Pharmacy benefit managers (PBMs) administer prescription drug benefits for over 275 million Americans, supporting a variety of plan sponsors including commercial health plans, self-insured employers, union plans, Medicare Part D, and managed Medicaid plans. To assess the evolving role of PBMs within the US healthcare landscape, Avalere Health conducted a targeted literature review. Our search strategy was designed to capture relevant publications focusing on (1) PBM history and evolution context, (2) PBM impact on drug costs, access and outcomes, and (3) emerging trends and future directions for PBMs. We discuss our findings in a paper that aims to describe the role of PBMs in the US healthcare system using evidence to inform the current policy debate.

PBMs in the US Healthcare System

In contract negotiations, plan sponsors and PBMs negotiate the services provided, ranging from administrative functions like claims processing to clinical functions like safety and clinical programs.

Figure 1. Range of Key Services PBMs Provide to their Clients

PBMs can improve member health outcomes through clinical programs. Evidence shows that member and provider outreach programs can increase medication adherence by up to 16% for members with chronic conditions. Additionally, drug therapy management programs can help members better manage their chronic conditions and coordinate their care; a study published in the American Journal of Managed Care found a 10.4% reduction in inpatient visits and 2.6% reduction in emergency department utilization.

PBMs can also generate cost savings on behalf of plan sponsors through negotiations with life science companies and network pharmacies. According to a 2019 report from the US Government Accountability Office, PBMs worked with plan sponsors to manage drug benefits and negotiate rebates to offset Part D spending by 20%. A research paper from the National Bureau of Economic Research estimated that PBMs generate at least a net of $145 billion annual savings.

Over the past few years, PBMs have faced increased scrutiny from policymakers, regulators, and the public. In 2022, the Federal Trade Commission launched an investigation into PBM business practices.​ Congress has also been exploring PBM reform, with at least four pending bills in the Senate and 16 pending bills in the House. At the state level, 35 states have enacted at least one bill covering non-PBM affiliated pharmacy reimbursements, patient cost sharing, rebate pass through, spread pricing, PBM reporting, white bagging, and delinking since 2023.

Figure 2. State Bills to Regulate PBM Activities in Select Topics, 2023–2025 

This heightened attention is largely due to concerns regarding some PBM practices and the impact on prescription drug prices and access. Critics argue that vertical integration with health plans and other entities, as well as consolidation within PBMs, have adversely affected the affordability and accessibility of medications.

The healthcare ecosystem is inherently complex, with multiple stakeholders involved, creating an environment where the nuances of relationships and impacts are not easily untangled. For a constructive debate around legitimate concerns of efficiency and affordability in the pharmaceutical market, stakeholders should take a wholistic approach that balances the calls for increased transparency and timely access with the understanding of how PBMs can serve as tools for efficiency—driving competition, reducing costs, and improving adherence.

Download the white paper.

Funding for this research was provided by Evernorth Health Services. Avalere Health retained full editorial control.

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The EO provides limited detail on how a DTC program would be structured and operationalized or what the role of government would be. Additionally, there is a fundamental question of whether the goal is to establish a DTC channel that affects the physical distribution model of a product, enables patients to directly benefit from MFN pricing, or a combination of the two. There is also uncertainty on whether it applies to medical and pharmacy benefit products and the subsequent operationalization, channel and reimbursement implications. Avalere Health has identified a range of potential approaches for setting up a DTC program in the context of MFN – ranging from incremental in nature and building on existing market models to the establishment of a new government-facilitated purchasing channel.

Below, we outline the spectrum of potential approaches for structuring a DTC program to facilitate MFN access and pricing. Implementation considerations and potential policy and market access pathways for these approaches will likely vary based on drug-specific factors (retail vs. specialty, pharmacy benefit vs. physician administered) and by market segment (commercial, Medicare Parts B and D, Medicaid).

Figure 1. Potential Approaches for Structuring a Direct-to-Consumer Program to Facilitate MFN Access and Pricing 

Next Steps

Biopharmaceutical companies and payers face key decisions in the upcoming months, including deciding whether to participate in a voluntary MFN model, developing and executing policy and access strategies to shape these changes, and evolving their business and portfolio strategies to reflect new market realities.

Avalere Health’s seasoned experts in market access, US and global pricing strategy, and federal and state policy support organizations with a range of tailored activities, including:

• Analysis of the feasibility and opportunity of participating in a voluntary MFN program
• MFN implementation scenarios and implications for both policy and business strategy
• DTC strategies landscape, benchmarking assessment and program design
• Portfolio impact and risk assessments
• Assessment of the implications of MFN program participation on IRA Medicare negotiation
• Stakeholder mapping and engagement planning
• Support for public comments and federal engagement
• Product level access and pricing strategy, both US and global

With robust access to domestic and international pricing data, latest Medicare utilization data, and in-country experts across several key markets, we are well-positioned to support you across a number of areas. Connect with us to learn more.

The post MFN EO Raises A Range of Potential Options for DTC Implementation appeared first on Avalere Health Advisory.

A resilient and competitive generic drug market is a cornerstone of a well-functioning pharmaceutical system. Generics play a crucial role in driving down costs, increasing access, and ensuring long-term sustainability of healthcare spending. According to a report from the Food & Drug Administration (FDA), a single generic competitor can lead to a 39% net price erosion, while six or more generic competitors can drive down net prices by more than 95% compared to brands, thus delivering savings not just for the healthcare system, but also directly for patients at the pharmacy counter.

Impact of Medicare Drug Price Negotiation on Generics

The generic market is under increasing pressure amid ongoing supply chain issues and tariff risks, but emerging dynamics from the IRA may also create new challenges. The Centers for Medicare & Medicaid Services (CMS) selects drugs for negotiation based on total Medicare expenditures. Biologics become eligible for selection 11 years after their first FDA approval, while small-molecule drugs become eligible after seven years. Once the negotiation process concludes, these drugs will be available to the Medicare program at a maximum fair price (MFP) until a generic or biosimilar enters the market.

CMS is currently undergoing its second round of price negotiations with the manufacturers of 15 selected drugs for Initial Price Applicability Year (IPAY) 2027. Avalere Health estimates that as many of as 10 of the 15 drugs may have a generic come to market after the MFP is finalized, but either before or soon after the prices become effective in January 2027. If a generic product launches to compete against a brand-name drug that has already had a new lower price set by CMS, its ability to gain market share or justify entry at all may be compromised. In this scenario, generics are not only competing with a brand, but also with a government-set price, making it difficult to recover costs, invest in manufacturing, or sustain production.

EPIC Act Provisions and Stakeholder Responses

In March 2025, the Ensuring Pathways to Innovative Cures (EPIC) Act was introduced in the US Senate (and also in the House as H.R. 1492) to match the eligibility criteria of small-molecule drugs with biologics so that all drugs would have 11 years on the market before they could be selected for negotiation. Proponents argue that the threat of price negotiation earlier in the timeline for small-molecule drugs will stifle interest in small-molecule drug development and lead to fewer innovative medications for patients. President Trump’s support for removing disincentives for small molecule development may significantly increase the likelihood of this policy change. Opponents view the EPIC Act as a win for manufacturers that would diminish the government’s ability to generate savings. If passed, however, the law could also bolster generics and competition, ultimately resulting in savings for the government, Part D plans and patients.

Medicare Spending Impact

Avalere Health assessed the CMS Drug Spending Dashboard to estimate the expenditures associated with drugs already selected for IPAYS 2026 and 2027 and those projected to be selected in later years under both current law and under the proposed EPIC Act. Avalere Health then compared the share of gross Medicare spending that could be impacted by negotiations under current law with the share of gross spending that would be impacted if small molecules become ineligible for selection at 7 years following initial approval. Based on 2022 spending, the analysis found negligeable difference in share of Medicare spending, mainly because if some drugs get a longer timeline before selection, they will be replaced by other products from the list of highest spending drugs in Medicare (Table 1).

Table 1. Percentage of Total 2022 Medicare Gross Drug Expenditures Associated with Drugs Selected/Projected* for Selection, by IPAY** and Policy Scenario, in Relation to Total “Negotiation Eligible” Expenditures for Products with >$200M in Gross Medicare Spending, 2026–2034

*Based on Avalere Health policy modeling ** Spending includes both newly selected drugs and previously selected drugs subject to MFP in subsequent years

Overall, delaying eligibility for small-molecule drugs to be selected for negotiation may reduce the potential for savings as drugs with higher expenditures will need to be selected later. However, other small-molecule or biologic drugs with high expenditures will be selected in their place, which largely maintains the eligibility pool for negotiation. As a result, aligning small molecule eligibility timelines with biologics may support innovation in small molecule drug research without a substantial reduction in the overall savings for the Medicare program.

Part D Plan Impact

Medicare drug price negotiation also has implications for plan coverage and patient access. Specifically, Medicare Part D plans are required to cover all selected drugs, including all dosage forms and strengths. CMS plans to review Part D plan formularies for greater restrictions being placed on selected drugs compared to similar, non-selected drugs, which plans must then justify.

Broadly, Part D plans will have to consider MFPs of selected drugs when conducting formulary negotiations with both manufacturers of selected drugs and manufacturers of competitor drugs. Depending on resulting MFPs, plan economics could be negatively impacted if CMS did not generate significant savings relative to what could be negotiated in the market. Yet Part D plans are required to cover negotiated drugs even if a generic is imminent. Delaying negotiation for a subset of small molecule drugs could therefore restore plans’ ability to use generic entry to drive significant savings.

What’s Next

As policymakers weigh the full implications of the EPIC Act and other reforms, considering the impact on the generic drug market must remain a priority. With expertise in policy, evidence strategy, and market access, Avalere Health’s multidisciplinary team can help manufacturers and payers understand the nuance and complexities of interactions between IRA drug pricing provisions and proposed and final policies. Connect with us to learn more.

Methodology

Avalere Health identified drugs eligible for selection based on a proprietary list that evaluates drugs based on their initial FDA approval date, projected biosimilar and generic entry dates, other factors in line with IRA statute, and CMS guidance. Based on the timelines that CMS established in guidance, if a generic comes to market after an MFP is established, the MFP remains effective for the first initial applicability year. Avalere Health’s estimates are based on 2022 data and the analysis did not project revenue growth for the analyzed therapies.

The post What the EPIC Act Could Mean for Generics and Medicare Spend appeared first on Avalere Health Advisory.

