike (see below discussion regarding Part D plan pharmacy agreement requirements). After considering comments as to whether CMS should also use the MTF as a payment facilitator, CMS determined that the MTF also will offer payment facilitation on a voluntary basis for manufacturers—via the MTF Payment Module (MTF PM). The MTF PM will allow for the pass through of manufacturer funds to dispensing entities to facilitate payment of MFP-based refunds. CMS continued to note that, “under no circumstances will federal funds be used for these transactions or to resolve or make payment related to disputes that may arise between parties when the MTF PM is utilized, including with respect to nonpayment or insufficient payment by a particular party.”

• MFP payment mechanism.

  • Draft Guidance: Manufacturers may provide access to the MFP through one of two options:

    • Prospectively offering the MFP to the dispensing entity (i.e., as an up-front discount), in which case the manufacturer must maintain “[i]nvoice documentation of the drug sold at or below MFP, or an agreement between the Primary Manufacturer and dispensing entity establishing prospective purchasing of the selected drug” as evidence of the discount, which information must be submitted to CMS on request.

    • Retrospectively offering the MFP (i.e., as an after-the-fact rebate/refund), in which case “[i]nvoices from the dispensing entity and proof of successful payment” must be maintained by the manufacturer and submitted to CMS on request. If the rebate/refund is not the Standard Default Refund Amount, described below, due to an alternative payment arrangement between the manufacturer and the dispensing entity, the manufacturer must provide evidence of the dispensing entity’s acquisition cost and proof of successful payment as well.

  • Final Guidance: CMS confirmed that manufacturers may provide access to the MFP prospectively or retrospectively, in the manufacturer’s sole discretion, but revised the proposed policy set forth in the Draft Guidance in light of comments.

    • “In response to concerns that dispensing entities would have to operate at a loss until receiving the MFP refund retrospectively,” CMS established “a process for dispensing entities to self-identify as dispensing entities that anticipate material cashflow challenges because of potential delays created by reliance on retrospective MFP refunds within the 14-day prompt MFP payment window.” CMS added that manufacturers “must include a process for mitigating material cashflow concerns for dispensing entities in their MFP effectuation plans.”

    • Many commenters asked CMS to clarify how it will track and communicate changes to the status of a claim (e.g., reversals or adjustments) after the manufacturer has transmitted the MFP refund within the 14-day payment window. CMS indicated that it “plans to establish a credit/debit ledger system, administered by the MTF for payments passed through the MTF PM” that will allow manufacturers to apply credits from status changes toward future refunds owed to the dispensing entity. For payments not facilitated through the MTF PM, because the manufacturer either does not participate in the MTF PM or agrees with a dispensing entity to effectuate the MFP outside of the MTF PM, the manufacturer “will need to track and apply credits and debits for subsequent reversals or adjustments to claims paid outside of the MTF PM.”

• Manufacturer MTF participation.

  • Draft Guidance: CMS proposed to require that manufacturers of selected drugs register with the MTF so as to verify that the MFP was effectuated in each instance, regardless of whether access to the MFP was facilitated as an up-front discount or an after-the-fact rebate/refund and regardless of whether the manufacturer negotiated an amount other than the Standard Default Refund Amount, described below, or was obligated to offer a lower 340B ceiling price.

  • Final Guidance: CMS finalized mandatory participation in the MTF DM, but the MTF PM is voluntary for manufacturers, provided the manufacturer and the dispensing entity “establish a mutually agreed-upon method for effectuating the MFP outside of the MTF PM.” Manufacturers thus will be able to pass all MFP refund payments through the MTF PM, execute payment entirely outside of it, or engage in some combination of both.

• Dispensing entity MTF participation.

  • Draft Guidance: Data used to validate MFP eligibility would be based on existing prescription drug event (PDE) data and other data elements that dispensing entities could submit voluntarily (for example, the 340B identifier, as discussed below). CMS indicated that participation in the MTF for payment facilitation would also be voluntary for dispensing entities. The agency specifically solicited comment on other ways to engage with dispensing entities to validate data and facilitate payment.

  • Final Guidance: MTF DM participation is mandatory for dispensing entities. CMS stated that it “intends to also propose in a future rulemaking to require Part D plan sponsors to include in their pharmacy agreements provisions requiring dispensing entities to enroll in the MTF DM for purposes of data exchange.” With respect to the MTF PM, and as noted above, CMS indicated that, “[i]f the Primary Manufacturer participates in the MTF PM and transmits MFP refund payments to the MTF PM to be passed through to the dispensing entity, then the MTF PM will pass through the payment to the dispensing entity . . . . However, this does not preclude a dispensing entity from reaching an outside agreement with a Primary Manufacturer participating in the MTF PM for a separate arrangement to pay MFP refunds outside of the MTF PM.”

