Pharmacy-Level Analysis of CMS’ Final Guidance on Inflation Reduction Act Implementation

Recommended Action Items:

1. Pharmacies, like long-term care (LTC) pharmacies, should be prepared to self-identify as “a dispensing entity that anticipates having material cashflow concerns due to reliance on the retrospective maximum fair price (MFP) refunds within the 14-day prompt MFP payment window” with the Medicare Transaction Facilitator (MTF.)
2. Forthcoming contracts from Part D plan sponsors will include a provision, likely because of a forthcoming regulatory mandate, requiring pharmacies to enroll with the Medicare Transaction Facilitator (MTF.)

Summary of Key Points:

1. The drug prices negotiated by HHS are specific to individuals enrolled in Medicare Part D and MA-PD plan under Medicare Part C. These prices are not negotiated for individuals covered by Medicare Advantage programs, private insurance, Medicaid or in their Medicare Part A stay. 
   a. Beginning in 2026, HHS will have the authority to negotiate prices for medications covered by Medicare Part B. These prices will take effect in 2028. We expect future guidance from CMS related to this process that will initiate in 2026.
2. At present, CMS will NOT require a Part D Plan sponsors to pay a dispensing fee to a pharmacy for dispensed medications with negotiated prices.
3. While CMS clarified the Primary Manufacturers must meet the 14-day prompt payment window, the guidance provides limited “teeth” to enforce it. CMS does set forth a protocol for pharmacy to “self-identifying” as a “pharmacy anticipating cashflow concerns.” Rather, CMS directs primary manufacturers to develop plans to support these pharmacies as part of their MFP effectuation plans; CMS pledged to monitor the program for effectiveness.
4. Pharmacies, through planned regulation on plan sponsors, will need to enroll with the selected Medicare Transaction Facilitator. Pharmacies will be able to select electronic payment or a paper check from the Primary Manufacturer.
5. CMS will establish a “centralized intake system” for issues related to maximum fair price access and associated implementation challenges. Pharmacies and Primary Manufacturers will have access to both tracks of disrupt resolution.

Frequently Asked Questions:

What Happened?

A: In final guidance issued on October 2nd, the Centers for Medicare and Medicaid Services (CMS) provided some clarity and guidance on the operationalization of negotiated Medicare Part D medications allowed under the Inflation Reduction Act (IRA). Unfortunately, CMS took limited action to support pharmacies as these new prices are implemented under this program. Rather, the agency promised to “closely monitor for whether further programmatic adjustments are needed to address any contrary practices that emerge.”

What Is the Maximum Fair Price (MFP) and Who Sets It?

A; The MFP is negotiated directly between CMS and the Primary Manufacturer.
Per the enabling legislation, “negotiated prices used in payment by each Part D plan sponsor for each selected drug also must not exceed the applicable MFP plus any dispensing fees for such drug. In Part D, the negotiated price of a drug is the basis for determining beneficiary cost-sharing and for benefit administration at the point-of-sale.”

How Will CMS Select the Medications to Negotiate in 2025 for Prices to Take Effect in 2027?

A: In Section 60.3 of the final guidance, CMS provides extensive details on the selection process. Additional details are available here.

What Medications Had Prices Negotiated in 2025 to Take Effect on January 1, 2027?

A: Januvia, Farxiga, Enbrel, Jardiance, Stelara, Xarelto, Eliquis, Entresto, Imbruvica and Fiasp; Fiasp FlexTouch; Fiasp PenFill; NovoLog; NovoLog FlexPen; NovoLog PenFil

Who is an MFP-eligible individual?

A: As defined in section 1191(c)(2)(A) of the Social Security Act and Section 80 of the guidance, MFP-eligible individuals are individuals “enrolled in a prescription drug plan under Medicare Part D or an MA–PD plan under Medicare Part C (including an Employer Group Waiver Plan), if Part D coverage is provided under such plan for such selected drug.”

The MFP is not required to be made available to a Medicare beneficiary who only uses other sources of prescription drug coverage, (ie: Retiree Drug Subsidy, prescription drug discount cards) for who there is no PDE record for the claim. Primary Manufacturers are not expected to make the MFP available to hospitals, physicians, other providers enrolled in Part B or individuals enrolled in Medicare Advantage (MA) Plans.

Who is Responsible for Ensuring the MFP and Any Necessary Remittances to Pharmacies?

A: Under the IRA and this guidance, the Primary Manufacturer of a medication is responsible for ensuring that the MFP is made available to eligible individuals, pharmacies and other dispensing entities. The Primary Manufacturer is obligated to provide access to the MFP for dosage forms, strengths and package sizes of selected medications.

CMS will allow Primary Manufacturers to contract with third parties to fulfill their obligations, but the Primary Manufacturer remains responsible for compliance.