Background

Since the first Food & Drug Administration (FDA) approval of a CAR-T product in 2017, concerns have persisted over how the Medicare program would reimburse for these products, which are commonly administered in the inpatient setting and have a significant cost for providers (e.g., average sales prices exceeding $450,000). Hospital inpatient reimbursement is calculated on a case-by-case basis using an MS-DRG base payment rate that is adjusted for factors such as hospital geography, diagnosis, case severity, and discharge status. Additional reimbursement can be provided through new technology add-on payments (NTAPs) and outlier payments.

For FY 2025, inpatient stays with CAR-T treatment are currently assigned to MS-DRG 018, which has a base reimbursement rate of $269,139. Outlier payments are available to hospitals to cover extremely costly cases when the costs exceed the total of the MS-DRG payment, the NTAP amount (if applicable), and the current fixed-loss threshold of $46,147. Even with these adjustments, Medicare reimbursement for CAR-T cases today sometimes fails to cover total hospital costs, which can negatively impact provider uptake and patient access.

For FY 2026, CMS proposed several policies that would impact provider reimbursement for CAR-T and other cell and gene therapies (CGTs).

Payment Changes for CAR-T Cases 

As a result of an increase to the base operating and capital rates for all IPPS payments and an increase in the proposed relative weight for MS-DRG 018, the proposed base payment for CAR-T cases in FY 2025 would increase by 16.7%, to $314,176.

High-Cost Outlier Payments

The proposed fixed-loss threshold for FY 2026 is $44,305, a 4% decrease over the current threshold. A decrease in the threshold goes against the prevailing trends of steady increases; the outlier threshold increased by 74% from FY 2020 to FY 2025.  For CAR-T cases, which are more likely than other inpatient stays to qualify for outlier payments, fluctuations in the threshold are particularly important, as they dictate the losses hospitals must incur before qualifying for an outlier payment. The combination of an increased base rate for CAR-T cases and a lower outlier threshold would increase provider reimbursement (see Figure 1).

Figure 1. Illustrative Example: Hospital Reimbursement for CAR-T Cases Under IPPS: Proposed FY 2026 vs. Final FY 2025

DSH: Disproportionate Share Hospital; IME: Indirect Medical Education

Assumptions:

• Hospital charges for CAR-T episodes are kept constant across all examples, consistent with the geometric mean charges included in the FY 2026 Proposed Rule after outliers removed file ($1,856,594)
• Hypothetical hospital is assumed to have an average operating and capital cost-to-charge ratio of 0.3​, which influences CMS calculations of hospital costs.
• Hospital receives add-on payments that stem from payments for IME and DSH adjustments, which are calculated as a percentage of the base MS-DRG. In this figure, there is an assumed IME factor of 0.2 and DSH adjustment of 0.05​
• Hospital area wage index is 1.0, meaning no adjustment is made to the labor-related share of the standardized amount.
• Outlier payments cover 80% of the difference in costs and payments after accounting for the fixed-loss amount.

Adjustment for Clinical Trial Cases

CMS reimburses CAR-T clinical trial cases, which do not incur drug costs, at a lower rate than non-clinical trial cases. Using its standard approach with a minor adjustment to exclude cases that do not incur CAR-T drug costs, CMS proposed an adjustment factor of 0.23 to the relative weight of MS-DRG 018 for these cases (the same factor utilized in FY 2025). This would result in a base rate for clinical trial cases of $72,260, an increase of 17% over FY 2025.

Product NTAP Assessments 

CMS is evaluating several CGT products for potential NTAP status in FY 2026:

• Obe-cel (AUCATZYL®) for the treatment of acute lymphoblastic leukemia (ALL)
• Liso-cel (BREYANZI®) chronic lymphocytic leukemia or small lymphocytic lymphoma (CLL/SLL). The product was previously approved for NTAP in FY 2021-2022 for large B-cell lymphoma
• Afamitresgene autoleucel (TECELRA®) for the treatment of advanced synovial sarcoma

Key Considerations

Stakeholders should consider several implications stemming from proposed FY 2026 changes for existing assets and for future cell and gene therapies.

• Development of MS-DRG 018:Total reimbursement will vary by hospital and case, but the proposed increase in reimbursement for FY 2026 would support cost recovery for providers. However, profitability by case will become increasingly variable given the assignment of additional therapies to the MS-DRG. There were 1,110 cases available in the data this year to support rate-setting, representing a range of products. Additional immunotherapies mapped to the MS-DRG can lead to fluctuations in the base rate and could eventually lead CMS to consider splitting the MS-DRG depending on the number of cases and differences in resource costs. In the proposed rule, CMS noted a request from commenters to explain why certain cell therapies do not map to MS-DRG 018 and a requestor raised a question about how the cost of a therapy may influence MS-DRG assignment. CMS did not directly address these concerns but did acknowledge that “there may be distinctions to account for as we continue to gain more experience in the use of these therapies.”
• NTAP Eligibility:The increase in the number of available CAR-T products may make it increasingly difficult for new products to qualify for NTAP as it becomes harder to clearly satisfy criteria for newness, cost, and clinical improvement relative to on-market products. Additionally, the consideration of Breyanzi’s NTAP application for a new indication could be informative for other CAR-T manufacturers studying use in new indications.
• Gene Therapy Payment Considerations: In the proposed rule, a requestor suggested the creation of a neurosurgical gene therapy MS-DRG given the approval of KEBILIDI^TM (eladocagene exuparvovec-tneq) and the number of relevant products in pipeline. Ultimately, CMS stated that given the lack of available data in the claims for these products, it would be premature to establish a new MS-DRG. However, this is a topic that could be revisited as more patients are dosed and could be important given the current assignment of gene therapies to MS-DRGs with base rates dramatically lower than therapy costs.
• Site-of-Care Shifts: Differences in Medicare reimbursement methodology for the inpatient versus outpatient setting can sometimes result in higher reimbursement for CAR-T in the outpatient setting, where CAR-Ts are typically separately paid at average sales price plus 6%. However, the majority of Medicare patients still tend to be treated in the inpatient setting. In an analysis of FY 2023 Medicare fee-for-service CAR-T cases, Avalere Health found that only 10% of cases were treated outpatient. This is fairly consistent in Medicare Advantage as well, where 13% of CAR-T cases took place in the outpatient setting during calendar year 2022. Additionally, the Center for Medicare & Medicaid Innovation could consider alternative reimbursement approaches in Medicare fee-for-service for CGTs, such as bundled payments or site-neutral payment. However, no Medicare models have been announced to date.

Next Steps

Carefully monitoring reimbursement for these innovative products will allow CGT manufacturers, providers, and payers to engage other stakeholders based on anticipated developments. To discuss how Avalere Health can support your business on issues related to CGT commercialization, NTAP proposal submissions, provider reimbursement, access support, or policy developments, connect with us.

Note: Medicare outpatient CAR-T utilization was determined using claims data accessed in the Virtual Research Data Center via a data use agreement with CMS.

The post CMS Proposes Pay Bump for CAR-T in FY 2026 appeared first on Avalere Health Advisory.

“The new drug pricing EO is noteworthy, both for what it revisits and what it excludes. There is no mention of broad-scale rebate reform, for example, with the focus shifting instead to purchasing, PBM [pharmacy benefit manager] reform, and negotiation strategies,” said Milena Sullivan, Policy Practice Director in Avalere Health’s Advisory capability.

The EO supports changes to program guidance under the Inflation Reduction Act’s (IRA’s) Medicare Drug Price Negotiation Program. It also signals forthcoming proposals impacting the broader Medicare program, PBMs, and states. For more details, see the range of directed actions and corresponding deadlines below.

Drug Pricing EO and Medicare Drug Price Negotiation Program

The EO signals potential future changes in the Trump administration’s approach to the Medicare Drug Price Negotiation Program with the objective of achieving more savings compared to the first year of the program under the previous Biden administration.

“Many stakeholders were critical of the results of MFP [Maximum Fair Price] round 1, so it is no surprise the new administration would prioritize trying to get a better deal. If the MFP isn’t better than what plans negotiate today, patient and plan costs can increase even if the government sees savings,” said Megan West, Managing Director.

Potential changes identified in the EO could focus on program transparency, prioritizing negotiation of high-cost drugs, and minimizing the negative impacts on pharmaceutical innovation. The EO also pledges to work with Congress on aligning negotiation selection rules for small molecule and biological products—an issue that has gained interest in recent months following introduction of the EPIC Act in Congress.

“There is some speculation that the EO may be signaling a shift away from gross costs to net when calculating Medicare’s spend on negotiation-eligible products. This would be a major shift and, coupled with potential legislative changes like the EPIC Act, could drastically shift the timing of selection risk for individual products,” said Ashley Flint, Principal.

Drug Pricing EO’s Effects on Medicare

The EO directs government officials to work on alternatives to a Biden administration demonstration for stabilizing standalone Prescription Drug Plan (PDP) premiums in Medicare Part D. Without the demonstration, the average premium for standalone plans would have increased considerably in 2025.

“Part D benefit enhancements under the IRA and other market dynamics have put pressure on premiums for standalone PDPs. Low premiums are a driver of enrollment in Part D, and the demo has helped mitigate premium increases for 2025. Action on the demonstration from CMS is likely to significantly shape plan decisions to stay competitive in the PDP market for 2026 and beyond,” according to Kylie Stengel, Associate Principal.

Stakeholders were also put on notice of a future Center for Medicare and Medicaid Innovation (CMMI) demonstration focused on high-cost drugs in Medicare, including newer drugs not subject to Medicare negotiation. In the prior Trump administration, CMMI proposed international reference pricing for Part B drugs under a “most-favored nation” approach.

“The reference to medicines not subject to Medicare negotiation feels significant, since that would include Part B and Part D medicines. Medicare spends more on medicines in Part D than Part B, so a broader approach could achieve more savings, which is critical to longevity for a CMMI model,” said Lisa Joldersma, Strategic Advisor.

Drug Pricing EO’s Impact on PBMs

With PBM reform stalling in Congress at the end of 2024, the EO prioritizes developing recommendations to promote a more transparent, efficient, and competitive prescription drug supply chain. These priorities are consistent with previous congressional efforts. One specific proposal is for the Department of Labor (DOL) to issue regulations improving transparency for self-funded (ERISA) plans from PBMs—an idea first raised to DOL in 2014.

“This focus on transparency and PBM practices continues a key theme that we saw under the previous Trump administration. It will be critical for stakeholders to monitor further developments, both administratively and legislatively, that could significantly impact the drug supply chain,” according to Emily Donaldson, Principal.

Drug Pricing EO’s Impact on States

The EO aims to support states in managing Medicaid drug spending, ensuring manufacturers pay “accurate Medicaid drug rebates,” and promoting innovative payment arrangements.

