Healthcare & Life Sciences: Drug Pricing Digest — Number 51

Inflation Reduction Act, Healthcare Reform, and General Developments

CMS RELEASES PROPOSED 2026 PHYSICIAN FEE SCHEDULE

The Centers for Medicare & Medicaid Services (CMS) released the calendar year 2026 Physician Fee Schedule (PFS) proposed rule, which was published in the Federal Register on July 16, 2025. The comment period ends on September 12, 2025.

The PFS proposed rule addresses the interplay between requirements of the Inflation Reduction Act (IRA) and the Part B program.

• Part D inflation rebates and 340B units: The IRA provides that 340B units are to be excluded from the Part D inflation rebate calculation beginning January 1, 2026. In the PFS proposed rule, CMS proposes a claims-based methodology to identify and remove 340B units by evaluating whether prescription drug event records are potentially 340B-eligible based on prescriber affiliation with registered covered entities and pharmacy designation as a 340B contract pharmacy. CMS also plans to establish a 340B claims data repository where covered entities can voluntarily submit Part D claims data to help refine the exclusion methodology. The proposed approach represents CMS’s latest effort to implement the statutory requirement to exclude 340B units from Part D rebate calculations.
• Part B inflation rebate baseline data: CMS proposes that if baseline data are not available for a drug in the baseline or benchmark quarter, “CMS will use the third full calendar quarter after the Part B rebatable drug is assigned a billing and payment code as the payment amount benchmark quarter.” Further, “if a published payment limit is not available for the applicable payment amount benchmark quarter, we are proposing to calculate the payment amount … using positive ASP or positive WAC data reported by manufacturers to the ASP Data Collection System.” But if such data are not available, “we are proposing to use WAC data from other public sources for the given quarter to calculate the payment amount.”
• Maximum fair price (MFP) and average sales price (ASP): CMS proposes that “units of selected drugs sold at MFP are included in the calculation of the manufacturer’s ASP … effective January 1, 2026,” because these units are not excluded from the ASP calculation under the statute and based on CMS’s assertion that these units are included in Medicaid Best Price.

The PFS proposed rule addresses other topics as well, including:

• Revisions to the bona fide service fee definition, particularly as to the standard a manufacturer must apply for determining whether a service fee is passed through, and how fair market value should be determined
• Adoption of a bundled sale definition for purposes of the ASP calculation that tracks, but is not identical to, the Medicaid bundled sale definition

Sources: BloombergLaw, InsideHealthPolicy (first, second), 340B Report.

CMS RELEASES PROPOSED 2026 HOSPITAL OUTPATIENT PROSPECTIVE PAYMENT SYSTEM AND AMBULATORY SURGICAL CENTER RULE

CMS also released the calendar year 2026 Outpatient Prospective Payment System (OPPS) proposed rule, which was published in the Federal Register on July 17, 2025. The comment period ends on September 15, 2025.

Among other things, the OPPS proposed rule addresses how CMS intends to reduce future payments to hospitals for services to “offset” the payments CMS previously made to 340B covered entities as part of unwinding the Part B payment methodology that was struck down by the Supreme Court. We discussed the Court’s decision in issue No. 30 of this digest.

CMS also indicates that “for payment to be available under Medicare Part B for covered outpatient drugs of a manufacturer, the manufacturer must have entered into and have in effect” a Medicaid National Drug Rebate Agreement (NDRA). CMS then identifies the J-Codes assigned to products by manufacturers with no NDRA in place, in table 66 on page 33651 of the proposed rule, and states that “if the manufacturers, or labelers, of these products do not promptly enter into a Medicaid NDRA, Medicare Part B payment will no longer be available for these products.”

Sources: InsideHealthPolicy, StatNews, BloombergLaw (first, second, third), 340B Report (first, second).

MFN DRUG PRICING POLICY PROMPTS DIRECT-TO-CONSUMER ARRANGEMENTS

A joint venture of two manufacturers has adopted a direct-to-consumer distribution model for its drug, with the aim to make the drug available at a discount to under- and un-insured patients. The arrangement reportedly came “after discussions with the Trump administration.” Another manufacturer announced that it is considering a similar arrangement and is reportedly also “in talks” with the administration. As we reported in issue No. 46 of this digest, the executive order regarding the most favored nation (MFN) pricing policy instructs the Department of Health and Human Services (HHS) to “facilitate direct-to-consumer purchasing programs for pharmaceutical manufacturers that sell their products to American patients at the most-favored-nation price.”

Sources: Wall Street Journal, BloombergLaw, Financial Times, Scrip.

FDA NATIONAL PRIORITY VOUCHER PROGRAM ACCEPTS APPLICATIONS

The new Commissioner’s National Priority Voucher (CNPV) program, which the Food and Drug Administration (FDA) announced in June, has begun accepting applications. The posted eligibility criteria have been revised to include “increasing affordability,” which “could include a company that lowers the U.S. price of a drug or drugs consistent with Most Favored Nation pricing or reduces other downstream medical utilization to lower overall healthcare costs.” This change follows remarks by the FDA commissioner that we reported in issue No. 50 of this digest. Stakeholders continue to discuss the legality of FDA considering drug pricing.

Sources: InsideHealthPolicy (first, second), Endpoints News.

OIG ADVISORY OPINIONS ADDRESS COMPANION DIAGNOSTICS AND PATIENT ASSISTANCE PROGRAMS

The Office of Inspector General (OIG) issued two favorable advisory opinions with implications for pharmaceutical manufacturers.

