A disgruntled pharmaceutical industry is reportedly gearing up for legal challenges to the Centers for Medicare & Medicaid Services’ drug price negotiation proposal, per Reuters.
The administration had released initial guidance on the negotiation process in March, which targeted 2026 for the first fiscal year “maximum fair prices” would kick in for up to 10 Medicare Part D drugs. Negotiations over those prices would begin later this year and wrap before fall 2024.
The guidance was accompanied by a call for public comment and was quickly panned by the pharma industry for processes that, among other critiques, restrict drugmakers from discussing the negotiations and scheduled few meetings between the government during price setting (see below).
Citing six unnamed industry sources and yet-to-be-made-public response letters from five drugmakers, the Reuters report outlined the discussion restriction as a likely target for litigation under the First and Eighth Amendments.
Other areas of legal scrutiny could include the swift process by which CMS proposed and finalized its rules and whether the factors that determine whether a drug is eligible for negotiation unlawfully extend the provisions of the Inflation Reduction Act, according to the report.
Additional Part B and Part D drugs would become eligible for negotiation in the years following 2026, CMS said in its initial guidance. The agency plans to finalize the guidance in July, prior to which Reuters’ sources said the drugmakers would likely file their lawsuits.
The pharmaceutical lobby has brought a laundry list of complaints to the Centers for Medicare & Medicaid Services (CMS) regarding its recently proposed plans to begin negotiating Medicare Part D drug prices in 2026 and beyond.
Industry group PhRMA said Friday that the agency's proposed implementation of the Inflation Reduction Act "is in no way a 'negotiation,'" and that "CMS chose to go beyond what was outlined in the statute, taking the most extreme stance to sweep in as many medicines as possible and be as punitive as possible."
CMS released initial guidance on March 15 describing how up to 10 Part D drugs with no generic or biosimilar competition would be subjected to "maximum fair prices," the back-and-forth process CMS would use to determine that pricing threshold and how the process would be expanded to more products in later years (see below). The initial guidance was accompanied by a one-month call for comments from stakeholders and the public.
In 76 pages of comments submitted to the agency, PhRMA critiqued the agency for only allowing a 30-day comment period for such an "unprecedented" change to the Medicare program and suggested that the brief turnaround "falls short of legal requirements, as well as what is widely acknowledged to be a sound policy development process."
Other major points of contention highlighted by the group in comments and accompanying materials included:
- CMS' decision not to solicit stakeholder feedback on certain critical portions of the guidances, including the section covering which medicines and forms will be subject to price setting, the statute’s orphan drug exclusion and the special rule for biosimilars;
- Limited meetings between the agency and the manufacturer during the price-setting process that "cannot occur until the manufacturer's counteroffer has already been submitted;"
- A gag clause on manufacturers to be imposed on manufacturers during the price-setting process;
- CMS' decision to delay the release of its explanation for how prices have been set until months after the price was imposed, which limits industry insights for the following year's negotiations;
- Limited opportunity for patient and provider feedback;
- An inclusion of products that have remaining patents and exclusives that could disincentivize industry innovation;
- An 'extremely broad definition" that subjects a manufacturer's products with the same core molecule or active ingredient into a single price-setting process; and
- Potential negative access to medicines for patients due to market effects resulting from the price setting.
"Rather than take a thoughtful, careful approach in this first year, CMS chose the opposite," PhRMA wrote in a blog post. "Given the stakes for patients, CMS should be taking a more measured approach when implementing the price setting provisions of the [Inflation Reduction Act]."
The Centers for Medicare & Medicaid Services' (CMS') Medicare Drug Price Negotiation Program will kick off in 2026 with “maximum fair prices” for up to 10 Part D drugs with no generic or biosimilar competition, according to initial guidance for the program released by the agency Wednesday.
CMS will then select a max of 15 additional “high expenditure, single source” Part D drugs for negotiation in 2027, followed by up to 15 more Part B or Part D drugs for 2028, according to the initial guidance (PDF). The agency will then add up to 20 new Part B or Part D drugs to the program during each subsequent year, it said.
“President Biden is leading the fight to lower the cost of prescription drugs—and with the Inflation Reduction Act, we’re making historic progress,” Department of Health and Human Services Secretary Xavier Becerra said in a press release. “Through the Medicare Drug Price Negotiation Program, we will make sure seniors get a fair price on Medicare’s costliest prescription drugs, promote competition in the market, and ensure Medicare is strong for beneficiaries today and into the future.”
The release was accompanied by a call for public comment on the initial guidance. CMS said it will consider comments received by April 14 for the release of its revised guidance, which it “anticipates” issuing for the 2026 negotiations sometime this summer.
The Medicare Drug Price Negotiation Program was established as part of the Inflation Reduction Act passed in August 2022.
The first round of negotiations between the government and drugmakers will begin in 2023 and continue into 2024 before negotiated prices go into effect Jan. 1, 2026, according to the initial guidance. Negotiated maximum fair prices for the selected drugs are scheduled to be released Sept. 1, 2024.
CMS’ guidance outlined how it would select the 10 or fewer Part D drugs for 2026. Of note, at least seven years will have to have passed since a drug was approved by the Food and Drug Administration as of Sept. 1, 2023, whereas biological products will have to have been licensed for at least 11 years. Certain orphan drugs, low-spending Medicare drugs and plasma-derived biological products will be excluded, as per the requirements of the Inflation Reduction Act.
When putting together an initial offer to kick off negotiations with manufacturers, CMS said in a fact sheet that it “intends to focus on the clinical benefit that the drug provides to people with Medicare as well as whether the drug addresses an unmet medical need and its impact on specific populations compared to its therapeutic alternatives."
CMS will then hear a counteroffer from manufacturers before issuing a maximum fair price for the drug, The agency said it is seeking feedback on aspects of the offer-counter-offer exchange process—alongside other concerns such as confidentiality terms following an agreement, penalties for violations, dispute resolution processes—during the public comment period.
“Drug price negotiation is a critical piece of how this historic law improves the Medicare program,” CMS Administrator Chiquita Brooks-LaSure said in a press release. “By considering factors such as clinical benefit and unmet medical need, drug price negotiation intends to increase access to innovative treatments for people with Medicare.”
Administration officials said they have been hitting internal timelines regarding the design of, hiring for and implementation of the negotiation program and do not expect any delays in the run-up to 2026. A full timeline of key dates (PDF) is available as part of the new guidance.
The initial guidance is limited to the first year negotiated prices will apply, and as such does not address renegotiation. CMS said it will provide information on program guidance for future years further down the line.
In a speech given Wednesday afternoon, President Joe Biden likened CMS’ upcoming negotiation capabilities to those already granted to the Department of Veterans Affairs. He also painted the program and other drug price control efforts authorized by the Inflation Reduction Act as a long-overdue government victory over the pharmaceutical industry.
“Look, I'm a capitalist, if you want to go out and make a lot of money, go make money. Just pay your fair share,” Biden said. “For real, I have no problem with a company making reasonable profits—but my lord, not on the backs of working families and seniors.”
Biden’s fiscal year 2024 budget proposal included calls for Congress to give Medicare broader negotiating authority so the program could cover more drugs sooner after launch.