“The EO’s Medicaid proposals signal continued interest in bringing novel drug payment solutions to states, building on value-based purchasing and multiple Best Price flexibilities advanced in the administration’s first term with the ability to shape the future of the Cell and Gene Therapy Access Model currently focused on sickle cell disease,” said Margaret Scott, Principal.

Finally, the previous Trump administration established pathways for state importation programs. Some states have advanced through the process, but none have been able to implement a plan to date. The EO calls for a streamlined process for approval of state importation plans “without sacrificing safety or quality.” States have continued to debate importation programs this legislative session.

Contact Us

Avalere experts have deep knowledge of past proposals and the current trends driving policy and advocacy. To learn more about how the EO policies could take shape, including their impact on your business, connect with us.

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The Inflation Reduction Act mandates that the Centers for Medicare & Medicaid Services (CMS) negotiate a Maximum Fair Price (MFP) for a set number of drugs each year. To date, 10 Part D drugs have been negotiated for the Initial Price Applicability Year (IPAY) 2026, with an additional 15 Part D drugs selected for IPAY 2027.

After CMS negotiates MFPs, manufacturers must provide access to the MFP to Medicare beneficiaries and to pharmacies and providers dispensing negotiated drugs. In October 2024, CMS provided guidance on how manufacturers could effectuate MFP prospectively or retrospectively, but the agency did not set a standard method. In a prospective model, pharmacies would acquire an inventory of drugs at a price based on MFP, and then likely would need to hold the MFP inventory separately from drugs to be sold at other prices. In a retrospective model, pharmacies could maintain a single drug inventory acquired at a price (e.g., the wholesale acquisition cost [WAC]), and receive a reconciliation payment from manufacturers. CMS has defined the standard reconciliation payment amount (known as the standard default refund amount, or SDRA) as the difference between WAC and MFP, but manufacturers and dispensers maintain the ability to utilize alternative refund amounts.

Stakeholders are increasingly concerned that the MFP effectuation options proposed by CMS could create administrative and financial burdens for pharmacies. There is growing attention on whether small and independent pharmacies may face challenges in dispensing IPAY 2026 and 2027 drugs, potentially affecting beneficiary access to these medications. In a review of pharmacy closures, Avalere found that 38% of non-chain pharmacies closed between 2009 and 2020. Continued financial and operational pressures could contribute to further closures.

To contribute to the discussion on MFP effectuation, Avalere conducted an analysis to determine the percentage of prescriptions for IPAY 2026 and IPAY 2027 drugs dispensed through independent and franchise pharmacies, as well as the proportion of beneficiaries who obtain their medications through these channels. For this analysis, franchise pharmacies are defined as independently owned pharmacies that operate under a franchisor’s branding and business model within a specific region.

Findings

At the national level, 34% of scripts for IPAY 2026 or IPAY 2027 drugs are filled at an independent or franchise pharmacy. Similarly, at the national level, 30% of beneficiaries accessed at least one of the IPAY 2026 or IPAY 2027 drug at an independent or franchise pharmacy. That equates to 12 million beneficiaries and 74 million scripts filled.

Avalere also analyzed results at the state level to understand potential regional variability (Figure 1). The share of beneficiaries that access IPAY2026 or 2027 drugs at an independent or franchise pharmacy is at or above the national average in 22 states.

Figure 1: Percent of Total IPAY 2026 or IPAY 2027 Beneficiaries that Filled a Script at an Independent or Franchise Pharmacy

The five states with the highest share of beneficiaries using independent or franchise pharmacies across both years are North Dakota, Arkansas, Mississippi, Nebraska, and Illinois (Table 1).

Table 1: States with the Highest Share of Beneficiaries Using Independent or Franchise Pharmacies to Access IPAY 2026 or IPAY 2027 Drugs

The five states with the lowest share are Arizona, Delaware, Nevada, New Hampshire, and Ohio (Table 2).

Table 2: States with the Lowest Share of Beneficiaries Using Independent or Franchise Pharmacies

Conclusion

As CMS continues to refine the MFP effectuation process, it is important to consider the potential impact on various dispensing entities and the beneficiaries they serve.  Similarly, as manufacturers prepare to submit their MFP effectuation plans to CMS by September 2025, it is important to consider these findings to anticipate any potential access challenges and channel considerations.

Methodology

Avalere Health analyzed 2023 Medicare Prescription Drug Event (PDE) data through an agreement with CMS, accessed through CMS’s Chronic Condition Warehouse Virtual Research Data Center. Avalere identified all prescriptions for IPAY 2026 and IPAY 2027 drugs from the 2023 PDE data using brand names. Avalere then identified the volume of IPAY 2026 and IPAY 2027 selected drugs going through independent and franchise pharmacies using dispenser class code. (Dispenser class code 01 is defined as “independent pharmacy” and 05 is defined as “franchise pharmacy.”) Then, Avalere summarized the number of scripts, percent of total scripts, number of beneficiaries filling at least one script for a selected drug, and percent of beneficiaries at the national and state level for IPAY 2026 and IPAY 2027 drugs flowing through independent or franchise pharmacies. Avalere used the location of the pharmacy that dispensed the drug to provide state level metrics.

To estimate pharmacy closures between 2009 and 2020, Avalere utilized Medicare Part D 100% PDE claims, accessed via a research collaboration with Inovalon, Inc. and governed by a research-focused CMS Data Use Agreement to review utilization and identified when and where closures occurred across the United States. Avalere identified locations of pharmacies in the US by linking to pharmacy NPIs in the National Plan and Provider Enumeration System.

The post Impact of MFP Effectuation on Pharmacies and Beneficiaries appeared first on Avalere Health Advisory.

Intended to restrain drug price increases, the inflation penalty affects both brand and generic products, but poses unique challenges for generic manufacturers, due in large part to the differing dynamics of the multi-source (generic) versus single-source (brand) markets. Purchasing pattern fluctuations, including changes in customer base and seasonal changes in product usage, can raise a generic product’s AMP even when the manufacturer did not increase the price. In addition, pricing for generic drugs is highly affected by the commoditized nature of the multi-source generic market. Price competition in many generic markets has driven prices down to just above production costs, with minimal margins to absorb any fluctuations (e.g., increases in manufacturing or ingredient costs). This downward pressure may result in price increases for generic manufacturers when input costs increase or when there is a shortage. This is particularly likely when the AMP benchmark is low, which occurs when a manufacturer enters the market after others or if it is an older generic drug (where there has been sustained price competition).

This paper details five scenarios of how AMP increases may occur and lead to a generic manufacturer being subject to inflation rebates in situations where the generic manufacturer is not taking a price increase beyond the inflation rate:

• Scenarios in which a generic manufacturer may be faced with a Medicaid inflation rebate without increasing the price of the drug:
  • Scenario A: Change in customer base (e.g., loss of high-rebate, high-volume contract)
  • Scenario B: Seasonal fluctuations in product usage and product costs
• Scenarios in which a generic manufacturer is faced with a Medicaid inflation rebate due to price increases driven by market pressures:
  • Scenario C: Increases in product input cost not reflected in the Consumer Price Index for All Urban Consumers (CPI-U)
  • Scenario D: Drugs in shortage
  • Scenario E: Mature generics and late entrants to the generics market

The application of inflation rebates in these instances can cause generic products to become unprofitable in Medicaid. This can lead to product withdrawals and, over time, less competitive and sustainable markets.

Download the full white paper.

Funding for this research was provided by the Association for Accessible Medicines. Avalere retained full editorial control.

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]]> https://advisory.avalerehealth.com/insights/white-paper-the-medicaid-drug-rebate-program-and-considerations-for-generic-markets/feed 0 https://advisory.avalerehealth.com/insights/impacts-of-340b-on-state-medicaid-programs-and-patient-oop-costs https://advisory.avalerehealth.com/insights/impacts-of-340b-on-state-medicaid-programs-and-patient-oop-costs#_comments Wed, 12 Feb 2025 17:27:21 +0000 https://avalere.com/?p=33940 Persistent growth in the 340B Drug Pricing Program is raising questions about the financial impact to patients, other stakeholders, and the healthcare system overall. To address some of these questions, Avalere analyzed how state Medicaid programs are impacted by foregone rebates when 340B covered entities carve claims out of the Medicaid program and into 340B…

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]]> Persistent growth in the 340B Drug Pricing Program is raising questions about the financial impact to patients, other stakeholders, and the healthcare system overall. To address some of these questions, Avalere analyzed how state Medicaid programs are impacted by foregone rebates when 340B covered entities carve claims out of the Medicaid program and into 340B instead. Avalere found that in 2023, states did not obtain an estimated $2 billion in Medicaid rebates for products administered in the hospital outpatient setting because of 340B. Avalere also compared cost sharing for patients who fill prescriptions through 340B covered entities that are not required to provide reduced fees.

Background

The 340B Drug Pricing Program (“340B”) requires drug manufacturers participating in Medicaid to provide discounts to certain eligible covered entities, like Disproportionate Share Hospitals (DSHs) and Rural Referral Centers (RRCs). 340B covered entity purchases totaled approximately $66.3 billion in 2023, outpacing the estimated $51 billion in net Medicaid spending on prescription drugs in the same year. DSHs account for the largest portion of 340B purchases, at nearly 80% as of 2023.

Although many 340B policy discussions have focused on DSHs, program growth has also been observed across other entity types, including RRCs, with 340B purchases increasing by over 800% between 2015 and 2023, growing from $150 million to $1.47 billion during that time.  Additionally, according to the Health Resources & Services Administration, the top-10 selling 340B drugs accounted for roughly one-third of all 340B purchases in 2023. While there is variation across individual drugs, 2023 340B purchases for these 10 drugs in total was about $3.5 billion higher than combined Parts B and D spending on these 10 drugs in 2022.

Policymakers and Congressional analysts have proposed several 340B reforms in recent years, including the 340B SUSTAIN and 340B ACCESS Acts; these have not moved past discussion draft status or bill introduction. In December 2024, the Congressional Budget Office included a policy option to address Medicare Part B reimbursement for 340B-acquired drugs in its publication, “Options for Reducing the Deficit: 2025 to 2034.” At the state level, several laws have been passed to address manufacturer program integrity, including those that require manufacturers to deliver 340B discounted products to contract pharmacies and that prohibit certain entities from requiring claims data information from covered entities or contract pharmacies.

