CMS guidelines finalize process for second cycle of the Medicare Drug Price Negotiation Program

The draft guidance outlines how the US Centers for Medicare & Medicaid Services intends to implement the Medicare Drug Price Negotiation Program for the second round of drugs subject to price controls in 2027.

Following publication of the draft guidance in May 2024, the US Centers for Medicare & Medicaid Services (CMS) has finalized guidance for the next phase of the Medicare Drug Price Negotiation Program (the ‘Negotiation Program’). The extensive, 313-page guidance builds upon the lessons learned from the first round, where CMS announced the negotiated prices for 10 selected drugs in August. The guidance also considers the ‘significant comments’ the agency received in response to May’s draft guidance.

This second cycle of negotiations will focus on selecting and negotiating prices for up to 15 additional Part D drugs, which will be announced by February 1, 2025. Negotiations with participating drug companies will take place throughout 2025, with the newly negotiated prices for these drugs set to become effective on January 1, 2027. There is growing speculation about which drugs may be selected in the next round.

The negotiated prices for the first 10 drugs from the initial cycle will take effect starting January 1, 2026, marking the beginning of CMS’s effort to reduce costs under the Negotiation Program. CMS predicts the negotiated prices will save Medicare beneficiaries $1.5 billion in out-of-pocket costs when they take effect in 2026. These savings come on top of other provisions in the Inflation Reduction Act, such as the new annual cap of $2000 on out-of-pocket drug costs for those with Medicare prescription drug coverage, which will start in January 2025.

Laying the groundwork for future negotiations

The final guidance outlines the requirements for discussions with drug companies to ensure that Medicare beneficiaries have access to negotiated prices in 2026 and 2027. This also includes procedures for Medicare Part D plans, pharmacies, and other dispensing entities. In response to stakeholder feedback, CMS has revised the timing of negotiation meetings between CMS and drug companies, allowing companies to better assess CMS’s initial offer and engage in discussions before formally responding. The guidance also introduces data exchange requirements and optional payment tracking between pharmacies, participating drug companies and CMS through the Medicare Transaction Facilitator Data Module (MTF DM), “to ensure that eligible individuals with Medicare and the pharmacies that serve them have access to the maximum fair prices.”

Strengthened patient engagement

One notable change to the guidance is the revamped format of the ‘patient listening sessions’, which allowed patients to provide input on how drug prices impact their access to necessary medications. Many of the comments criticized the lack of patient engagement in the first negotiation process, citing the need for, “patient-focused events that promote discussion instead of events that are listen-only.” In the new guidance, CMS has introduced a more structured approach to these sessions, explaining they will conduct up to 15, “patient-focused roundtable events” that “foster more meaningful engagement and input from participants.” These events will be organized by condition (when applicable) and include patients, patient advocacy organizations, and caregivers. Clinicians will have the opportunity to participate in a town hall meeting organized by CMS, which will also be open to other stakeholders such as researchers, manufacturers, and the public, “ensuring the process is as transparent and inclusive as possible.”

Real-world evidence and its role in negotiations

The guidance places greater emphasis on the role real-world evidence (RWE) in multiple areas of the Medicare Drug Price Negotiation Program. CMS has revised its definition of “All Other R&D Direct Costs” to include expenses related to generating RWE submitted to the FDA, recognizing its role in supporting drug safety and effectiveness. Additionally, CMS will consider RWE when reviewing factors related to the clinical benefit, therapeutic alternatives, and other relevant aspects during the drug price negotiation process. CMS also encourages the submission of analyses or studies leveraging real-world data (RWD) from sources such as patient registries by clinicians, patients, caregivers, manufacturers, and researchers, and will prioritize methodologically rigorous research, “including both observational research and research based on randomized samples,” in its review. Furthermore, CMS will utilize RWE, internal analytics, and expert consultations to evaluate the clinical benefits of selected drugs compared to alternatives, helping shape initial offers for negotiated prices.