Medicare Drug Price Negotiation Program and Medicare Prescription Drug Benefit Program

Federal RegisterJun 16, 2026

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 423 and 429

[CMS-4215-P]

RIN 0938-AV90

Medicare Drug Price Negotiation Program and Medicare Prescription Drug Benefit Program

AGENCY:

Centers for Medicare & Medicaid Services (CMS), Health and Human Services (HHS).

ACTION:

Proposed rule.

SUMMARY:

This proposed rule would codify the Medicare Drug Price Negotiation Program (“Negotiation Program”) and would establish certain new policies for the Negotiation Program and the Medicare Prescription Drug Benefit Program as required by the Inflation Reduction Act of 2022. This proposed rule would also propose a modification to the fixed combination drug policy.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on August 17, 2026.

ADDRESSES:

In commenting, please refer to file code CMS-4215-P.

Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed):

Electronically.

You may submit electronic comments on this regulation to

https://www.regulations.gov/docket/CMS-2026-CMS-2026-2080.

Follow the “Submit a comment” instructions.

By regular mail.

You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-4215-P, P.O. Box 8013, Baltimore, MD 21244-8013.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

By express or overnight mail.

You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-4215-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

For information on viewing public comments, see the beginning of the

SUPPLEMENTARY INFORMATION

section.

FOR FURTHER INFORMATION CONTACT:

Elisabeth Daniel,

IRARebateandNegotiationprogram@cms.hhs.gov,

or (667) 290-8793, for issues related to the Medicare Drug Price Negotiation Program.

SUPPLEMENTARY INFORMATION:

I. Executive Summary and Background

Inspection of Public Comments:

All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received:

https://www.regulations.gov.

Follow the search instructions on that website to view public comments. CMS will not post on

Regulations.gov

public comments that make threats to individuals or institutions or suggest that the commenter will take actions to harm an individual. CMS continues to encourage individuals not to submit duplicative comments. We will post acceptable comments from multiple unique commenters even if the content is identical or nearly identical to other comments.

Plain Language Summary:

In accordance with 5 U.S.C. 553(b)(4), a plain language summary of this rule may be found at

https://www.regulations.gov/.

A. Executive Summary

1. Purpose

This proposed rule would codify policies related to the implementation of certain provisions of the Inflation Reduction Act of 2022 (IRA) (Pub. L. 117-169, August 16, 2022) and amendments made by the Working Families Tax Cut legislation (Pub. L. 119-21, July 4, 2025).

This proposed rule would also codify policies for the Medicare Drug Price Negotiation Program at part 429 consistent with sections 1191 through 1198 of the Social Security Act (hereinafter “the Act”) and codify policies for the Medicare Prescription Drug Benefit Program at part 423 consistent with section 11001(b) of the IRA, which made certain amendments to the Act, including with respect to Medicare Part D.

2. Summary of the Provisions

We propose to codify policies established in final guidance for the Negotiation Program

in regulatory text. Specifically, we propose to codify, with limited modification, the policies set forth in guidance for the Medicare Drug Price Negotiation Program by adding the new part 429 to title 42, Chapter IV of the Code of Federal Regulations and modifying policies for the Medicare Prescription Drug Benefit Program at part 423 and welcome comments on these proposals.

The most recent final guidance published for the Negotiation Program is the Medicare Drug Price Negotiation Program: Final Guidance, Implementation of Sections 1191—1198 of the Act for Initial Price Applicability Year 2028 and Manufacturer Effectuation of the Maximum Fair Price in 2026, 2027, and 2028, available at:

https://www.cms.gov/files/document/ipay-2028-final-guidance.pdf.

In addition, we propose new policies for the Medicare Drug Price Negotiation Program as follows:

• Proposed § 429.125(b)(4)(i) would clarify treatment of new formulations were circumstances to emerge where statutory requirements could be in tension with the general fixed combination drug policy proposed at § 429.125(b)(4). To do so, we are proposing a narrow modification to the general fixed combination drug policy for certain fixed combination drugs that are new formulations. Under the modification, if CMS determines that products with the same New Drug Application (NDA)/Biologics License Application (BLA) holder differ in active moiety(ies)/active ingredient(s) due to the inclusion of an active moiety/active ingredient that creates a new formulation and enables an alternative route of administration for the co-administered active moiety(ies)/active ingredient(s), then CMS will identify the potential qualifying single source drug using all dosage forms and strengths of the shared active moiety(ies)/active ingredient(s) that is offered by the same NDA/BLA holder.