These federal and state policy discussions have raised important questions about how 340B impacts patient cost sharing, the potential for duplicate discounts, the intersection with other private and public payers such as Medicaid, and the impact on the broader healthcare system. For example, the North Carolina State Treasurer recently released a report that highlighted substantial profits that 340B hospitals can generate on products acquired at 340B discounts, finding that patient cost sharing exceeded acquisition costs in some cases. This dynamic was also highlighted in a January 2025 New York Times article. Additionally, recent analyses and reports have found that, due to contractual limitations, employers may forgo billions in savings via manufacturer rebates and that other stakeholders can benefit financially from the program.

Impact of 340B on Mandatory Medicaid Rebates

Under federal law, manufacturers are not required to provide both a discounted 340B price and a mandatory Medicaid drug rebate for the same unit of drug. The majority of states allow 340B covered entities (specifically DSHs) to decide whether 340B claims will be carved in or carved out with respect to the Medicaid program. Claims that are carved into 340B are listed in a Medicaid Exclusion File and Medicaid programs are not supposed to claim Medicaid Drug Rebate Program rebates on drugs administered by such a hospital or filled by its pharmacies. While this discretion allows hospitals to maintain savings from 340B, it functionally means that states do not collect the mandatory Medicaid rebates for these prescriptions.

Medicaid rebates on outpatient drugs totaled approximately $54 billion in 2023, with estimates ranging  from $46 million to $6 billion per state. Avalere estimates that based on the current list of carve-in hospitals, states may have forgone approximately $2 billion in Medicaid rebates just on products administered in the hospital outpatient setting in 2023. Estimates are based on Medicare fee-for-service spending on 340B-acquired drugs and cost report data (see Methodology for details). There are likely additional rebates that Medicaid programs forgo for products distributed via 340B contract pharmacies.

In a recent KFF survey of state Medicaid directors, over half noted that the chance of a Medicaid shortfall in fiscal year 2025 was “50-50,” “likely,” or “almost certain,” despite currently stable budgets. This is a departure from 2021 and 2022, where most states did not anticipate state revenue shortfalls. The Republican-controlled 119th Congress and second Trump administration may revisit current Medicaid policy, potentially changing matching rates or other policies that may impact states’ Medicaid budgets, such as block grants.

Given the possibility of increased financial strain, state Medicaid programs may seek to understand how much their programs may be currently forgoing rebates based on the carve in status described above.

Patient Cost Sharing

Federal law provides that certain covered entities (e.g., health centers, Ryan White Program clinics), may obtain 340B eligibility on the basis of receiving federal grants or subawards under a federal grant. Many of these organizations ensure that patients receive reduced cost sharing consistent with federal sliding fee scale program requirements in the Public Health Service Act.

Most large hospitals, like DSHs, and their contract pharmacies are not subject to sliding fee scale requirements. They may purchase drugs at the same discounted 340B price as grantee covered entities, but they are not required to lower the amount they charge the patient for that medicine. To illustrate this dynamic, Avalere reviewed a variety of publicly available prescription drug sliding fee scale programs and typical insurance coverages for patients with incomes 175% of the Federal Poverty Level. Avalere assumed a single deductible of $700 with preferred brand drugs being subject to the deductible and 25% coinsurance post-deductible, which represents a typical, commonly chosen Silver Tier Exchange plan with 87% cost sharing reduction. Avalere then considered the experience of a patient prescribed a medicine with a wholesale acquisition cost of $100 on the preferred brand tier of their plan. While in their deductible phase, a patient filling their prescription at a typical DSH hospital or its contract pharmacy would pay $100 per fill until they meet their deductible. That patient would pay approximately $29 with a typical sliding fee scale.

Contextualizing the Findings

This Avalere analysis contributes to a broader body of public reports that identify ways the 340B program may have both direct and indirect impacts on multiple healthcare stakeholders, including government payers, employers, and patients. It will be important for policymakers to understand this full spectrum of considerations as they contemplate potential reforms to 340B.

Staying ahead of the latest trends and 340B policy and program developments will be critical for stakeholders looking to engage in a 340B reform conversations in 2025 and beyond. To learn more about how Avalere can support you on 340B policy and strategy, connect with us.

Methodology

To estimate forgone Medicaid rebates resulting from 340B carve-in policies, Avalere leveraged publicly available 2021 Medicare cost report data to determine total outpatient revenue. To estimate the share of outpatient revenue attributable to 340B-acquired drugs, Avalere leveraged the Addendum AAA file released as part of the Outpatient Prospective Payment System Remedy Final Rule to set a site-specific 340B share of outpatient revenue attributable to such products. Avalere estimated the share of revenue attributable to Medicaid using discharge information from the cost reports and adjusted all amounts to include patient cost-sharing liability and eliminate add-on payments. A standard 23.1% rebate was assumed for estimated Medicaid 340B acquired drugs for all sites listed on the Medicaid Exclusion File.

Funding for this research was provided by Bristol Myers Squibb; Avalere retained full editorial control.

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]]> https://advisory.avalerehealth.com/insights/impacts-of-340b-on-state-medicaid-programs-and-patient-oop-costs/feed 0 https://advisory.avalerehealth.com/insights/white-paper-valuing-multi-use-drugs-in-medicare-negotiation https://advisory.avalerehealth.com/insights/white-paper-valuing-multi-use-drugs-in-medicare-negotiation#_comments Wed, 05 Feb 2025 16:04:24 +0000 https://avalere.com/?p=33911 Click here to access the white paper. In 2026, the maximum fair prices (MFPs) for the first set of selected drugs under the Medicare Drug Price Negotiation Program will go into effect. Additionally, on January 17, 2025, the Centers for Medicare & Medicaid Services (CMS) released the list of the next 15 drugs selected for…

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]]> Click here to access the white paper.

In 2026, the maximum fair prices (MFPs) for the first set of selected drugs under the Medicare Drug Price Negotiation Program will go into effect. Additionally, on January 17, 2025, the Centers for Medicare & Medicaid Services (CMS) released the list of the next 15 drugs selected for negotiation for the 2027 plan year.

The Inflation Reduction Act outlines general parameters for selecting drugs for negotiation and setting MFPs but leaves the details of methodology and implementation to CMS. In guidance, CMS has established the methodologies for selecting and negotiating these products for the 2026 and 2027 initial price applicability years. CMS’s current approach for establishing a single MFP weights the utilization of different indications for a drug and its therapeutic alternative(s). However, this utilization-based weighting approach may undervalue newer indications, as peak drug utilization typically occurs several years post-launch and newer uses may offer different patient benefits and warrant diverse pricing strategies. Undervaluing these newer uses may disincentivize manufacturer development of additional uses for a product, particularly later in a product’s lifecycle. This change in incentives may impact treatments commonly used by Medicare beneficiaries, such as those for chronic diseases, which often have multiple product uses.

This white paper explores three potential alternative approaches that CMS could consider for setting MFPs across products with multiple indications, including weighting different product uses based on:

• Medicare prevalence
• Clinical input
• Unmet patient needs

While not an exhaustive list of potential options, these approaches aim to balance incentives for continued innovation with the goals of improving patient access and addressing treatment gaps. As the number of drugs selected for Medicare negotiation grows in future years and more drugs with varied uses are selected for negotiation, CMS’s methodology for determining MFPs will play an increasingly critical role in shaping patient access, increasing development incentives, and meeting the evolving needs of the Medicare population.

Funding for this research was provided by Novo Nordisk. Avalere retained full editorial control.

 

 

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]]> https://advisory.avalerehealth.com/insights/white-paper-valuing-multi-use-drugs-in-medicare-negotiation/feed 0 https://advisory.avalerehealth.com/insights/ipay-2027-negotiated-drugs-expand-impact-on-beneficiaries https://advisory.avalerehealth.com/insights/ipay-2027-negotiated-drugs-expand-impact-on-beneficiaries#_comments Thu, 30 Jan 2025 21:05:01 +0000 https://avalere.com/?p=33884 On January 17, the Centers for Medicare & Medicaid Services (CMS) released the list of the next 15 Part D drugs that have been selected for Medicare negotiation for Initial Price Applicability Year (IPAY) 2027. This list follows the first 10 selected drugs for IPAY 2026. While MFPs will apply specifically to the 25 selected…

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]]> On January 17, the Centers for Medicare & Medicaid Services (CMS) released the list of the next 15 Part D drugs that have been selected for Medicare negotiation for Initial Price Applicability Year (IPAY) 2027. This list follows the first 10 selected drugs for IPAY 2026.

While MFPs will apply specifically to the 25 selected drugs, they may also impact the competitive dynamics between these drugs and their therapeutic alternatives. With more drugs now being selected, Medicare Part D plans may increasingly change formulary strategies based on MFPs, potentially impacting beneficiaries’ access to both selected drugs and their therapeutic alternatives.

To assess the potential number of Medicare beneficiaries who may see impacts of MFPs in the market, Avalere identified therapeutic alternatives of the 25 selected drugs for IPAYs 2026 and 2027. Using the most recent CMS dashboard data, Avalere then estimated the number of beneficiaries by therapeutic area that used one of the 25 selected drugs or a therapeutic alternative in 2022 (Table 1).

Table 1. Estimated Number of Medicare Beneficiaries that Used a Product Selected for Negotiation (IPAY 2026 and 2027) or a Therapeutic Alternative, by Therapeutic Area, 2022

 

Therapeutic Area	Part D Beneficiaries	Estimated Part B Beneficiaries	Estimated Total Beneficiaries
Antiasthmatic and Bronchodilator Agents	3,698,859	8,788	3,707,647
Anticoagulants	5,039,783		5,039,783
Antidiabetics	7,129,785		7,129,785
Antipsychotics	149,219		149,219
Autoimmune	220,171	154,633	374,804
Heart Failure Agents	520,839		520,839
Gastrointestinal Agents	636,302		636,302
Oncology	206,888	148,338	355,226
Pulmonary	20,686		20,686
Psychotherapeutic and Neurological Agents	39,818		39,818

*Estimated Part B beneficiaries includes fee-for-service (FFS) beneficiaries from the CMS Part B dashboard and estimated Medicare Advantage (MA) enrollees based on the relative enrollment in FFS vs. MA. If individual drugs were selected products or therapeutic alternatives to selected products for both 2026 and 2027, beneficiary counts for the drugs were only counted once. However, the number of beneficiaries reported does not represent a unique count of enrollees, as beneficiaries may take multiple products within and across therapeutic areas.