How Will Manufacturers Make Medications Available at the MFP?

A: As discussed, it is the responsibility of the Primary Manufacturer to make the MFP available, including to 340B covered entities and their contract pharmacies. CMS will allow Primary Manufacturers to use either (1) “retrospective reimbursement to issue refunds to dispensing entities” or (2) “providing access to the MFP through prospective sale of selected drugs at prices no greater than the MFP.” Primary manufactures will also be allowed to use a combination of these approaches.

It must also “indicate its general plan and procedures for contacting and receiving communications from dispensing entities.”

Primary Manufacturers are required to submit an MFP Effectuation Plan at least four months before the date of negotiated price effectuation. For prices entering effect on January 1st, 2026, the plan must be submitted to CMS by September 1st, 2025.

Primary Manufacturers will be allowed to amend their plan and must make CMS aware of changes “as soon as practicable, regardless of whether the notice is provided before a selected drug’s first initial price applicability year or thereafter, and subject to the terms, if applicable, of a signed MTF participation agreement.”

What about Compounded Products Using Active Ingredients with Negotiated Prices?

A: “CMS will exclude any PDE data with a compound code indicating the PDE record is for a compounded drug when calculating the low-spend Medicare drug exclusion (section 30.1.2) and the rankings of negotiation-eligible drugs (section 30.2)… MFP refunds will not be required for PDE records for selected drugs that were billed as compounds.”

Will CMS Require a Dispensing Fee to Be Provided for Negotiated Drugs?

A: No, CMS, at present, will not require a dispensing fee – a proposal made by ASCP and other pharmacy organizations during the comment period. Rather, they write “CMS will work to ensure plans and PBMs engage in sustainable and fair reimbursement practices with all pharmacies to ensure access to selected drugs, consistent with their statutory obligations, for individuals with Part D. CMS will closely monitor for whether further programmatic adjustments are needed to address any contrary practices that emerge.”

CMS further encouraged plan sponsors to work with pharmacies “to ensure adequate and fair compensation for dispensing selected drugs.”

How Are Pharmacies Supposed to Interact with Primary Manufacturers?

A: To facilitate the necessary interaction between the manufacturer and pharmacy, CMS plans to engage an MTF. CMS stated, “neither Primary Manufacturers nor dispensing entities shall have to pay any fees to utilize the MTF.”

For additional guidance, please see:

• Table 5 provides examples of justification codes and values for the “Method of Determining MFP Refund Amount” Claim-Level Payment Element for Primary Manufacturers – page 218-219.
• Table 3 describes the timing and required actions of Primary Manufacturers to comply with the 14-day prompt MFP payment window based on the Primary Manufacturers elected effectuation model – page 208

Who Has to Participate with the MTF and What Will They Do?

A: Both Primary Manufacturers and pharmacies will need to have a relationship with the MTF.

Participation with the MTF will be mandatory for manufacturers. CMS plans to use additional regulatory authority, likely the annual Part D Plan rule, to require plan sponsors to include in future pharmacy contracts provisions requiring pharmacy enrollment to facilitate necessary data exchanges. Elements of this exchange will include 1) banking information and secure locations for Electronic Remittance Advice using the X12 835 standard (ERA) or remittance, 2) accuracy, 3) maintaining functionality to receive ERA or remittance and 4) self-identify if the pharmacy anticipates material cashflow concerns.

Through the MTF, CMS intends to provide banking information to Primary Manufacturers to support transmission of MFP refund payments directly to pharmacies, including preference for electronic transfer or paper check.

Pharmacies will have the power to determine how they receive funds from Primary Manufacturers. CMS writes, “for dispensing entities that have indicated their preference to receive electronic transfer of funds, the Primary Manufacturer is required to provide an electronic reimbursement mechanism, and for dispensing entities that have indicated their preference to receive payment via paper check, the Primary Manufacturer would need to, at a minimum, ensure that paper checks were provided as a reimbursement mechanism.” Additionally, the guidance provides details on how the MTF will maintain credit/debt ledger to track credits and debits related to MFP refunds to dispensing entities. The guidance also provides for the subsequently identified as 340B claims. CMS intends for the MTF to allow the Primary Manufacturer and pharmacy to view the status of available credits. The agency plans to issue additional technical guidance on this matter. Section 40 of the final guidance provides extensive details on the MTF.

Will the MTF be prefunded?

A: CMS declined, because of a lack of Congressional appropriations, to prefund the MTF account. Prefunding was a request from ASCP and other pharmacy organizations to facilitate immediate operationalization.

Where and How Can I Complain about Bad Actors in the System or Make CMS Aware of Issues?

A: To comply with legislation, CMS will establish a centralized intake system to address complaints and disputes on the MFP availability and MTF functionality. It is not designed to receive general comments or feedback. CMS intends that “any complaints that involve operational issues with the MTF system will receive resolution from the MTF Contractor.”