In a favorable advisory opinion (AO 25-07) published on June 27, 2025, OIG addressed a pharmaceutical manufacturer’s program to sponsor free companion diagnostic testing for patients with certain conditions. As described in the opinion, the manufacturer pays a fixed fee for each FDA-approved test the laboratory performs to determine whether patients have a specific deficiency, making them eligible for the manufacturer’s drug, and the laboratory does not otherwise bill any patient, payor, or third party for testing performed under the arrangement.

While OIG acknowledged that the arrangement implicates the Anti-Kickback Statute, it found the risk of fraud and abuse sufficiently low due to key safeguards: (i) the test was just as likely to show that the drug was not indicated and, therefore, a competitor drug might be prescribed; (ii) the providers do not receive any remuneration from the manufacturer in connection with the arrangement; (iii) the manufacturer does not proactively provide information about the arrangement directly to providers or patients and does not require or otherwise incentivize providers who order the test to recommend or prescribe the manufacturer’s products; (iv) the manufacturer receives no patient- or provider-identifiable data; (v) field personnel cannot access program data, discuss the drug when promoting the testing program, or distribute materials that take into account a provider’s test usage or prescribing history; and (vi) the laboratory is contractually prohibited from marketing activities. OIG concluded that the arrangement also satisfies the “promotes access to care” exception to the Beneficiary Inducements Civil Monetary Penalty (CMP).

In a second advisory opinion (AO 25-06), which was released on the same day, OIG similarly took a favorable position on a pharmaceutical manufacturer’s patient assistance program to provide transportation, lodging, and other ancillary, per diem support to eligible patients receiving the requester’s stem cell-based gene therapy. OIG concluded that certain mitigating factors sufficiently decreased the risk of fraud and abuse. In its Anti-Kickback Statute analysis, OIG noted that (i) the support removes barriers to access for a onetime medically necessary treatment provided at a limited number of qualified facilities and facilitates compliance with patient care instructions (e.g., in instances where an extended hospital stay is necessary), (ii) the manufacturer does not authorize support for any expenses which are otherwise covered, and (iii) the manufacturer does not promote the arrangement to physicians or caregivers as a reason to prescribe the product. OIG also determined that the arrangement meets the “promotes access to care” exception to the Beneficiary Inducements CMP.

Source: BioWorld.

STAKEHOLDER COMMENTS TO IPAY 2028 PROPOSED GUIDANCE

As we discussed in issue No. 50 of this digest, the comment period for the IPAY 2028 draft guidance closed on June 26, 2025. One topic commenters reportedly viewed negatively is the revised approach to fixed dose combination products.

Sources: BloombergLaw (first, second).

CONTINUED FOCUS ON THE CGT ACCESS MODEL

CMS announced that the Cell and Gene Therapy (CGT) Access Model, which we discussed in issues No. 43 and No. 45 of this digest, is proceeding, and that 33 states along with the District of Columbia and Puerto Rico have enrolled.

Sources: BioWorld, BloombergLaw, InsideHealthPolicy, Scrip.

Medicaid Drug Rebate Program (MDRP)

CMS ISSUES MANUFACTURER RELEASE

On July 25, 2025, CMS published Manufacture Release No. 121, which provides additional information on three topics addressed in the CMS 2024 final rule that, among other things, implemented the Medicaid Services Investment and Accountability Act of 2019 (MSIAA).

• “Covered outpatient drug” (COD) definition: The final rule expanded the COD definition by modifying when a drug is considered to be “directly” reimbursed. The release explains that “if a single payment is made for a service that includes a drug (bundled payment), and that drug would have otherwise satisfied other portions of the definition of COD, that drug would not be eligible for a rebate because it was not directly reimbursed. However, ‘direct reimbursement’ for a drug would include a single payment to a provider when the provider’s claim identifies the drug and an amount directly attributable to the drug and such arrangements are therefore eligible for a rebate.”
• “Market date” definition: The same regulation also implemented a “market date” definition, which previously had existed only in guidance. The release attempts to further clarify the new definition.
• Rebate disputes: The release provides further detail regarding the time limitation that the final rule imposes on manufacturer disputes of state Medicaid rebate invoices. CMS explains that “under the 12-quarter time limit, a manufacturer may only initiate a dispute, request a hearing, or seek an audit of a state regarding state drug utilization data during a period not to exceed 12 quarters from the last day of the quarter in which the postmark date of the state invoice occurs.”

With contributions to technical updates from Riparian.

340B Program

REBATE MODEL GUIDANCE AT OMB; LITIGATION CONTINUES

Health Resources and Services Administration (HRSA) guidance regarding rebate models remains in review at the Office of Management and Budget (OMB). Reportedly, stakeholders continue to meet with the Trump administration to discuss the issue.

Source: 340B Report.

Litigation regarding 340B rebate models, which we discussed in issues No. 46, No. 47, and No. 50 of this digest, continues at the appellate level.

Sources: 340B Report (first, second).

ADDITIONAL STATES ADOPT CONTRACT PHARMACY LAWS

More states have enacted or proposed legislation that would bar drug manufacturers from restricting contract pharmacy access. Some bills would require covered entities to make disclosures regarding 340B discounts. We note that legislative action related to the 340B program may have occurred in other states but has not yet been reported in the trade press.

Source: 340B Report.

MANUFACTURER CHALLENGES TO STATE 340B LAWS CONTINUE

Lawsuits challenging the 340B laws enacted by various states continue.

Sources: 340B Report (first, second, third, fourth).

Medicare Part B

No developments to report.

Medicare Part D

No developments to report.

State Law Developments

No developments to report.