• Process. At a high level, the MTF data flow process for verifying eligibility for the MFP is as follows:

  • A Part D plan sponsor approves a claim from a dispensing entity based on confirmation of beneficiary enrollment in Medicare Part D and coverage of the drug.

  • The plan sponsor approving the claim submits data to CMS’s Drug Data Processing System (DDPS), which provides a second round of validation.

  • DDPS sends the data to the MTF, which prepares certain claims-level data, described below, to be sent to the manufacturer.

  • The MTF’s transmission of the claims-level data starts the 14-day prompt MFP payment window, described below, with the data transmission day being Day 0.

  • If the manufacturer enrolls in the MTF PM, the manufacturer pays the MFP and submits payment-related data to the MTF DM and MTF PM within the 14-day prompt MFP payment window.

  • If the manufacturer does not enroll in the MTF PM, or for payments effectuated outside of the PM, the manufacturer submits the payment-related data to the MTF DM and pays the dispensing entity directly in accordance with its voluntary agreement with that entity.

• Data requirements.

  • Draft Guidance:

    • The MTF would provide the manufacturer with certain claims-level data to support verification of a claim as MFP-eligible, including, but not limited to, the Medicare source of coverage (Part B or Part D); date of service; identifier for the service provider; a 340B identifier (if voluntarily provided by the dispensing entity); days supply; the wholesale acquisition cost (WAC) and the MFP at the time of dispensing; and the Standard Default Refund Amount, described below.

    • The MTF would collect certain payment-related data from the manufacturer to confirm the MFP payment was made, including the refund transaction date; confirmation that access to the MFP was given to the dispensing entity (using a payment element code, supported by evidence to be maintained by the manufacturer and submitted to CMS on request); method for determining how access to the MFP was given (i.e., up-front discount or after-the-fact rebate/refund); National Provider Identifier (NPI) for the dispensing entity; quantity of the selected drug at issue; and amount of payment sent. Where applicable, manufacturers must maintain documentation supporting why the manufacturer did not give access to the MFP, as when the manufacturer instead provided a lower 340B ceiling price.

  • Final Guidance: The finalized list of data elements to be collected in the MTF DM includes most elements proposed in the Draft Guidance, with some variations to account for the addition of the MTF PM and other changes outlined herein, and a few additional elements. CMS “agrees with commenters that limited additional information to support a Primary Manufacturer with identifying 340B-eligble claims is necessary” and thus CMS believes that two additional elements—prescriber ID and prescriber ID qualifier—could be useful to a manufacturer “when identifying whether a prescription was written by a prescriber with a high percentage of claims originating from a 340B covered entity.” The final list of data elements also includes “Service Provider Payment Method Preference” to support the MTF PM.

• The 14-day MFP prompt payment window.

  • Draft Guidance: The 14-day MFP prompt payment window in which the manufacturer must pay the MFP rebate/refund would start with the MTF sending/the manufacturer receiving the claims-level data supporting the eligibility of the transaction for the MFP. (CMS was inconsistent in specifying whether this window would begin when the MTF sends the data or when the manufacturer receives them.) Manufacturers would be required to send payment data to the MTF within that window to demonstrate that access to the MFP was provided.

  • Final Guidance: CMS finalized the 14-day MFP prompt payment window and clarified that it starts with the transmission of the claims-level data by the MTF to the manufacturer and ends with the transmission of the payment information by the manufacturer to the MTF DM. CMS finalized such window despite comments stating that the 14 days does not provide “enough time for manufacturers to process claims accurately and to thoroughly ensure compliance.” CMS revised the proposed policy set forth in the Draft Guidance to clarify that the 14-day MFP prompt payment window “begins when the MTF DM sends the claim-level data elements,” not when the manufacturer receives them. And CMS further specified that a manufacturer “must transmit . . . an MFP refund amount within 14 days, as opposed to ensuring the dispensing entity has received the MFP reimbursement within 14 days, in order to comply with the 14-day prompt MFP payment window.” CMS stated that this clarification “provides for greater consistency with the Part D prompt pay rules” and “should provide interested parties and CMS with a clear standard” for monitoring whether manufacturers “have made the MFP available on a timely basis.” Where the MFP payment amount is made available prospectively or outside of the MTF PM, the manufacturer is still expected to submit claim-level payment elements to the MTF DM within the 14-day prompt MFP payment window. Finally, CMS discussed the current 30-day window for plans to submit PDE records. Because 80% of PDE records are currently submitted within seven days, CMS intends to undertake a future rulemaking to propose shortening the current 30-day window to seven days “to ensure dispensing entities receive timely payment of MFP refunds.”

• MFP payment amount.