Methodology

For IPAY 2026 drugs, Avalere used the therapeutic alternatives identified for each selected drug in CMS’s MFP justifications. For IPAY 2027 drugs, Avalere used internal clinical expertise to identify therapeutic alternative products. For both IPAYs 2026 and 2027 therapeutic alternatives, Avalere only assessed branded products, as these products are most likely to be directly impacted by MFPs. Avalere then used the 2022 CMS Part D and Part B spending dashboards (the most recent year of available data) to identify the number of beneficiaries taking each identified selected drug and therapeutic alternative. Because the Part B dashboard only includes spending and utilization from FFS Medicare, Avalere applied a ratio based on MA vs. FFS enrollment in 2022 to estimate the number of enrollees taking a selected drug or a therapeutic alternative.

A Trusted Partner for IRA Negotiation

The IRA will continue to have wide-reaching impacts across the prescription drug market. With expertise in policy, evidence strategy, and market access, Avalere’s multidisciplinary team can help patient advocates, plans, and manufacturers understand the nuance and complexities of Medicare negotiation for 2027 and beyond. Connect with us to learn more.

The post IPAY 2027 Negotiated Drugs Expand Impact on Beneficiaries appeared first on Avalere Health Advisory.

]]> https://advisory.avalerehealth.com/insights/ipay-2027-negotiated-drugs-expand-impact-on-beneficiaries/feed 0 https://advisory.avalerehealth.com/insights/estimating-the-spillover-impact-of-ira-part-b-negotiation https://advisory.avalerehealth.com/insights/estimating-the-spillover-impact-of-ira-part-b-negotiation#_comments Mon, 27 Jan 2025 16:16:46 +0000 https://avalere.com/?p=33839 As the new Trump administration is poised to take over Medicare drug price negotiations, stakeholders are closely monitoring how the negotiation process may evolve in the next four years. This spring, the Centers for Medicare & Medicaid Services (CMS) plans to release draft guidance for the third cycle of the Medicare Drug Price Negotiation Program,…

The post Estimating the Spillover Impact of IRA Part B Negotiation appeared first on Avalere Health Advisory.

]]> As the new Trump administration is poised to take over Medicare drug price negotiations, stakeholders are closely monitoring how the negotiation process may evolve in the next four years. This spring, the Centers for Medicare & Medicaid Services (CMS) plans to release draft guidance for the third cycle of the Medicare Drug Price Negotiation Program, which for the first time will include physician-administered drugs covered under Part B. Given the complex nature of various government pricing definitions, the impact of Medicare negotiation for Part B drugs may have direct spillover effects in the commercial market.

Background

Under statutory language included in Sec. 1847A, Congress directs CMS to reimburse physicians for the cost of Part B drugs in Medicare fee-for-service (FFS) at the manufacturer’s average sales prices (ASP) plus a 6% add-on payment to cover a range of fixed overhead costs. Such costs include expenses associated with proper storage, shipping, handling, inventory management, IT infrastructure, patient bad debt, and compliance with drug compounding and preparation requirements, to name a few. Under the Inflation Reduction Act (IRA), reimbursement for negotiated drugs will get reduced to the negotiated maximum fair price (MFP) +6%, effectively cutting provider payment for these products, despite the potential for practice overhead costs for those drugs to remain unchanged.

The IRA impact on providers could also extend outside of Medicare FFS. Price concessions associated with the MFP are not excluded from government price reporting, so both Best Price and ASP for negotiated drugs are also likely to steadily decline over time. This in turn would lower reimbursement in Medicare Advantage (MA) and private insurance plans for providers whose contracts are tied to ASP as a pricing metric. A recent Avalere analysis finds that physicians could lose at least $25 billion in add-on payments for the 10 Part B drugs expected to be negotiated first.

To better understand the impact of potential IRA Part B negotiations in the commercial market, Avalere surveyed MA and commercial payer organizations on how prevalent ASP-based contracts are and how focused payers may be on implementing changes to their reimbursement rates.

Survey Findings

Avalere’s survey included 50 representatives from national and regional payer organizations, representing over 250 million lives in the commercial market and MA. There were two key findings:

1. ASP remains a key reimbursement metric outside of Medicare FFS. The survey revealed that a significant portion of payers continue to use reimbursement methodologies that mirror Medicare, with “ASP+6%” and the “Medicare Allowable” amount having the highest use among payers (Figure 1). The degree of IRA impact on physicians outside of Medicare FFS could be impacted based on how many contracts are tied to reimbursement methodologies impacted by the MFPs.

Figure 1. Percent of Payer Respondents Using Certain Provider Reimbursement Methodologies



* One respondent indicated that the percentage add-on for their ASP + % reimbursement methodology in provider contracts was proprietary.
^Two respondents indicated their organization utilizes “value-based” reimbursement methodologies.
Note: Subtotals do not equal 100% since respondents may use multiple reimbursement metrics across contracts.
AWP: Average Wholesale Price

2. Other contract terms, such as contract length, can impact the magnitude and timing of IRA impacts. Over 80% of respondents across both MA and commercial markets reported contract duration of two or more years with providers. About 20% of respondents indicated that their organization is contemplating reimbursement methodology changes over time due to certain policies and market trends.

What’s Next?

Changes in payment for Part B drugs selected for negotiation could lead to changes in prescriber behavior, impact consolidation incentives, or prompt site of care shifts. Policymakers should consider the potential spillover impact of Medicare Part B negotiations and its potential implications for patient access to treatments.

To learn more about the impact of Medicare drug price negotiation, as well as other IRA drug pricing provisions, connect with an Avalere expert today.

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]]> https://advisory.avalerehealth.com/insights/estimating-the-spillover-impact-of-ira-part-b-negotiation/feed 0 https://advisory.avalerehealth.com/insights/cms-announces-next-15-drugs-selected-for-ira-negotiation https://advisory.avalerehealth.com/insights/cms-announces-next-15-drugs-selected-for-ira-negotiation#_comments Fri, 17 Jan 2025 19:16:10 +0000 https://avalere.com/?p=33795 On January 17, the Centers for Medicare & Medicaid Services (CMS) released the list of the next 15 Part D drugs that have been selected for Medicare negotiation for Initial Price Applicability Year (IPAY) 2027. The list release comes in advance of the February 1, 2025, statutory deadline and marks one of the final major…

The post CMS Announces Next 15 Drugs Selected for IRA Negotiation appeared first on Avalere Health Advisory.

]]> On January 17, the Centers for Medicare & Medicaid Services (CMS) released the list of the next 15 Part D drugs that have been selected for Medicare negotiation for Initial Price Applicability Year (IPAY) 2027. The list release comes in advance of the February 1, 2025, statutory deadline and marks one of the final major actions by the Biden administration before leaving office on January 20. The incoming Trump administration will now drive the Medicare negotiation process in the coming months.

The 15 selected drugs for IPAY 2027 were used by 5.3 million Medicare Part D beneficiaries over the relevant spending window (November 2023 to October 2024) and represent nearly $41 billion in total Part D gross covered prescription drug costs, or about 14% of total program spending, during that timeframe (See Table 1).

Table 1. Selected Drugs for IPAY 2027

Drug	Manufacturer	Commonly Treated Conditions	Total Part D Gross Covered Prescription Drug Costs (November 1, 2023 – October 31, 2024)
1. Ozempic/Rybelsus/ Wegovy	Novo Nordisk	Diabetes, CVD, obesity	$14.4B
2. Trelegy Ellipta	GSK	Asthma, COPD	$5.1B
3. Xtandi	Astellas/Pfizer	Prostate cancer	$3.2B
4. Pomalyst	Bristol Myer Squibb	Kaposi sarcoma, multiple myeloma	$2.1B
5. Ibrance	Pfizer	Breast cancer	$2.0B
6. Ofev	Boehringer Ingelheim	Idiopathic pulmonary fibrosis	$2.0B
7. Linzess	AbbVie	Chronic idiopathic constipation, IBS-C	$1.9B
8. Calquence	AstraZeneca	CLL/SLL, Mantle cell lymphoma	$1.6B
9. Austedo/Austedo XR	Teva	Chorea in Huntington’s disease, Tardive dyskinesia	$1.5B
10. Breo Ellipta	GSK	Asthma, COPD	$1.4B
11. Tradjenta	Boehringer Ingelheim/ Eli Lilly	Diabetes	$1.1B
12. Xifaxan	Bausch/Salix	Hepatic encephalopathy, IBS-D	$1.1B
13. Vraylar	AbbVie	Bipolar disorder, major depressive disorder, schizophrenia	$1.1B
14. Janumet/Janumet XR	Merck	Diabetes	$1.1B
15. Otezla	Amgen	Oral ulcers in Behcet’s disease, plaque psoriasis, psoriatic arthritis	$1.0B

CLL/SLL: Chronic lymphocytic leukemia/small lymphocytic lymphoma; COPD: Chronic obstructive pulmonary disease; CVD: Cardiovascular disease; IBS-C: Irritable bowel syndrome with constipation; IBS-D: Irritable bowel syndrome with diarrhea

Key Insights from the IPAY 2027 List

As manufacturers and other stakeholders look ahead to the next phase of the process, some key insights raise important considerations for therapeutic dynamics, access, and development incentives:

• As expected, four oncology drugs have been selected for IPAY 2027. Protected class status for these products will impact ceiling price calculations relative to current Part D net prices, likely leading to more significant savings with resulting Maximum Fair Prices (MFP).
• Chronic disease treatments (e.g., diabetes, COPD) also continue to dominate the list for Year 2 given the conditions’ high prevalence and, accordingly, high drug spending. The selection of these products may cause continued price erosion in chronic disease therapeutic areas. Drugs targeting neurologic diseases (e.g., schizophrenia, bipolar disorder, major depressive disorder, Tardive dyskinesia, Huntington’s disease) have also started to comprise a larger share of the selected drug list for similar reasons.
• The selection of a product that also has an indication for the treatment of obesity comes at a time when policymakers are considering expanding Medicare coverage of these treatments and raises interesting considerations. Of note, three brands have been selected together, likely because they have the same active moiety. This approach may indicate how similar products could be selected in future years. It also continues to draw attention to the fact that CMS is selecting products at the active moiety/ingredient level, which has major implications for investment and research and development.
• Three of the IPAY 2027 selected products were also listed as therapeutic alternatives to IPAY 2026 products, based on the recently released CMS MFP justifications. The selection of these products suggests that MFPs for Year 1 drugs could place further downward pressure on MFPs in Year 2.
• Products associated with significant increases in spending since 2022 experienced hastened timing of selection and underscore the dynamic nature of negotiation risk.
• CMS indicates that for Year 2 of the program, four drugs were determined to qualify for the small biotech exception, and no drugs were excluded from selection due to the biosimilar delay.
• CMS anticipates that the patient-focused roundtables and town hall event for the 15 selected drugs will occur in March and April 2025. Additional information is expected next month.