• Proposed § 429.125(c)(3)(i) would clarify how CMS would identify the day from which to measure the 7- and 11-year time since approval and licensure periods for drugs that formerly qualified for the Orphan Drug Exclusion.

• Proposed § 429.130 would codify the process and schedule according to which CMS reviews information to determine if the manufacturer of a generic drug or biosimilar that is approved or licensed, respectively, is engaged in Bona Fide Marketing (as defined in § 429.20) of that generic drug or biosimilar.

• Proposed § 429.210(c) would provide additional details related to the Primary Manufacturer transfer of responsibility for all requirements of the Negotiation Program Agreement to an acquiring entity.

• Proposed § 429.415(a)(2) would explain how CMS would calculate the 30-day equivalent supply for a selected drug that is typically administered one time (for example, some vaccines, gene therapies, and cancer therapies).

• Proposed § 429.440 would explain how CMS would implement the Temporary Floor for Small Biotech Drugs for initial price applicability years 2029 and 2030.

• Proposed §§ 429.605 and 429.610 would clarify when off-label use would be considered for renegotiation eligibility and selection by aligning the renegotiation eligibility and selection policies for off-label use with the initial offer development process. This clarification maintains consistency across CMS processes for negotiation and renegotiation, as required by section 1194(f)(4)(B) of the Act.

Unless otherwise specified, CMS proposes that the provisions herein would apply with respect to all initial price applicability years beginning with initial price applicability year 2029, including, for example, with respect to the selection of drugs and the negotiation or renegotiation of MFPs for initial price applicability year 2029 that will take place during calendar year 2027. In this proposed rule, unless otherwise specified, references hereinafter to “the Negotiation Program Guidance” are to the most recent program guidance published by CMS, which is the Medicare Drug Price Negotiation Program: Final Guidance, Implementation of Sections 1191-1198 of the Act for Initial Price Applicability Year 2028 and Manufacturer Effectuation of the Maximum Fair Price in 2026, 2027, and 2028 that was published on September 30, 2025.

CMS anticipates publishing the final version of this rule in Fall 2026, after considering and responding to public comments received on this proposed rule, such that the final requirements will apply to initial price applicability year 2029 and all subsequent years, taking effect beginning with the process of the selection of drugs for negotiation and renegotiation, if applicable, for initial price applicability year 2029.

Given that the identification and selection of drugs for negotiation and renegotiation occurs more than 2 years before the first application of the MFP (that is, before the start of the selected drug's first initial price applicability year), the processes for drugs that were selected for negotiation for initial price applicability years 2026, 2027, and 2028 and for renegotiation for initial price applicability year 2028 will be at varying stages of implementation when this rule is proposed and finalized. Consistent with the program instruction requirement at sections 11001(c) and 11002(c) of the IRA, the program guidance issued by CMS for initial price applicability years 2026, 2027, and 2028 remains applicable and is not superseded by this proposed rule with respect to such years. In other words, because sections 11001(c) and 11002(c) of the IRA require CMS to implement the Negotiation Program for initial price applicability years 2026, 2027, and 2028 through program instruction and other forms of program guidance, the requirements for a selected drug that was included on the list of selected drugs with respect to initial price applicability year 2026, 2027, or 2028 are set forth with respect to such years in the applicable program guidance. Revisions to the implementation of policy for 2026, 2027, and 2028 with respect to drugs selected for initial price applicability years 2026, 2027, and 2028 would be addressed by CMS through publication of revised guidance. In accordance with the expiration of the statutory program instruction requirement at the end of 2028, CMS proposes that the provisions herein, as applicable, will apply starting in 2029 with respect to the drugs selected for initial price applicability years of 2026, 2027, or 2028.