  • Draft Guidance: CMS proposed to calculate a “Standard Default Refund Amount” equal to the difference between the WAC and the MFP on the date of dispensing and sought comment on that proposal. CMS maintained that it would remain the manufacturer’s responsibility to “choose to refund an amount different than the Standard Default Refund Amount if the Primary Manufacturer determines some other amount is appropriate to make the MFP available . . . .”

  • Final Guidance: CMS finalized its proposal to calculate a Standard Default Refund Amount using WAC. CMS determined that “the MTF DM will provide the Primary Manufacturer with the [Standard Default Refund Amount] (i.e., WAC per unit on the date of service of the Part D claim minus MFP per unit on the date of service of the Part D claim, then multiplied by quantity dispensed) as part of the transmitted claim-level data elements.” But CMS reiterated that it will remain the manufacturer’s responsibility to “choose to refund an amount different than the [Standard Default Refund Amount] if the Primary Manufacturer determines some other amount is appropriate to make the MFP available.” CMS will “make available to dispensing entities an Electronic Remittance Advice that uses the X12 835 standard adopted under HIPAA (ERA) (for electronic payments) or a remittance (for payment made by paper check) for all MFP refund payments by a Primary Manufacturer that are passed through the MTF PM.”

• Manufacturer MFP effectuation plans.

  • Draft Guidance: Consistent with the IPAY 2026 Final Guidance, CMS indicated it would require manufacturers to submit, in writing, details of its plan to effectuate the MFP. CMS indicated that these plans would be due June 1, 2025, for IPAY 2026, and June 1, 2026, for IPAY 2027, and would be made public.

  • Final Guidance: CMS moved the plan submission deadline to September 1, 2025, for IPAY 2026 and September 1, 2026, for IPAY 2027, and will no longer make those plans public. Instead of publishing manufacturer effectuation plans on the IRA website, redacted versions of the plans will be accessible to dispensing entities through the MTF DM. CMS also “explain[ed] the contents of a forthcoming [ICR] that will establish a standardized form for [manufacturers] to use to satisfy the requirements [of the written effectuation plan].”

• Disputes.

  • Draft Guidance: CMS indicated that it would “establish a centralized intake system . . . intended to address complaints and disputes related to MFP availability and MTF functionality.” The system would contain two “tracks,” one for disputes initiated by manufacturers or dispensing entities, and one for complaints, which would be available to the public as well as manufacturers and dispensing entities.

    • Disputes. CMS would consider a dispute to be a “specific, identifiable challenge to a technical aspect of the MTF system and process.” For example, if a manufacturer or dispensing entity were to believe there is an error in the data, it could initiate the dispute resolution process laid out in the proposed guidance. When making a report, the disputing party would need to submit evidence supporting its position, which CMS would consider along with any other relevant information before issuing a non-appealable finding. CMS did not explicitly address whether initiating a dispute would halt the running of the 14-day prompt MFP payment window (and thus the manufacturer’s obligation to provide access to the MFP). CMS noted it was considering, and specifically solicited comment on, how to address MFP claims adjustments and reversals.

    • Complaints. CMS would consider a complaint as any issue brought forward by an individual or entity that does not fall under the definition of a dispute, including “reports that MFP was not made available.” Complaints would not necessarily trigger a specific resolution but would be reviewed by CMS and could warrant an investigation. In reviewing complaints, CMS may request additional information, including requesting that a manufacturer provide documentation of its attempts to make the MFP available. If the manufacturer provides documentation showing it made good faith attempts to make the MFP available, but the transaction could not be completed (e.g., because the dispensing entity provided inaccurate or out-of-date bank information), CMS could “take evidence of good faith into account when completing the investigation and deciding whether to pursue an enforcement action.” If CMS were to determine that a manufacturer failed to make the MFP available, the manufacturer would have an opportunity to take corrective action to make the MFP available.

  • Final Guidance: CMS finalized the complaint and dispute process largely as proposed, but with key clarifications. CMS clarified that “[t]he 14-day prompt MFP payment window will not be tolled for a claim in dispute.” Instead, resolution of a dispute leading to a reversal or adjustment of the MFP refund will be addressed through the MTF PM credit/debit ledger system where the manufacturer is enrolled in the PM, and, where that is not the case, by a method agreed upon by the manufacturer and the dispensing entity. CMS also specified that complaints and disputes related to MFP availability and MTF functionality must be submitted no later than 120 calendar days from the date of the subject of the complaint or dispute. CMS stated that it encourages dispensing entities and manufacturers to work together in good faith to resolve any issues regarding MFP availability before utilizing the established complaint process, and noted that “[d]ocumentation of efforts to resolve complaints should be submitted when a complaint is filed.” CMS indicated its intent to provide additional information regarding the disputes and complaints process and to make process improvements in its implementation.

Nonduplication of the MFP and the 340B ceiling price.