What’s Next

Manufacturers of the 15 selected drugs for IPAY 2027 will have until February 28 to enter into agreements with CMS. Evidence packages, including manufacturer-specific data and evidence about alternative treatments, is due to CMS by March 1. Other interested stakeholders must also submit any information on selected drugs and their therapeutic alternatives by this March 1 deadline. The negotiation period will officially run from February 28 to November 1, and CMS is expected to publish the MFPs for IPAY 2027 drugs by November 30, 2025. CMS is required to publish the MFP explanations for the IPAY 2026 products by March 1, 2026, in advance of the MFPs taking effect on January 1, 2027.

A Trusted Partner for IRA Negotiation

The IRA will continue to have wide-reaching impacts across the prescription drug market. An effective IRA negotiation preparation and response strategy requires informed analysis. With expertise in policy, evidence strategy, and market access, Avalere’s multidisciplinary team can help manufacturers understand the nuance and complexities of MFPs and interactions between the various IRA drug pricing provisions. Connect with us to learn more.

The post CMS Announces Next 15 Drugs Selected for IRA Negotiation appeared first on Avalere Health Advisory.

]]> https://advisory.avalerehealth.com/insights/cms-announces-next-15-drugs-selected-for-ira-negotiation/feed 0 https://advisory.avalerehealth.com/insights/three-takeaways-from-the-cms-mfp-justifications-for-ipay-2026 https://advisory.avalerehealth.com/insights/three-takeaways-from-the-cms-mfp-justifications-for-ipay-2026#_comments Mon, 13 Jan 2025 14:25:57 +0000 https://avalere.com/?p=33768 On January 2, the Centers for Medicare & Medicaid Services (CMS) released the required public explanations for the maximum fair prices (MFPs) of the first 10 drugs selected for the Medicare Drug Price Negotiation Program. While the Inflation Reduction Act (IRA) does not require CMS to release the price justifications until March 1, 2025, this…

The post Three Takeaways from the CMS MFP Justifications for IPAY 2026 appeared first on Avalere Health Advisory.

]]> On January 2, the Centers for Medicare & Medicaid Services (CMS) released the required public explanations for the maximum fair prices (MFPs) of the first 10 drugs selected for the Medicare Drug Price Negotiation Program. While the Inflation Reduction Act (IRA) does not require CMS to release the price justifications until March 1, 2025, this publication came earlier than expected in advance of the upcoming change in administration. The new Trump administration will take the helm for Year 2 of the Medicare negotiation program, with the next 15 selected drugs expected to be announced by February 1, 2025.

Three Key Takeaways

Avalere analyzed the newly released justifications, along with the MFPs released in August, and made the following initial observations:

1.  Level of Detail

CMS released two files for each selected drug: one that contains a brief explanation of the negotiation process, timeline, therapeutic alternatives, key outcomes of interest, and redacted negotiation meeting notes, and another that contains the redacted evidence packages submitted by manufacturers, as well as other third-party submissions. While the files explain the outcomes of interest identified by CMS for each drug and the therapeutic alternatives selected for each indication, they do not detail how the clinical and economic data specifically factored into each negotiated MFP. For each product, the agency includes the high-level effectiveness and safety outcomes of interest per indication, contextual considerations, and a bibliography of evidence used in the negotiation process.

In the rationales, CMS also highlights some patient input (e.g., ease of dosing and route of administration) as an important consideration throughout the negotiation process. These references are notable as manufacturers preparing for potential negotiation selection consider data points that would be compelling to CMS.

2. Weight of Value Elements and Manufacturer Data in MFPs

The rationales do not detail how CMS used manufacturer-specific data (e.g., research and development, federal financial support, patents, market data, etc.) to inform upward or downward MFP adjustments. The manner and degree to which CMS weighed manufacturer data when negotiating MFPs is unclear.

However, the rationales offer more insight into the value elements CMS used when negotiating MFPs. CMS states that it prioritized direct comparative evidence (e.g., head-to-head randomized control trials) while also reviewing mixed and/or indirect treatment comparisons and real-world evidence (when available) to holistically assess comparative evidence for a selected drug. Manufacturers can learn from the type and quality of the evidence CMS prioritized when preparing their own evidence package submissions.

3. Comparison of CMS-Identified Therapeutic Alternatives to Manufacturer ICR Proposals

CMS outlined its approach to identifying therapeutic alternatives by conducting a comprehensive review of data from diverse sources. These include drug classification systems frequently used for formulary development, Part D compendia indications, drug and drug class reviews, and input from patients. Additionally, CMS considered national guideline recommendations, Medicare utilization patterns, and other relevant factors.

Notably, for all selected drugs, CMS identified a different list of therapeutic alternatives compared to the options proposed by the primary manufacturer in their evidence submissions, highlighting potential differences in clinical and regulatory perspectives on treatment equivalence and substitution. In many cases, manufacturers proposed narrower lists of alternatives compared to CMS. Manufacturers tended to limit comparator products to closely related mechanisms or specific clinical comparators, frequently citing non-equivalence to their products.

Next Steps for Medicare Negotiation

The release of the CMS MFP justifications marks one of the final major milestones for initial price applicability year (IPAY) 2026 in advance of those prices taking effect on January 1, 2026. Attention will now turn to the release of the IPAY 2027 list in early 2025 and anticipation of new directions that the second Trump administration may take the program.

The new administration may explore regulatory flexibilities under the program, such as revisiting CMS’s current approach to defining the drugs that are eligible for selection or assessing generic or biosimilar competition in the market. However, it is also possible that the new Trump administration might seek to be more aggressive in negotiating MFPs relative to savings that CMS achieved for the IPAY 2026 products and could even informally consider international reference prices to inform pricing targets.

A Trusted Partner for IRA Negotiation

The IRA will continue to have wide-reaching impacts across the prescription drug market. An effective IRA negotiation preparation and response strategy requires informed analysis. With expertise in policy, evidence strategy, and market access, Avalere’s multidisciplinary team can help manufacturers understand the nuance and complexities of these MFPs and interactions between the various IRA drug pricing provisions. Connect with us to learn more.

 

 

 

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]]> https://advisory.avalerehealth.com/insights/three-takeaways-from-the-cms-mfp-justifications-for-ipay-2026/feed 0 https://advisory.avalerehealth.com/insights/medicare-prescription-payment-plan-may-help-enrollees-facing-more-coinsurance-in-2025 https://advisory.avalerehealth.com/insights/medicare-prescription-payment-plan-may-help-enrollees-facing-more-coinsurance-in-2025#_comments Tue, 07 Jan 2025 14:55:29 +0000 https://avalere.com/?p=33755 Previous Avalere analysis of the calendar year (CY) 2025 Part D formulary files found a substantial shift from copays to coinsurance among Part D plans. In 2025, 83% of standalone Prescription Drug Plans (PDPs) will have three coinsurance tiers, an increase from the 57% in 2024. For Medicare Advantage Prescription Drug Plans (MA-PDs), 63% will…

The post Medicare Prescription Payment Plan May Help Enrollees Facing More Coinsurance in 2025 appeared first on Avalere Health Advisory.

]]> Previous Avalere analysis of the calendar year (CY) 2025 Part D formulary files found a substantial shift from copays to coinsurance among Part D plans. In 2025, 83% of standalone Prescription Drug Plans (PDPs) will have three coinsurance tiers, an increase from the 57% in 2024. For Medicare Advantage Prescription Drug Plans (MA-PDs), 63% will have two or more coinsurance tiers in 2025, substantially more than the 18% in 2024. This means that more Part D plans will require coinsurance on both the non-preferred drug tier and the preferred brand tier in 2025. Increased use of coinsurance, especially when enrollees may have historically faced copays, may mean that more patients may benefit from the new Medicare Prescription Payment Plan, which allows participants to spread out-of-pocket costs more evenly over the remaining months of the plan year.

Impact Across Top Therapeutic Areas

Beneficiaries taking drugs commonly placed on the non-preferred drug and preferred brand tiers are likely to be most impacted by these shifts from copay to coinsurance and may face increased cost sharing on a per prescription basis as well as potentially higher total out-of-pocket costs in 2025.

Avalere examined drugs in therapeutic areas with the highest Part D spending to assess which beneficiaries may be more likely to see shifts from copays to coinsurance in 2025. Across the top therapeutic areas by Part D spend, beneficiaries taking asthma medications (antiasthmatic and bronchodilator agents), anticoagulants, antidiabetics, cholesterol drugs (antihyperlipidemics), and eye medications (ophthalmic agents) will experience the largest shifts from copays to coinsurance (Figure 1). From 2023 to 2025, use of coinsurance by all Part D plans for covered drugs increased by more than 30 percentage points on average in four of these five therapeutic areas (antiasthmatic and bronchodilator agents, anticoagulants, antidiabetics, and ophthalmic agents).

Figure 1: Percentage of Part D Covered Drugs with Coinsurance for Top Therapeutic Areas with Largest Shifts from Copays to Coinsurance, 2023–2025



Interactions with the Medicare Prescription Payment Plan

The shift from copays to coinsurance may increase OOP costs for certain medications. While per script OOP costs may increase for some beneficiaries, the lower OOP cap in 2025 is likely to mitigate significant increases in total annual OOP costs.

For beneficiaries who will experience higher OOP costs in 2025 compared to previous years, OOP cost increases for 2025 may make it more likely that these enrollees benefit from the Medicare Prescription Payment Plan. CMS requires Part D plans to notify certain beneficiaries about the availability of the Medicare Prescription Payment Plan–including notification at the point of sale for OOP costs of at least $600 per script and before the start of the plan year based on at least $2,000 in OOP spending prior to September 2024. However, some enrollees facing higher OOP costs in 2025 may not be proactively notified about the program and its potential benefits if their historical OOP spending did not meet the $2,000 threshold laid out by CMS. Manufacturers and other stakeholders should consider how these cost-sharing changes may result in unexpected OOP costs and consider which enrollees would benefit from greater awareness of the Medicare Prescription Payment Plan.

Looking ahead to 2026, the first set of maximum fair prices (MFPs) under the Medicare Drug Price Negotiation Program will also go into effect. Across all Part D plans, seven of the first 10 selected drugs were placed on copay tiers more than 85% of the time when covered in 2023. In 2025, coinsurance is used at least 40% of the time for virtually all of the covered IPAY 2026 products. While MFPs in 2026 may reduce OOP costs for products with coinsurance compared to 2025, beneficiaries could still pay more for these drugs compared to prior years, when copays were primarily used.

To learn more about the impacts of these Part D OOP changes for 2025 and beyond, connect with us.

