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Likely Large Headline Discounts per IRA Announced Soon
The due date for the 15 drugs selected (see chart below) for the 2nd round of negotiated prices is Nov. 30th, but we expect a decision in the coming weeks, possibly as soon as next week. We expect negotiated prices to be discounted by around 60% to 80% of current gross price (list price) for the drugs selected for review and which is higher than expected. As a reminder, the announced 1st cuts ranged 38-79% off list prices and CMS estimated ~22% lower net (including rebates, etc.) spending relative to 2023 net levels. We are working on the details for the net discount for the 2nd round list of drugs. The first round of negotiated discounts will go into effect in 2026, while the second round goes into effect 2027.
New CMS Rule on Global Drug Pricing Benchmark
Yesterday, an OMB notice titled Global Benchmark for Efficient Drug Pricing (GLOBE) Model by CMS is under review. This proposed rule (likely involving Most Favored Nation (MFN)) is now under the Office of Management and Budget (OMB) review and will likely address the structure and legal authority to launch this type of program. We expect this policy to include Medicare and Medicaid rates for drugs. The Trump administration has made it known they would like MFN to be a national policy, so this rule will describe the framework for how this national program would work. The rule could also discuss the role of a government run website to allow consumers to connect directly with manufacturers offering discounted drug prices. We will have more information on this topic and likely impact in the coming weeks.
Overall Transition from List to Negotiated Pricing Framework
Overall, the framework for negotiated U.S. drug pricing, while consisting of various moving parts, is going to highly likely to continue after President Trump leaves office. President Trump has been able to convince enough Republicans the need to negotiate pricing for prescription drugs, an area where most Democrats would agree. Therefore, The U.S. will likely continue shifting toward a system in which Medicare and Medicaid will directly negotiate with manufacturers for certain high-cost, single-source drugs, thereby reducing reliance on rebate negotiations behind the scenes. The upcoming GLOBE proposed rule will explain the framework of this structure, but it will be an evolving structure over the years into the next administration.
Litigation Possibility Remains
The process to negotiate drug prices nationwide through a MFN policy faces possible legal challenges, and its details (appeals, administrative rules, penalties) will evolve in the coming years. We expect some challenges to the government, which could cause delays in implementation. That being said, the shift to negotiated drug pricing we do not believe is going away.
Manufacturers Need to Adapt/Global Spillover
Manufacturers will need revised pricing, contracting, portfolio, and launch strategies to navigate U.S. pricing policy while preserving global returns. As efforts are underway in the U.S. regarding moving closer to international pricing norms; manufacturers have other avenues to respond and offset these changes.
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