• IPAY 2026 Final Guidance: By statute, manufacturers need offer only the lesser of the MFP or the 340B ceiling price to 340B covered entities, not both. In the IPAY 2026 Final Guidance, CMS recognized this requirement and stated it would work with the Health Resources and Services Administration (HRSA) to ensure the MFP is made available where appropriate in a nonduplicated amount to the 340B ceiling price.

• Draft Guidance: The 2027 Draft Guidance reiterated that CMS would not assume responsibility for “deduplicating” the MFP and 340B ceiling price and instead indicated that it would be the manufacturer’s responsibility to resolve any MFP-340B duplication outside of the MTF process.

  • CMS proposed that it would provide “a process to identify applicable 340B-eligible claims through the reporting of payment elements to the MTF,” referring to the process through which the MTF would provide a 340B identifier to the manufacturer (if voluntarily supplied by the dispensing entity) and manufacturers could identify 340B claims to the MTF, as necessary, to support why the manufacturer did not pay the MFP. Under this process, manufacturers would be required maintain, “[a]t a minimum, either records from the Primary Manufacturer’s process for deduplicating 340B claims and the conclusion reached for the claim, or confirmation from a 340B covered entity, or any vendor the 340B covered entity employs to determine 340B status, that the claim was processed as 340B eligible” and evidence that the 340B ceiling price was less than the MFP.

  • CMS expressly stated that it “is not charged with verifying or otherwise reviewing whether a particular drug claim is a 340B-eligible claim.” It indicated that it would coordinate with HRSA, as necessary, to facilitate compliance with the nonduplication requirement as between the MFP and the 340B ceiling price but otherwise would assume no responsibility for nonduplication of the MFP and 340B ceiling price.

• Final Guidance: CMS largely finalized the Draft Guidance as proposed with a few clarifications regarding MFP-340B nonduplication.

  • CMS reiterated that it “will not, at this time, assume responsibility for such 340B ceiling price and MFP nonduplication functions, whether through a ‘clearinghouse’ or through other means, but will monitor this approach and will continue to explore the feasibility of incorporating 340B-related transactional data from 340B covered entities or their TPAs identifying claims eligible under section 1193(d)(1) of the Act into MTF processes in the future.”

  • As to the MTF’s 340B indicator (if voluntarily supplied by the dispensing entity), CMS clarified that inclusion of the data element “does not represent or imply that CMS verified the 340B status of the claim nor that dispensing entities are required to include this code on claim submissions.” CMS declined requests by some commenters to require that dispensing entities utilize a 340B claims modifier.

  • CMS clarified that the NPI (whether a prescriber NPI or a hospital/provider NPI) generally does not constitute sufficient evidence that a drug is 340B-eligible because “not all individuals served by covered entities are necessarily eligible to receive a drug purchased at the 340B ceiling price.”
  • A manufacturer must have “documented evidence that the 340B ceiling price is lower than the MFP and that the claim for the selected drug is 340B eligible” in order to support a “reasonable belief” that the MFP claim for the selected drug is subject to the nonduplication exception and therefore not eligible for the MFP. CMS stated that “an NPI alone . . . generally will not constitute sufficient evidence that a claim was 340B-eligible.” CMS intends to audit such nonduplication exception requests, and manufacturers must maintain such documentation to share with CMS.
  • CMS also clarified that manufacturers may utilize the credit/debit ledger system that CMS intends to establish to reconcile issues involving MFP-340B duplication.

What drugs are eligible for selection for negotiation?

• Qualifying single source drug.

  • Draft Guidance: Consistent with the IPAY 2026 Final Guidance, CMS proposed to retain the qualifying single source drug (QSSD) definition it previously established: a Food and Drug Administration (FDA)-approved drug/biological product for which at least 7/11 years have elapsed since approval/licensure and for which there is no generic/biosimilar product on the market, inclusive of all dosage forms and strengths with the same active moiety/ingredient and the same New Drug Application (NDA)/Biologics License Application (BLA) holder. CMS clarified, however, that it would investigate products with different trade names marketed under different NDAs/BLAs containing the same active moiety/active ingredient for purposes of identifying potential QSSDs. CMS stated that “if a drug is a fixed combination drug with two or more active moieties / active ingredients, the distinct combination of active moieties / active ingredients will be considered as one active moiety / active ingredient for the purpose of identifying potential qualifying single source drugs.”

  • Final Guidance: No significant changes, but CMS did clarify the sources (e.g., RxNorm, OpenFDA, FDALabel, FDA’s Active Ingredient-Active Moiety Relationship/Basis of Strength file) it will use to identify the active moiety/active ingredient of a product when identifying potential QSSDs, including FDA by consultation as appropriate.

• Exclusions from QSSD and negotiation-eligible drug definitions.

