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Blog
Your Drug and Maximum Fair Price: How to Operationalize It to Comply with the Legislation
Apr 01, 2025
The various milestones to comply with the Inflation Reduction Act of 2022 (IRA) are around the corner. Multiple provisions have already been enacted and Medicare Part D benefit design changes were implemented on January 1, 2025. The next key date is in 2026 when Maximum Fair Price (MFP) negotiations for selected drugs become effective.
Consequently, the industry has started implementing initiatives to comply with the various components of the IRA. Each aspect of the legislation has its own set of requirements, and the operationalization mechanisms are unique for the different provisions.
In this journey, many question arise, such as:
The Center for Medicare & Medicaid Services (CMS) issued explanations and guidance on how negotiated prices will be applied to certain high-expenditure drugs covered under Medicare Part D. Many key questions were addressed in final comments around drug and manufacturer eligibility, selection criteria, and timing. Unfortunately, many questions on implementation, measurement, and enforcement were left unanswered leaving industry to adjust without guidance.
Looking forward
CMS published on August 15, 2024, the MFPs for the first 10 Part D drugs to be applied Jan 1, 2026. More recently, on January 17, 2025, CMS published the list of the selected 15 Part D drugs for 2027, and on March 14, CMS announced the manufacturers' participation.
Maximum Fair Price selection schedule
As drugs are negotiated, the aim is to lower drug costs for Medicare beneficiaries and improve the sustainability of the Medicare program. When combined, the drugs selected for 2026 and 2027 account for an estimated $87B ($47B for 2026 selections and $40B for 2027 selections) in Medicare spend, or roughly 40% of total Part D expenditures. CMS is on record stating that they expect to save $6B in drug expenditures in 2026, although that will have to be seen.
Impact on manufacturers
The implementation of MFPs under the Medicare Drug Price Negotiation Program is impacting managed care processing. Manufacturers will need to align their Managed Care operations, revenue management processing systems, and workflows to accommodate these new prices and ensure compliance with the legislation. Dispensing negotiated drugs will be challenging to pharmacies and the actual effectuation process is still in flux, with manufacturers determining how to stay compliant.
The 14-day prompt MFP payment window
Payment elements must be submitted to the Medicare Transaction Facilitator (MTF) within 14 calendar days of receipt of the original MTF claim-level data elements (i.e., within the 14-day prompt MFP payment window).
The MTF Data Module (MTF DM) will include claim-level data elements confirming that the drug was dispensed to an MFP-eligible individual and will initiate the 14-day prompt payment window.
Manufacturers are responsible for calculating the appropriate amount to effectuate the MFP and ensuring that timely payment is made to the dispensing entity. There are two main parts:
- Data facilitation
- Payment facilitation
With only 14 days to review data and ensure payment is made to the pharmacy, the window for processing claims is tight. Several key activities need to be executed with little room for reprocessing:
MFP high-level process — "14-day prompt MFP payment window"
340B exclusions
Per the legislation, manufacturers are required to charge 340B covered entities the lower of the two discounted prices (MFP vs. 340B) but do not have to provide both discounts for the same unit of drug dispensed. However, dispensing entities are not required to provide 340B identifiers on the claims; therefore, 340B claims identification is a key step in the process where manufacturers are responsible for deduplicating 340B claims and providing the conclusion status reached.
The mechanics are to be clarified as there are important data gaps that must be addressed to be compliant with the law. Key questions remain such as, should manufacturers pay MFP refund and then true-up? What would a claw back process look like? What will CMS accept as exclusion validation? How will changes in cash flow impact Covered Entities?
Government pricing and gross-to-net implications
In addition to questions on implementation and 340B exclusions, there are downstream effects that need to be analyzed by a manufacturer’s finance and operations organizations. These include, but are not limited to, Government Pricing and Gross-To-Net perspective.
Government pricing implications (not exhaustive)
Gross-to-net implications (not exhaustive)
Conclusion
The introduction of the IRA legislation has significantly increased the complexity of pharmaceutical supply chain transactions. To ensure compliance, it is crucial to analyze, design, implement, integrate, and thoroughly test multiple impacted areas using a solid and proven methodology. A comprehensive roadmap and project plan, along with appropriate staffing levels and initiatives, are essential for successful program execution. Selecting a partner who understands the nuances of the law and has industry-wide experience is a key factor to successfully navigating the coming uncertainty. For more insight and support with operationalization of the IRA legislation, please reach us at Global Pricing & Contracting - IQVIA.
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