CMS Issues First Proposed Rule for IRA Medicare Drug Price Negotiation

The Centers for Medicare & Medicaid Services (CMS) on June 12, 2026, released its first proposed rule to implement the Inflation Reduction Act (IRA) Medicare Drug Price Negotiation Program through formal notice-and-comment rulemaking. The proposal represents a significant milestone in the evolution of the program, which has operated under guidance documents since its launch and now must transition to codification through regulation, beginning with Initial Price Applicability Year (IPAY) 2029. The proposed rule also comes amid a suite of other regulatory activities underway related to the 340B Prescription Drug Pricing Program, as well as the pending Guarding U.S. Medicare Against Rising Drug Costs (GUARD) and Global Benchmark for Efficient (GLOBE) drug pricing models under review by the Office of Management and Budget (OMB).

Although much of the proposed rule codifies policies previously established through guidance, CMS also proposes several notable policy changes that could have significant consequences for pharmaceutical manufacturers, particularly those who manufacture high-expenditure biologics, fixed-combination products and products that previously qualified for the small biotech exception. The agency is also using this rulemaking to advance a broader program integrity agenda intended to prevent manufacturers from restructuring products in ways that could avoid negotiation eligibility or application of negotiated prices.

Public comments are due to CMS by August 17, 2026, and CMS is expected to finalize the rule in Fall 2026. The list of drugs selected for the 2029 negotiation cycle is expected to be released by February 1, 2027. Additionally, 2028 negotiated prices will be released before November 30, 2026. In parallel, CMS is proposing revisions to both the Negotiation Program Drug Selection Information Collection Request (ICR) and Drug Price Negotiation ICR. Comments on those proposals are also due within 60 days.

Notably, CMS published the proposed rule and ICRs amid broader changes in the drug pricing policy landscape, including the administration's efforts related to advancing most-favored-nation drug pricing, price reporting requirements, potential changes to the 340B Drug Pricing Program and state efforts to regulate drug prices.

View the proposed rule, fact sheet and a detailed timeline.

Key Takeaways

• CMS is formally transitioning the Medicare Drug Price Negotiation Program from operating based on guidance to regulation beginning with IPAY 2029.
• CMS proposes a major revision to its treatment of certain fixed-combination products, including products that combine an existing biologic with hyaluronidase to enable subcutaneous administration.
• The proposal would likely affect several high-profile oncology and specialty products.
• CMS is proposing new protections for small biotechnology companies after the statutory small biotechnology exemption expires following IPAY 2028.
• The agency proposes codifying Part D coverage requirements for negotiated drugs and revising the regulatory definition of negotiated price.
• CMS is expanding enforcement authorities and proposing additional program integrity measures.
• The proposal provides the clearest indication yet of how CMS intends to administer negotiations as the program expands to more Part B drugs beginning in future years.

Program Transition from Guidance to Regulation and More Drugs Selected for Negotiation

The IRA authorized CMS to implement the negotiation program through guidance for IPAYs 2026 through 2028. With that authority now expiring, formal rulemaking is both legally required and operationally necessary. The proposed rule establishes a permanent regulatory framework governing drug selection, negotiation procedures, manufacturer reporting obligations, compliance requirements and implementation of Maximum Fair Prices (MFPs) beginning with IPAY 2029. Guidance governing the 2026 to 2028 cycles remains in effect for drugs already selected under those years. Beginning with IPAY 2029, CMS will select up to 20 negotiation-eligible Part B and Part D drugs annually.

CMS Targets Fixed-Combination Products and Alternative Routes of Administration

The most consequential policy proposal in the rule concerns CMS' treatment of certain fixed-combination products, though the agency indicated in guidance issued October 2025 it would provide clarity on in future rulemaking. Historically, CMS has generally treated fixed-combination products as distinct products for purposes of identifying qualifying single-source drugs (QSSDs). Under the proposed rule, however, CMS would create a narrow but potentially significant exception.

Specifically, CMS proposes aggregating products when:

• the products share the same underlying active ingredient
• the products are owned by the same new drug application or biologics licensing application holder
• an additional ingredient is added primarily to create a new formulation that enables an alternative route of administration

CMS specifically cites situations in which an existing intravenous biologic is reformulated with hyaluronidase – an enzyme that supports the degradation of certain acid, often used as a spreading solution – to enable subcutaneous administration. Through the first three years of the negotiation program, there has been a significant increase in the number of brand-name products that sought to reformulate their products from those administered intravenously as a way to potentially avoid eligibility for negotiation. As part of the proposed rule, CMS proposed to effectively close that potential loophole, characterizing that reformulation as a program integrity effort. The agency argues that absent this policy, manufacturers could avoid drug selection or application of negotiated prices by launching new formulations shortly before a product becomes eligible for negotiation.

Under the proposal, if an original product is selected for negotiation, the negotiated MFP would apply across dosage forms, strengths and formulations, including newer subcutaneous versions containing hyaluronidase. CMS acknowledges that the policy is intended to address biologics payable under Medicare Part B, where concerns about manufacturers using alternative administration routes to avoid negotiation are expected to grow as more Part B products become eligible.