  • Draft Guidance: CMS proposed some clarifications to the standards for implementing the statutory exclusions from the definitions of QSSD and negotiation-eligible drug that it had adopted in the IPAY 2026 Final Guidance.

    • As to low Medicare spend drugs, CMS proposed to clarify that, for a single source drug or biological product assigned a shared billing and payment code, CMS would apportion the amount of spending specific to a selected drug under that code toward the low Medicare spend drug threshold based on the proportion of the selected drug’s average sales price volume data relative to those of other drugs in the code.
    • As to small biotech drugs, manufacturers would be required to submit a small biotech drug exception request by mid-December 2024, to be eligible for consideration for the exclusion for IPAY 2027. CMS also proposed to clarify that it “will publish the number of drugs that applied for and received the [small biotech exception] for initial price applicability year 2026 as part of publishing the selected drug list on February 1, 2025.”

  • Final Guidance: No significant changes, but CMS did provide a few clarifications.

    • As to low Medicare spend drugs, CMS clarified that it will exclude PDE data for drugs with a compound code when calculating Medicare spend, consistent with CMS’s new exclusion of selected drugs billed as compounds from MFP effectuation.

    • As to small biotech drugs, CMS confirmed that the deadline for submission will be mid-December 2024, and anticipates providing a 30-day submission period. CMS released the Small Biotech Exception and Biosimilar Delay initial ICR on July 2, 2024.

Biosimilar delay provision.

• Draft Guidance: In the IPAY 2026 Final Guidance, CMS set forth the process for delaying, by one (Initial Delay Request) or two (Additional Delay Request) years, selection for negotiation of a biologic that would otherwise be selected, where:

  1. The biologic would have been an extended-monopoly drug if selected,

  2. The delay is requested by a biosimilar manufacturer,

  3. The biosimilar manufacturer submits certain specified information,

  4. CMS determines that there is a high likelihood that the biosimilar will be licensed and marketed within two years of what otherwise would be the selected drug publication date, and

  5. Certain disqualifying circumstances are not present.

In the Draft Guidance, CMS solicited comment regarding the types of documentation that may constitute “clear and convincing evidence” that the manufacturer has satisfied the high likelihood standard. CMS also solicited comment on the date by which CMS should inform the biosimilar manufacturer of a successful Initial Delay Request. CMS noted that it was considering making Initial Delay Request determinations for IPAY 2027 by late 2025 to allow for sufficient notice to the biosimilar manufacturer prior to publication of the selected drug list for IPAY 2028.

• Final Guidance: No significant changes , except for the extension of the bona fide marketing standard to whether a biosimilar is timely marketed. CMS noted that, “for purposes of its review of marketing in the context of the Biosimilar Delay CMS will consider whether the totality of the circumstances . . . demonstrates a high likelihood that the Biosimilar Manufacturer will engage in bona fide marketing of that biosimilar.” CMS also provided that it will look to decisions by the United States Patent and Trademark Office’s Patent Trial and Appeal Board for the patent-related component of the high likelihood determination. CMS will notify a manufacturer of a successful Initial Delay Request by November 5, 2025.

What about the bona fide marketing standard?

• Draft Guidance: Consistent with the IPAY 2026 Final Guidance, CMS reiterated that a drug/biological product may not be selected for negotiation where a generic/biosimilar product was “marketed” by the selected drug publication date or during the negotiation period. For purposes of determining when a product was “marketed,” CMS proposed to continue applying the “bona fide marketing” standard it established for IPAY 2026 under which it considers a drug to be marketed when the totality of the circumstances, including Medicare Part D PDE data and average manufacturer price data for a specified 12-month period, establish that the drug is the subject of “bona fide marketing.”
• Final Guidance: No significant changes, but CMS clarified in response to comments that “[a] generic drug or biosimilar approved for fewer than all of the FDA-approved indications as the listed drug or reference product may be considered marketed for purposes of the Negotiation Program.” (See also the discussion above regarding the application of the bona fide marketing standard to the biosimilar delay provision.)

What about compound drugs?

• Draft Guidance: The Draft Guidance did not speak to compounded drugs, specifically.
• Final Guidance: Compounded drugs are excluded (for now). CMS stated that “for operational reasons at this time for 2026 and 2027, MFP refunds will not be required for PDE records for selected drugs that were billed as compounds.” CMS made conforming changes to several sections of the Final Guidance to effectuate this change, but noted that “CMS is exploring operational changes to the PDE record layout that would provide CMS with visibility into data on the quantity dispensed for a selected drug when that selected drug is billed as a compound, at which point such PDE record may be used to allow for inclusion in the claim-level data elements that are included in the file transmittal.”

How will drugs be selected for negotiation?