Methodology

Avalere used the 2023, 2024, and 2025 Part D formulary files released by the Centers for Medicare & Medicaid Services, Prescription Drug Event (PDE) data, and MediSpan for this analysis. Avalere used PDE data to identify the therapeutic areas that correspond to the top 50 brand drugs by Part D spend in 2022. Drugs were then grouped into therapeutic areas based on MediSpan GPI groupings.

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]]> https://advisory.avalerehealth.com/insights/medicare-prescription-payment-plan-may-help-enrollees-facing-more-coinsurance-in-2025/feed 0 https://advisory.avalerehealth.com/insights/new-resource-state-statute-oncology-drug-coverage-report https://advisory.avalerehealth.com/insights/new-resource-state-statute-oncology-drug-coverage-report#_comments Mon, 06 Jan 2025 17:41:53 +0000 https://avalere.com/?p=32014 Understanding the impact of state statutes on payer coverage for cancer treatments is important as treatment landscapes continue to evolve. Statutes are enacted state laws that may authorize administrative regulations. As of November 2024, 41 states have statutes related to coverage of oncology treatments. These statutes have a direct effect on a variety of stakeholders,…

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]]> Understanding the impact of state statutes on payer coverage for cancer treatments is important as treatment landscapes continue to evolve. Statutes are enacted state laws that may authorize administrative regulations. As of November 2024, 41 states have statutes related to coverage of oncology treatments. These statutes have a direct effect on a variety of stakeholders, including patients, providers, and payers. Policymakers in most states have enacted statues that require coverage of off-label uses of drugs/biologics when specific criteria are met.

One critical aspect of the statutes discussed in the report is the use of clinical compendia as the basis for determining the medical appropriateness of off-label cancer treatments. As there is no federal law regarding coverage of off-label uses of medications in the commercial payer space, commercial payers’ coverage criteria (e.g., prior authorization) varies across the states where payers operate. Payer policies may align with state statute, expand beyond statute, or be more restrictive. It may be complicated to keep track of where state statute would conflict with, and perhaps, override a payer coverage policy. Statutes may refer to compendia using reference or authoritative language, or by name (e.g., American Hospital Formulary Service Drug Information, National Comprehensive Cancer Network [NCCN]: NCCN Drugs & Biologics Compendium [NCCN Compendium®]).

What is in The Report?

Avalere’s report provides an overview of state statutes on commercial payer coverage of drugs/biologics that have been (1) approved by the Food and Drug Administration and (2) recognized for additional off-label use in clinical compendia for the treatment of cancer. State statute websites current as of November 2024 were used to review and analyze statutes in all 50 states, the District of Columbia, and Puerto Rico that apply to the process of how compendia are considered for determining coverage. It highlights how these statutes can vary, detailing which compendia are mentioned and any cancer-specific language.

The State Statute Drug Coverage Report answers key questions, including:

• Which states have statutes related to the use of compendia to determine coverage?
• Which states have cancer-specific statutes?
• Which compendia are recognized by each state in determining coverage and reimbursement?

The report provides an overview of state statutes in which coverage requirements are mentioned, and identifies if language confirms application to cancer, which compendia are used, how compendia are used, and if NCCN is referenced. This report serves as a supplement to other payer coverage tracking of drugs/biologics, as the statutes in this report may override individual drug/biologic policy coverage criteria. The goal of this report is to support coverage and reimbursement for drug/biologic therapies when used for the treatment of cancer; it may be of interest to life science companies who are supporting providers in patient cases of appeal for declined coverage.

This report is not an interpretation of individual treatment decisions, nor is it a recommendation for off-label usage or a guarantee of payer coverage. Notably, these are state-regulated statutes only and do not apply to self-funded, ERISA-exempt plans. It does not constitute legal advice nor opinion; rather, it is for general informational purposes only. This report can serve as an educational tool, providing insights into off-label oncology treatment policies from state perspectives. It is intended to help stakeholders navigate the complexities of using compendia to support coverage and reimbursement of cancer treatments.

Access The Report

To purchase the report or speak with an Avalere expert, contact us here.

Avalere’s experts in commercialization, regulatory, and policy strategy can help manufacturers, patient advocacy organizations, and other stakeholders analyze the statutes and access implications to off-label treatments and help develop strategies to mitigate delays in patient access to oncology treatments.  This report offers comprehensive analysis along with recently updated state legislature.

 

 

 

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]]> https://advisory.avalerehealth.com/insights/new-resource-state-statute-oncology-drug-coverage-report/feed 0 https://advisory.avalerehealth.com/insights/ira-negotiation-impact-on-part-b-beneficiary-oop-costs https://advisory.avalerehealth.com/insights/ira-negotiation-impact-on-part-b-beneficiary-oop-costs#_comments Wed, 04 Dec 2024 20:51:19 +0000 https://avalere.com/?p=33665 The Inflation Reduction Act’s (IRA) Medicare Drug Price Negotiation Program (MDPNP) allows the Centers for Medicare & Medicaid Services (CMS) to negotiate Maximum Fair Prices (MFPs) for a subset of high-spend drugs. MFPs for the first 10 Part D negotiated products will take effect in 2026. Starting in 2028, physician-administered drugs covered under Part B…

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]]> The Inflation Reduction Act’s (IRA) Medicare Drug Price Negotiation Program (MDPNP) allows the Centers for Medicare & Medicaid Services (CMS) to negotiate Maximum Fair Prices (MFPs) for a subset of high-spend drugs. MFPs for the first 10 Part D negotiated products will take effect in 2026.

Starting in 2028, physician-administered drugs covered under Part B will also be included in the MDPNP. The legislation defines the “ceiling” for the MFP based on the non-federal average manufacturer price (non-FAMP) and the number of years since a drug’s Food and Drug Administration approval. For Part B negotiated drugs, the MFP ceiling calculation is based on the lower of a manufacturers’ average sales price (ASP) or the applicable percentage of the average non-FAMP. Additionally, Medicare fee-for-service (FFS) beneficiary coinsurance is lowered accordingly based on the MFP.

Avalere evaluated the share of Medicare FFS beneficiaries most likely to benefit from the reduced out-of-pocket (OOP) costs stemming from the first 10 Part B drugs likely to be negotiated under the MDPNP.[1]

Supplemental Coverage in Part B

For drugs and services covered under Part B, Medicare FFS beneficiaries pay a 20% coinsurance amount after their deductible is met. However, many Medicare FFS beneficiaries have some source of supplemental coverage that helps with their OOP costs (e.g., employer-sponsored supplemental insurance, Medigap, Medicaid). Avalere found that approximately 88% of Medicare FFS beneficiaries in 2020 and 89% in 2021 had some form of supplemental coverage that helped cover part or all of their 20% coinsurance liability.

Impact of Negotiation on OOP Costs in Part B

Avalere estimated the first 10 Part B drugs likely to be subject to IRA negotiation based on the program methodology and historical Medicare FFS claims data. Avalere’s analysis of 2020 and 2021 survey data showed that less than 1% of Medicare FFS beneficiaries in 2020 and 2% in 2021 used any of the first 10 Part B drugs likely to be selected for negotiation. Among the Medicare FFS beneficiaries using any of the first 10 Part B drugs likely to be negotiated, most have some form of supplemental coverage, primarily through Medigap plans and employer-sponsored coverage. Avalere estimated that the proportion of these beneficiaries with no supplemental coverage was 5% in 2020 and 6.1% in 2021. Consequently, Avalere finds that among all Medicare FFS beneficiaries, between 0.03% and 0.1% would experience OOP cost savings from the first 10 Part B drugs likely to be negotiated.

What’s Next?

By February 1, 2025, CMS will announce the next 15 Part D drugs selected for negotiation in 2027, with Part B drugs becoming eligible for negotiation in 2028. CMS is expected to release draft guidance for Part B negotiations and the related MFP effectuation process in 2025.

Methodology

Avalere analyzed the 2020 and 2021 Medicare Current Beneficiary Survey (MCBS) data, including cost and utilization claims files, to estimate the proportion of Medicare FFS beneficiaries with supplemental coverage. Avalere then identified utilization of the first 10 Part B drugs likely to be negotiated under the MDPNP using the cost and utilization files. The MCBS data provides a representative sample of Medicare FFS beneficiaries and their claims. All results were weighted to reflect a national sample of Medicare FFS beneficiaries.

Learn More

To learn more about the impact of Medicare drug price negotiation, as well as other IRA drug pricing provisions, connect with an Avalere expert today.

Funding for this research was provided by PhRMA; Avalere retained full editorial control.

[1] Avalere estimates the first 10 Part B drugs likely to be negotiated include Orencia, Opdivo, Keytruda, Botox, Nucala, Ocrevus, Tecentriq, Cimzia, NPlate, and Entyvio.

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]]> https://advisory.avalerehealth.com/insights/ira-negotiation-impact-on-part-b-beneficiary-oop-costs/feed 0 https://advisory.avalerehealth.com/webinars/the-medicare-prescription-payment-plan-impact-to-part-d-stakeholders-in-2025 https://advisory.avalerehealth.com/webinars/the-medicare-prescription-payment-plan-impact-to-part-d-stakeholders-in-2025#_comments Tue, 05 Nov 2024 18:54:40 +0000 https://avalere.com/?p=33296 With several changes to the Medicare Part D benefit that will be implemented in Plan Year (PY) 2025, it is essential for healthcare providers to stay informed about these updates and their impact on patient care and prescription cost management to facilitate ongoing support for Medicare enrollees. In this webinar, Avalere will explore the details…

The post The Medicare Prescription Payment Plan: Impact to Part D Stakeholders in 2025 appeared first on Avalere Health Advisory.

]]> With several changes to the Medicare Part D benefit that will be implemented in Plan Year (PY) 2025, it is essential for healthcare providers to stay informed about these updates and their impact on patient care and prescription cost management to facilitate ongoing support for Medicare enrollees. In this webinar, Avalere will explore the details of these Part D benefit changes, with a focus on the new Medicare Prescription Payment Plan.

In this webinar, you will learn:

• Key differences in the Part D benefit for 2025, including an overview of the Medicare Prescription Payment Plan
• Who is likely to benefit from the Medicare Prescription Payment Plan and how they will be identified, what the process is for enrollment, and other key details about program operations and communications with patients enrolled in a Part D plan
• Potential impact of Medicare Prescription Payment Plan on monthly costs for enrolled patients who are likely to benefit and unlikely to benefit
• Interaction with other support for Part D patients
• Example cost scenarios with the Medicare Prescription Payment Plan

This webinar is designed for those who may benefit from a better understanding of the latest changes to Medicare Part D who may work in and with healthcare provider offices to support patient access.