Small Biotech Exception Sunsets, but CMS Proposes Temporary Relief

Consistent with statute, CMS is not proposing to extend or codify the Small Biotech Exception after IPAY 2028. Instead, the agency proposes implementing a temporary pricing floor for eligible small biotech products selected for negotiation during IPAYs 2029 and 2030.

Under the proposal:

• Manufacturers must affirmatively apply for small biotech status.
• CMS would be prohibited from negotiating an MFP below the statutory floor.
• The floor would equal approximately 66 percent of the applicable Non-Federal Average Manufacturer Price, adjusted as required by law.

Eligibility remains consistent with prior Small Biotech Exception criteria:

• The product must account for no more than one percent of total Medicare Part B and Part D spending.
• At least 80 percent of the manufacturer's Medicare drug spending must be attributable to that product.

Drug Selection Policies Largely Remain Intact

Apart from the proposed fixed-combination changes, CMS largely preserves its existing methodology for identifying QSSDs. The agency will continue aggregating dosage forms, strengths and formulations across products owned by the same manufacturer that share the same active moiety, active ingredient or antigen component.

CMS also proposes several operational refinements, including:

• using expenditure calculations down to the cent before applying tie-breaking methodologies
• publishing a list of the top 30 negotiation-eligible drugs rather than the top 50 previously published
• continuing current orphan drug exclusion policies, including changes included in the One Big Beautiful Bill Act (H.R. 1)¹
• retaining plasma-derived product exclusion policies²
• maintaining existing bona fide marketing standards for generic and biosimilar competition³

Part D Coverage and Formulary Requirements

CMS proposes codifying several Medicare Part D requirements related to negotiated drugs.

Specifically, Part D sponsors would be required to include selected drugs with an MFP on their formularies, subject to existing exceptions for certain generic and biosimilar substitutions. CMS would also revise the regulatory definition of "negotiated price" to clarify that negotiated prices for selected drugs may not exceed the MFP plus any applicable dispensing fees.

The proposal reflects CMS' concern that formulary placement decisions could undermine beneficiary access to negotiated drugs and signals increased federal oversight of plan implementation practices.

Expanded Compliance and Enforcement Authorities

CMS proposes several new compliance and enforcement provisions that would strengthen the agency's oversight authority.

Most notably, CMS would gain greater flexibility to impose civil monetary penalties without first offering manufacturers an opportunity to correct reporting deficiencies. Though CMS may still provide an opportunity for corrective action, it would no longer be required to do so before pursuing enforcement.

Additional proposals include:

• expanded reporting obligations
• additional documentation requirements during mergers and acquisitions involving selected drugs
• shortened timelines for manufacturers to submit certain suggestions of error
• future rulemaking regarding penalties associated with failures to provide access to the MFP

Additional Operational Changes

CMS also proposes a new methodology for calculating a 30-day equivalent supply for certain products administered only once in a patient's lifetime, including some gene therapies, oncology products and vaccines. For these products, CMS would establish a 30-day equivalent supply of 12, effectively treating them as annual therapies for purposes of certain negotiation calculations.

CMS also confirms that future guidance will address MFP implementation for Medicare Part B drugs selected for IPAY 2028 and signals additional future rulemaking on several implementation issues.

Looking Ahead

The proposed rule represents the most significant structural evolution of the Medicare Drug Price Negotiation Program since its creation under the IRA. Beyond codifying existing policies, CMS is using the rulemaking process to expand program integrity authorities, strengthen compliance oversight and close perceived loopholes that could allow manufacturers to avoid negotiation eligibility through reformulations or alternative routes of administration. The proposal also provides the clearest signal, yet that CMS intends to broaden the reach of the negotiation program as more Medicare Part B products become eligible for selection. Manufacturers with high-spend biologics, life cycle-management strategies involving new formulations or products approaching negotiation eligibility should closely evaluate the proposal and consider engaging in the comment process before the August 17, 2026, deadline.

In addition, manufacturers and other pharmaceutical stakeholders should assess these proposed changes in addition to other changes the administration is pursuing related to prescription drug prices and in pursuit of lowering prescription drug costs, such as through changes to the 340B program through pending reestablishment of the Health Resources and Services Administration 340B Rebate Model Pilot Program, as well as the GUARD Model, which was recently submitted to OMB for review before being finalized. This final rule is in addition to the GLOBE Drug Pricing Model, both of which manufacturers with MFPs would be excluded from.

For additional questions, please reach out to the authors.

Notes

¹ To be considered for the orphan drug exclusion, the drug or biological product must 1) be designated as a drug for one or more rare diseases or conditions and 2) be approved by the U.S. Food and Drug Administration only for one or more indications within such designated rare disease(s) or condition(s).

² CMS proposes that when determining whether a product is eligible for the plasma-derived product exclusion, it will "consider only whether the active moiety/active ingredient is derived from human whole blood or plasma."

³ Consistent with prior guidance, CMS proposes to adopt a "bona fide marketing" requirement to determine when a drug or biologic is subject to generic or biosimilar competition. Under this policy, CMS will determine that a generic or biosimilar product "is marketed," such that the reference product is not a QSSD or should be disqualified or removed from the program, only if there is "more than solely token or de minimis availability" of the generic or biosimilar product.

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