• Draft Guidance: Consistent with the statute, CMS would identify the 50 qualifying QSSDs with the highest total Part D expenditures over a specified 12-month period using PDE data. CMS would then rank these drugs, highest to lowest, and, for IPAY 2027, select the 15 highest ranked drugs on this list for negotiation, unless removed from the list on account of a delay in the selection of a biological product for negotiation.

• Final Guidance: No significant changes, but CMS clarified that, to align with its exclusion of selected drugs billed as compounds from MFP effectuation, it will exclude any PDE data with a compound code indicating the PDE record is for a compounded drug, in identifying the 50 qualifying QSSDs.

How will the negotiated price be set?

• Negotiation of a single MFP.

  • Draft Guidance: Consistent with the IPAY 2026 Final Guidance, CMS reiterated that it would negotiate a single MFP, subject to a single MFP ceiling, across all dosage forms and strengths of the selected drug and based on a 30-day equivalent supply.

  • Final Guidance: No significant changes, but CMS clarified that, to align with its exclusion of selected drugs billed as compounds from MFP effectuation, it will exclude any PDE data with a compound code indicating the PDE record is for a compounded drug, in negotiating the MFP.

• MFP ceiling.

  • Draft Guidance: Consistent with the IPAY 2026 Final Guidance, CMS reiterated that the MFP must be capped at the lower of a specified percentage of an applicable average non-federal average manufacturer price (non-FAMP) or an amount reflecting the sum of the enrollment-weighted Part D negotiated prices. In the IPAY 2027 Draft Guidance, CMS largely retained its prior policies with respect to the MFP ceiling, except to address the statutory requirement that, for the first time, two different average non-FAMP figures would be considered when setting the MFP ceiling, among other technical changes.

    • With respect to the calculation of the specified percentage of average non-FAMP, and consistent with the statute, starting with IPAY 2027, CMS would calculate the specified percentage, as described above, of each of two average non-FAMPs: the inflation-adjusted average non-FAMP for 2021 (or the first full year following market entry if a 2021 average non-FAMP is not available) and the average non-FAMP for the year prior to the selected drug publication date, which, for IPAY 2027, is 2024. CMS would then choose as the MFP ceiling the lowest of the two average non-FAMP figures and the sum of the plan-specific enrollment weighted amounts.

      • CMS would use only National Drug Codes (NDC)-11s for purposes of these average non-FAMP calculations, not including NDC-11s for samples, for which there are non-FAMP data in at least one calendar quarter in 2021 or 2024 respectively and for which CMS observes PDE days’ supply and quantity dispensed during 2021 or 2024 respectively.

    • With respect to calculating the sum of the plan-specific enrollment weighted amounts, CMS would use only NDC-11s of the Primary Manufacturer (or marketed by a Secondary Manufacturer), not including NDC-11s associated with samples, that show up in a PDE record that is considered final action at more than $0 for a covered Part D drug and for which CMS observes Direct and Indirect Remuneration (DIR) amounts for calendar year 2023.

  • Final Guidance: No significant changes, but CMS further clarified that the PDE records it would use to calculate the MFP ceiling would not include those identified as compounded drugs.

• Manufacturer-submitted information.

  • Draft Guidance: By statute, and consistent with the IPAY 2026 Final Guidance, CMS is required to consider certain information submitted by the manufacturer in negotiating the MFP, including information regarding research and development costs; production and distribution costs; federal financial support for discovery and development; pending and approved patents, FDA exclusivities, and FDA applications; and market, revenue, and sales volume data. CMS proposed to clarify that manufacturers are obligated to “timely report certain updates to data submissions.”

    • Specifically, manufacturers must submit updates if “the data was restated due to requirements of the government entity that initially receives and oversees processing of such data” (e.g., revisions to the “best price” reported for purposes of the Medicaid Drug Rebate Program).

    • CMS also stated that updates must be “timely” submitted to CMS via the IRA Mailbox but did not specify a deadline. CMS did not address whether there would be penalties for noncompliance with the expectation to submit these updates.

  • Final Guidance: No significant changes, confirming that manufacturers must report the required data and provide timely updates to their submissions, including for restatement of applicable government pricing data. CMS did not provide a specific deadline or address penalties for noncompliance but stated that it will “provide a method and process for submission of these updates via the CMS [Health Plan Management System (HPMS)] at such time” a manufacturer notifies CMS of an update.

• Initial offer: identification and pricing of therapeutic alternatives.

  • Draft Guidance: The IPAY 2026 Final Guidance addressed the evidence regarding alternative treatments to be collected. And, in identifying the prices of identified therapeutic alternatives to use as the basis for the initial offer, CMS indicated that it starts with “the Part D net price for the therapeutic alternative(s) that is covered under Part D and/or the Average Sales Price (ASP) for the therapeutic alternative(s) that is covered under Part B.” For IPAY 2027, CMS proposed to elaborate on the process for developing initial offer and signaled that there may be proposed changes to the questions related to evidence about therapeutic alternatives in the then-forthcoming proposed Negotiation Data Elements ICR for IPAY 2027.

