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.