Individuals do not need to be party to the MTF to submit a compliant. CMS has established a 120-calendar day limit to submit complaints and disputes.

For the MTF, CMS envisions two tracks for disputes, one focused on qualifying disputes from Primary Manufacturers and dispensing entities regarding technical aspects of the MTF process. Part D Plans will not have access to this dispute track. The second will be available to the public as well as manufacturers and dispensing entities and address issues not addressed by track one. CMS plans additional education on this process.

Specifics on CMS’ vision can be found on page 290 of the document.

If a Primary Manufacturer selects an alternative payment approach independent of the MTF, they will be required to detail their internal audit mechanism in their MFP Effectuation Plan.

How Will Manufacturers Have a Set Process for Identifying 340B Claims?

A: CMS did not establish a universal process. Rather, it states that “each Primary Manufacturer must include its process for nonduplication between the MFP and 340B ceiling price. CMS intends to make these plans available to dispensing entities via the MTF.”

Will CMS Require Primary Manufacturers to Include Information on Additional Discounts Provided to Pharmacies?

A: No. “CMS confirms the Primary Manufacturer does not need to include information of additional discounts provided to the dispensing entity under the payment element ‘Amount of Payment Sent as the MFP Refund.’”

Will Primary Manufacturers Be Required to Meet the 14-Day Prompt Payment Window?

A: While CMS is requiring Primary Manufacturers to meet the 14-day prompt payment window, the guidance provides limited teeth to this provision.

In the guidance, they state, “it is essential that Primary Manufacturers make timely payments to make the MFP available to pharmacies, mail order services, and other dispensing entities that dispense the selected drug with respect to MFP-eligible individuals….CMS will apply the standards set forth in current Part D prompt pay reimbursement regulations regarding payment by plan sponsors to pharmacies to Primary Manufacturers for their transmission of MFP refunds for selected drugs. That is, CMS will require that a Primary Manufacturer transmit payment of an amount that provides access to the MFP to pharmacies, mail order services, and other dispensing entities within 14 days.”

Additionally, the agency did clarify that “the 14-day prompt MFP payment window requires the Primary Manufacturer to transmit payment of an amount that provides access to the MFP within 14 calendar days of when the MTF sends data to the Primary Manufacturer that verify the selected drug was dispensed to an MFP-eligible individual.”

Rather, pharmacies will be able to self-identify as “a dispensing entity that anticipates having material cashflow concerns due to reliance on the retrospective MFP refunds within the 14-day prompt MFP payment window.” This list will be made available through the MTF so primary manufacturers can develop their MFP effectuation plans. CMS will require primary manufacturers to outline their planned approach to mitigate cashflow concerns within these plans.

How Do I Self-Identify as “Anticipating Having Material Cashflow Concerns” to CMS and Primary Manufacturers?

A: Pharmacies, when registering with the MTF, will be able to self-identify as anticipating having material cashflow concerns due to dispensing a large number of medications with negotiated prices or the nature of the patient mix served by the pharmacy. In the guidance, CMS specifically identified long-term care pharmacies as a type of pharmacy likely to experience these challenges.

Pharmacies will also be able to self-identify at the start of each year. Please note, that the pharmacy will likely have to self-identify for each drug, each year. In the guidance, the agency writes, “CMS will allow dispensing entities to identify themselves as anticipating material cashflow concerns at the start of a price applicability period with respect to a selected drug as a result of potential delays.” In response, Primary Manufacturers will not have to amend their MFP Effectuation Plan on an ongoing basis in response to updates to the list of self-identified pharmacies.

If I Self-Identify, What Does that Mean?

A: Unfortunately, CMS does not provide direct guidance on how Primary Manufacturers are to mitigate cashflow challenges. Rather, the agency allows each Primary Manufacturers to develop their own mitigation plan, to be published in their MFP Effectuation Plan.

CMS provides two examples of mitigation plans, prospective purchasing agreements or accelerated MFP refund timelines.

Additionally, CMS will allow Primary Manufacturers to “establish its own eligibility criteria for determining which dispensing entities are included in its mitigation approach.” Any individualized criteria must be included in the MFP Effectuation Plan.

CMS intends to review the Primary Manufacturer’s mitigation plan when conducting their risk assessment of the MFP Effectuation Plan. Any material changes on eligibility or mitigation plan must be submitted to CMS within 90 days of the change. It does not appear that CMS will require advance notice of changes.

Who Submitted Comments to CMS on Their Draft Guidance?

ASCP was one of just 145 entities to submit on-time comments to CMS for consideration in finalizing this guidance. [LINK: ASCP’s details and specific comments to the draft rule are available here.]