    • CMS indicated that, in identifying the prices of therapeutic alternatives for purposes of developing the initial offer, it would use “the lower of Part D total gross covered drug cost (TGCDC) net of DIR and [Coverage Gap Discount Program (CGDP)] payments . . . for the therapeutic alternative(s), and/or the Average Sales Price (ASP) for the therapeutic alternative(s) that is covered under Part B, or the MFP for initial price applicability year 2026 selected drugs that are therapeutic alternatives to determine a starting point for developing an initial offer . . . .” (emphasis added).

    • CMS noted that, in the then-forthcoming proposed ICR, it may propose to group certain questions together within certain categories—manufacturer input, patient or caregiver experience, clinical experience, and health research—to improve the data collection process.
    • CMS specifically solicited comment on how to improve patient-focused listening sessions as part of the negotiation process and the number and format of manufacturer opportunities to engage with CMS (which CMS considered reducing given the increased number of drugs to be selected for IPAY 2027).

  • Final Guidance: CMS largely adopted the changes to this section of the IPAY 2027 Guidance as proposed, including the revised calculation of the Part D net price.

    • “CMS acknowledges that a Primary Manufacturer may benefit from having access to the [evidence about alternative treatments] data submitted by other interested parties during the negotiation period. . . . CMS will aim to share redacted . . . data with the Primary Manufacturer of a selected drug during the negotiation process when feasible.”

    • With respect to patient-focused listening sessions for IPAY 2027, “CMS intends to host up to 15 patient-focused roundtable events, which will be open to patients, patient advocacy organizations, and caregivers and will allow for discussion among speakers” and “will aggregate selected drugs by condition when appropriate” in addition to holding a town hall for all selected drugs.
    • The Negotiation Data Elements and Drug Price Negotiation Process Initial ICR was published in the Federal Register on July 2, 2024, with the full text of the proposed ICR here. The comment period closed on September 3, 2024, but CMS has announced that it plans to issue an updated ICR for a second 30-day comment period.

In addition to the requirement to provide access to the MFP, what will happen after the MFP is set?

• Publication of the MFP.

  • Draft Guidance: CMS reiterated its prior guidance concerning MFP publication to the effect that the MFP and explanation of the MFP are to be published on the CMS website by the applicable statutory deadlines. CMS clarified that the published explanation “[is to] contain the single MFP for a 30-day equivalent supply of the selected drug, the NDC-9 per unit price, and NDC-11 per package price and will be updated annually to show the inflation-adjusted MFP for the selected drug.” The explanation is to include, subject to the confidentiality policy, “any data or circumstances that may be unique to the selected drug” and “redacted information regarding . . . data received, exchange of offers and counteroffers, and the negotiation meetings, if applicable.” CMS requested comment on the file layout to be posted on its website.

  • Final Guidance: No significant changes, except that CMS revised the number of rounded decimal places in the file layout to publish the NDC-9 per unit price to the sixth decimal place, aligning with how CMS publishes other prices.

• Application of the MFP.

  • Draft Guidance: As with the IPAY 2026 Final Guidance, CMS indicated that it would cap the single MFP per 30-day equivalent supply only at the drug level, which would then be converted into an as-applied MFP at the unit or package level. CMS proposed to clarify that it would calculate the as-applied MFP only for a drug with a non-zero WAC in a calendar quarter in 2024. Drugs for which CMS does not calculate the as-applied MFP would be treated as new NDCs. CMS also proposed to reduce the number of days a manufacturer has to submit a suggestion of error for calculating the MFP ceiling or as-applied MFP from 30 to 21 days.

  • Final Guidance: CMS finalized these proposals and added some additional details:

    • CMS clarified that, as feasible, it intends to provide manufacturers with information on certain CMS calculations during and after the negotiation period, including updates to its computation for applying a single MFP across dosage forms and strengths of the selected drug on account of new NDCs.

    • Additionally, “CMS intends to address, in future guidance, how the MFP application could be adjusted by updating the quotient of total quantity dispensed to 30-day equivalent supply based on observed PDE data for existing NDCs that lacked sufficient WAC or PDE data in [CY] 2024 to be included in the initial calculation of WAC ratios, and new NDCs launched after the initial calculation of WAC ratios.”

What is the timeline for the IPAY 2027 negotiation process?

