The results of the inaugural Medicare drug price negotiations later this year will have implications beyond setting the price CMS pays for the first 10 drugs to go through the process. It will also set the tone for future rounds of negotiations and set expectations for drugmakers.
That’s why CMS must ensure transparency, clarity and predictability by providing detailed guidance on comparator drug selection and the evaluation of evidence, according to health policy researchers at the D.C.-based Duke-Margolis Center for Health Policy.
“CMS’s choices about the negotiation framework will be revealed in real time, setting precedence for future years and sending powerful signals to the pharmaceutical industry about investment priorities,” Nitzan Arad, LLM, and colleagues write in an opinion piece published April 9 in Health Affairs.
The Inflation Reduction Act provided the general approach to negotiations, in which an initial offer and maximum fair price ceiling are set by an assessment of a drug’s clinical benefit and comparative effectiveness relative to comparators. This initial price can also be adjusted based on a variety of manufacturer-submitted data, including research and development costs.
This is where the details become important, Arad and colleagues, and CMS should be clear about exactly how comparison drugs are selected as well as how manufacturers' own data will be used in the negotiations. As an example, drugs from separate classes can be compared during negotiations as a way of supporting price reductions, but explicit criteria on how dissimilar comparators are chosen will be essential.
“This would help ensure that the pharmaceutical industry has a clear understanding of CMS's expectations, particularly regarding the types of comparative effectiveness evidence that will be important for negotiations,” the authors write. “Such clarity could encourage investment in the generation of evidence that is directly relevant to Medicare beneficiaries, potentially leading to the development of new drugs and drug categories that are of high value to this population.”
Likewise, CMS has said it will look at manufacturer-submitted data like research costs or government support, but it hasn't outlined a transparent and consistent process for how this data will be used by negotiators.
“The range of drugs subject to price negotiation will expand over time, including more drugs in smaller markets, with fewer close comparators and smaller current rebates,” Arad and co-authors comment. More:
Early negotiation policies would ideally be consistent with CMS’s approach in future negotiations when a non-FAMP-based MFP ceiling and comparisons to more distant therapeutic alternatives will likely become more prominent. These early decisions will shape the program as it evolves and provide an opportunity for CMS to clarify negotiation policies and their potential impact for the future.
CMS is due to publish the results of negotiations by Sep. 1 and implement them in 2026.
Evan joined TriMed in 2011, writing primarily for Health Imaging. Prior to diving into medical journalism, Evan worked for the Nine Network of Public Media in St. Louis. He also has worked in public relations and education. Evan studied journalism at the University of Missouri, with an emphasis on broadcast media.