Sponsored by and developed in collaboration with Regeneron® and Sanofi®.

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]]> https://advisory.avalerehealth.com/webinars/the-medicare-prescription-payment-plan-impact-to-part-d-stakeholders-in-2025/feed 0 https://advisory.avalerehealth.com/insights/340b-purchase-data-highlights-continued-program-growth https://advisory.avalerehealth.com/insights/340b-purchase-data-highlights-continued-program-growth#_comments Thu, 24 Oct 2024 22:01:05 +0000 https://avalere.com/?p=33406 On October 18, the Health Resources & Services Administration (HRSA) released its annual update on 340B covered entity purchases for 2023. The agency highlighted that under the 340B program, drug purchases at discounted 340B prices reached a record of $66.3 billion in 2023, representing a 24% year-over-year increase. These data allow stakeholders to better understand…

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]]> On October 18, the Health Resources & Services Administration (HRSA) released its annual update on 340B covered entity purchases for 2023. The agency highlighted that under the 340B program, drug purchases at discounted 340B prices reached a record of $66.3 billion in 2023, representing a 24% year-over-year increase. These data allow stakeholders to better understand the size of the 340B program and its use by different covered entity types.

Disproportionate share hospitals (DSHs) made approximately $51.9 billion in 340B purchases in 2023, accounting for approximately 78% of total 340B drug purchases. The next largest category of purchases was for health center programs, accounting for about $3.6 billion of total purchases (5.4%), followed by children’s hospitals, which made up roughly $2.1 billion of total purchases (3.2%). The data reported by HRSA is from the Prime Vendor Program (PVP), which captures most, but not all, 340B transactions.

Continued 340B Program Growth and Stakeholder Responses

Over the past decade, the 340B program has continued to grow significantly.

Figure 1. 340B Drug Sales from 2015-2023 (Billions)



Among government sponsored and funded programs, 340B drug spending is now second in size only to that of Medicare Part D’s. 340B purchases outpace net Medicaid spending on prescription drugs; KFF recently projected $51 billion in Medicaid net spending (spending post rebates) on prescription drugs in FY 2023. The 340B program growth trends have prompted manufacturers to impose contract pharmacy restrictions, increased stakeholders’ interest in potential rebate models, and have led policymakers to increase attention on the program and propose reforms.

A Closer Look at the Top 10 Drugs Based on 340B Sales

According to HRSA, the top-10 340B drugs accounted for roughly one-third of all 340B purchases in 2023. Avalere compared the 2023 340B purchases for these 10 drugs to the most recent year of data on Medicare Part B and Part D spending in the CMS Drug Spending Dashboards. While there is variation across individual drugs, 2023 340B purchases for these 10 drugs in total was about $3.5 billion higher than Part B and Part D spending on these 10 drugs in 2022 (see Table 1).

Table 1. 2023 340B Sales Compared to 2022 Medicare Spending for Top 10 340B Drugs

Brand Name	Primary Indication	2023 Total 340B Sales	2022 Total Medicare Part B + D Spending
Keytruda	Oncology	$6,905,377,755	$5,027,119,004
Biktarvy	HIV	$3,577,083,273	$2,703,581,195
Opdivo	Oncology	$1,953,824,181	$1,893,787,032
Darzalex Faspro	Oncology	$1,891,559,523	$1,618,324,049
Ocrevus	Oncology	$1,850,213,455	$816,698,392
Trikafta	Cystic Fibrosis	$1,817,226,143	$646,868,282
Humira (CF) Pen	Immunology	$998,809,804	$3,694,000,753
Descovy	HIV	$969,510,516	$574,036,753
Entyvio	Immunology	$949,744,300	$749,730,440
Durvalumab	Oncology	$889,594,527	$575,101,380
TOTAL		$21,802,943,477	$18,299,247,129

Source: Data from HRSA and CMS

Conclusion

Given the latest figures demonstrating continued 340B program growth, the conversation around reform is likely to continue in 2025 with bipartisan interest regardless of election outcomes in early November. In the 118th Congress, multiple bills (e.g., 340B SUSTAIN Act, 340B ACCESS Act) have been introduced, including proposals to ensure that patients benefit more directly from discounted prices, to improve program transparency, and to codify the role of contract pharmacies in the program.

Staying ahead of the latest trends and 340B policy developments will be critical for stakeholders looking to engage in a 340B reform conversation in early 2025. To learn more about how Avalere can support you on 340B policy and strategy, connect with us.

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]]> https://advisory.avalerehealth.com/insights/340b-purchase-data-highlights-continued-program-growth/feed 0 https://advisory.avalerehealth.com/insights/stakeholders-can-engage-usp-during-dc-2025-comment-period https://advisory.avalerehealth.com/insights/stakeholders-can-engage-usp-during-dc-2025-comment-period#_comments Thu, 17 Oct 2024 18:16:50 +0000 https://avalere.com/?p=33351 The US Pharmacopeia Convention (USP) is a nonprofit organization that disseminates public compendial quality standards for medicines and develops two drug classification systems: the Medicare Model Guidelines (MMG) for Part D plans and the Drug Classification (DC) for non-Part D plans. The classification systems group eligible drugs into categories and classes that health plans can…

The post Stakeholders Can Engage USP During DC 2025 Comment Period appeared first on Avalere Health Advisory.

]]> The US Pharmacopeia Convention (USP) is a nonprofit organization that disseminates public compendial quality standards for medicines and develops two drug classification systems: the Medicare Model Guidelines (MMG) for Part D plans and the Drug Classification (DC) for non-Part D plans. The classification systems group eligible drugs into categories and classes that health plans can use in their formulary development process. While there are limited formal requirements regarding how health plans interact with the USP’s classification systems, the USP’s decisions on how drugs are grouped within categories and classes can have a downstream impact on plan formularies, coverage requirements, and patient access.

The USP Releases Two Classification Sets to Guide Formulary Development

The Medicare Prescription Drug Improvement and Modernization Act of 2003 requires the USP, in collaboration with stakeholders, to create a list of categories and classes for Medicare Part D drug formulary development. The Medicare Prescription Drug Benefit Manual enables Part D plans to align their formulary structure with the Medicare Managed Care Manual (MMG), without penalties for non-compliance. Part D plans must adhere to specific coverage requirements, however, such as the “two drugs per class” rule and six protected classes,¹ making USP’s organization of drugs in the MMG crucial for patient access.

The USP updates the MMG every three years, with the latest version (v9.0) finalized in September 2023 for plan years 2025–2026. Additionally, the USP MMG influences prescription drug coverage in commercial plans by ensuring that health plans cover either the same number of drugs in each USP category as specified in a state’s Essential Health Benefits (EHB) benchmark plan or at least one drug per class.

At the request of health plans with other books of business (i.e., non-Medicare Part D plans), the USP launched the first version of the DC in 2019. The DC includes medications beyond those specifically covered under the Medicare Part D benefit—such as drugs used to treat symptomatic relief of cough and cold and to promote fertility—and is more comprehensive than the MMG.² Unlike the three-year update cycle of the MMG, the DC is updated annually, which offers stakeholders more opportunities to engage the USP.

The USP DC 2025 Draft

On October 1, the USP released the DC 2025 Draft. The draft includes the USP’s suggested classification for drugs approved by the Food and Drug Administration (FDA) from November 2023 to July 2024. The USP will also consider drugs approved between August and October 2024 for the final publication. One clear differentiation from MMG is that DC offers a third level of classification known as pharmacotherapeutic groups (PGs), which the USP defines as an attribute of a drug, providing additional informational groupings on drugs based on therapeutic use or pharmacology. ​

Pending public comment and final approval, the USP DC 2025 Draft proposes the following changes. Drugs approved after October 31 will be addressed in the next version.

New Classes:

• Blood Products and Modifiers: Added “Erythropoiesis Promoters”

New Pharmacotherapeutic Groups:

• Antineoplastics: Added “Anti-CD3/DLL3”
• Blood Products and Modifiers: 7 new PGs, including various Erythropoiesis Promoters and Blood Component Deficiency/Replacement groups
• New PGs in Cardiovascular Agents, Immunological Agents, Respiratory Tract/Pulmonary Agents, and Sleep Disorder Agents

New Drugs:

• Total: 90 new FDA-approved drugs across 22 classes
• Notable additions include drugs in Antibacterials, Antidementia, Antineoplastics, Blood Products, Cardiovascular Agents, and Immunological Agents

Figure 1. The USP MMG and DC Timeline



Note: Based on communication with the USP, work on MMG v10.0 will likely begin in 2026, with final timelines contingent on agreements with CMS. MMG v10.0 is anticipated to be released in the fall of 2026, and USP expects v10.0 will be effective from PY 2027-2029. However, given that formularies must be submitted to CMS by the first Monday in June for the subsequent plan year, Avalere expects MMG v9.0 to be effective through PY 2027 and MMG v10.0 to be effective from PY 2028 to 2030.

How to Engage

The USP invited stakeholders, including life sciences companies, to engage and offer feedback on the proposed updates. These periodic revisions are intended to account for the market entrance of newly approved drugs, drugs with newly approved indications, and reclassification of existing drugs as needed. Through October 31, 2024, stakeholders have two opportunities to offer feedback on the proposed 2025 the USP DC revisions:

• One-on-One Meetings with the USP: Stakeholders can email the USP to request a 30-minute meeting to review the USP’s proposed changes.
• Comment Submission: Stakeholders can submit written comments via an online form provided by the USP, highlighting changes they believe the USP should consider before finalizing the DC.

When preparing to engage the USP with feedback on the proposed updates to the classification systems, stakeholders should be prepared to offer alternative placements, understanding the benefits and tradeoffs. Avalere can help life sciences companies and other stakeholders organize proactively in preparation for engagement with the USP.

For planning engagement with the USP DC 2025 Draft, and to learn more about how Avalere can support you, connect with us.

¹ When Congress created the Medicare Part D program, it required plan formularies to include at least two drugs per class to ensure that beneficiaries would have access to treatments based on their needs. The CMS identified categories and classes of clinical concern, commonly known as the six protected classes, and required Part D plans to cover “all or substantially all drugs” within each class. These protected classes include anticonvulsants, antidepressants, antineoplastics, antipsychotics, antiretrovirals, and immunosuppressants.

² In the proposed NBPP for PY 2025, CMS requested feedback on the potential transition from the USP MMG to the USP DC system for classifying prescription drugs covered as EHB. Previously, CMS sought input on alternative systems, including the American Hospital Formulary Service (AHFS) and the USP DC.

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