The IPAY 2027 timeline largely mirrors that of IPAY 2026, except that the statutory period between the deadline for execution of the negotiation agreement and the end of the negotiation period is one month shorter than that for IPAY 2026, causing certain phases of the process to be marginally shorter. The timeline described in the Final Guidance is largely consistent with that in the Draft Guidance and is outlined in the Fact Sheet. That said, there are a few notable changes to the timeline from the IPAY 2026 timeline and from the Draft Guidance:

• More patient-focused listening sessions. CMS is allowing up to 15 patient-focused roundtable events that will aggregate selected drugs by conditions. The roundtable events will not be open to the public, but CMS will make public the transcript after all of the events have ended, with individual identifiable information redacted. CMS previously did not indicate how many patient-focused events it would hold. CMS will also hold one clinically oriented town hall meeting for clinicians and other interested parties, such as researchers, manufacturers, and members of the public.
• Timeline for manufacturer meetings with CMS. CMS stated that it will provide the first optional negotiation meeting between CMS and the manufacturer after the initial offer is issued and before the deadline for manufacturers to submit their written counteroffers. If CMS rejects a manufacturer’s counteroffer, CMS will offer up to two more optional negotiation meetings.
• Additional opportunities to exchange written offers. CMS is permitting manufacturers and the agency to “initiate additional, written offers and counteroffers via the CMS HPMS during the period between CMS’ rejection of the Primary Manufacturer’s statutory written counteroffer, if applicable, and the parties reaching an agreement on the MFP, or one week before final offers are due to be sent by CMS (October 15, 2025), whichever is earlier.” CMS adds that only one offer or counteroffer per selected drug may be active at a time in the CMS HPMS.

But wait, there’s more!

• Enforcement and termination of the negotiation agreement.

  • Draft Guidance: The statute subjects manufacturers to significant civil monetary penalties for:

    • Failing to offer the MFP with respect to a Medicare beneficiary.

    • Violating the terms of the negotiation agreement, including the requirement to timely submit the requisite information to CMS.

    • Knowingly providing false information with respect to certain aggregation rules concerning the small biotech exception and the biosimilar delay provisions. CMS defines “knowingly” as when a manufacturer “(1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information. No proof of specific intent to defraud is required.”

CMS proposed to add a “Failure to meet the MTF reporting requirements.”

• • Final Guidance: CMS finalized the addition of “Failure to meet the MTF reporting requirements” as a substantive violation and also added “failure to enroll in the MTF DM” and “Failure to submit a plan for making the MFP available.”

• Part D plan requirements.

  • Draft Guidance: By statute, and consistent with the IPAY 2026 Final Guidance, Part D plans are required to include selected drugs on their formularies. CMS reiterated its previous guidance that it would implement a formulary review process “to assess: (1) any instances where Part D sponsors place selected drugs on non-preferred tiers, (2) any instances where a selected drug is placed on a higher tier than non-selected drugs in the same class, (3) any instances where Part D sponsors require utilization of an alternative brand drug prior to a selected drug with an MFP (i.e., step therapy), or (4) any instances where Part D sponsors impose more restrictive utilization management (i.e., step therapy and/or prior authorization) for a selected drug compared to a non-selected drug in the same class.” CMS also signaled that changes may be coming once it has information on Part D plan formularies for 2025.

  • Final Guidance: No significant changes, but CMS will continue to monitor for compliance by Part D plans. CMS acknowledged in response to comments “that sponsors could also be incentivized in certain circumstances to steer Part D beneficiaries away from non-selected drugs in favor of selected drugs.” CMS noted that, if it identifies that Part D sponsors are not providing beneficiaries with meaningful access to selected drugs, CMS may consider new requirements for future contract years.

• Reasonable assumptions.

  • Draft Guidance: In the IPAY 2026 Final Guidance, CMS declined to permit manufacturers to use reasonable assumptions. In the Draft Guidance, CMS did not discuss reasonable assumptions.

  • Final Guidance: CMS reiterated that it will not permit the use or submission of reasonable assumptions except where the use of assumptions is explicitly indicated in the Negotiation Data Elements and Drug Price Negotiation Process ICR (e.g., to explain the methodology used to calculate certain costs reported to CMS).

What’s next?

We may learn more about CMS’s intentions regarding data submission for IPAY 2027 when CMS publishes the updated ICR forms with respect to that process in the coming months. Any manufacturer that anticipates selection of a drug/biological product for negotiation for IPAY 2027 or a future year should carefully review the Final Guidance to consider its impact on any such product.

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We will monitor the implementation of the Final Guidance, and any additional guidance CMS issues with respect to the Drug Price Negotiation Program. As always, it is important that you carefully review all such guidance to identify issues relevant to your organization.

Authored by Alice Valder Curran, Ken Choe, Melissa Bianchi, Joy Sturm, Allison Pugsley, Kathleen Peterson, Samantha Marshall, Lindsey Johnson, Mahmud Brifkani, Katie Kramer, Rianna Modi, and Caroline Farrington.