Finally, CMS reminds interested parties that the exclusion for small biotech drugs from what is otherwise a negotiation-eligible drug under section 1192(d)(2) of the Act ended in initial price applicability year 2028 and is, therefore, not codified in this rule. However, the definition of an eligible small biotech drug for purposes of the calculation of the temporary floor on the maximum fair price for small biotech drugs under section 1194(d) of the Act is included in this proposed rule (as described in more detail in section II.E.2. of this proposed rule).

3. Summary of Costs and Benefits

We are proposing new policies for the Negotiation Program as follows: a modification to the general fixed combination drug policy to clarify our treatment of certain new formulations; clarification for drugs that formerly qualified for the orphan drug exclusion; revisions regarding process and schedule of CMS review of information in making the determination for Bona Fide Marketing; additional details related to the Primary Manufacturer transfer of responsibility for all requirements of the Negotiation Program Agreement to an acquiring entity; calculation of the 30-day equivalent supply for a selected drug that is typically administered one time; implementation of the Temporary Floor for Small Biotech Drugs for initial price applicability years 2029 and 2030; and clarification of off-label use in consideration for renegotiation eligibility and selection. In summary, the effects of the IRA are to reduce government expenditures for Part B, to increase expenditures for Part D through 2030, and to decrease Part D expenditures beginning in 2031. For a detailed discussion of the economic impacts, see section V. of this proposed rule.

B. Background

Sections 11001 and 11002 of the Inflation Reduction Act of 2022 (IRA) (Pub. L. 117-169), signed into law on August 16, 2022, establish the Medicare Drug Price Negotiation Program (hereinafter the “Negotiation Program”) to negotiate maximum fair prices (MFPs) for certain high expenditure, single source drugs and biological products. Specifically, in accordance with section 1191(c)(3) of the Act, MFP means, with respect to a year during a price applicability period and with respect to a selected drug (as defined in section 1192(c) of the Act) with respect to such period, the price negotiated pursuant to section 1194 of the Act, and updated pursuant to section 1195(b) of the Act, as applicable, for such drug and year. The requirements for this program are described in sections 1191 through 1198 of the Act, as added by sections 11001 and 11002 of the IRA and as amended by section 71203 of the “Working Families Tax Cut” legislation (Pub. L. 119-21).

Under the IRA, with respect to each initial price applicability year, CMS shall: (1) publish a list of selected drugs in accordance with section 1192 of the Act; (2) enter into agreements with manufacturers of selected drugs in accordance with section 1193 of the Act; (3) negotiate MFPs for such selected drugs in accordance with section 1194 of the Act; (4) publish MFPs for selected drugs in accordance with section 1195 of the Act; (5) carry out administrative duties and compliance monitoring in accordance with section 1196 of the Act; and (6) impose civil monetary penalties (CMPs) in accordance with section 1197 of the Act. With respect to initial price applicability year 2028 and subsequent years, in accordance with section 1194(f) of the Act, CMS shall also: (1) determine renegotiation-eligible drugs; (2) determine whether to select drugs for renegotiation; and (3) renegotiate the MFP for any drug selected for renegotiation. To the extent applicable, any references in this proposed rule to the “MFP” include a renegotiated MFP.

Section 1198 of the Act establishes certain limitations on administrative and judicial review relevant to the Negotiation Program.

Additionally, on July 4, 2025, the “Working Families Tax Cut” legislation was signed into law. Section 71203(a)(2) of the “Working Families Tax Cut” legislation amended section 1192(e)(1)(3)(A) of the Act to modify the requirements for a drug to qualify for the Orphan Drug Exclusion. Section 71203(a)(3) of the “Working Families Tax Cut” legislation also added new section 1192(e)(4) of the Act, which describes the treatment of former orphan drugs.

For the first year of the Negotiation Program, the Secretary of the U.S. Department of Health and Human Services (“the Secretary”) selected 10 high expenditure, single source drugs covered under Part D for negotiation. The negotiated MFPs for these drugs took effect in initial price applicability year 2026.

The Secretary selected an additional 15 drugs covered under Part D for negotiation for initial price applicability year 2027,

and 15 drugs covered under Part D and/or payable under Part B for initial price applicability year 2028.

The Secretary will select up to 20 drugs covered under Part D and/or payable under Part B for initial price applicability year 2029 and subsequent initial price applicability years. Beginning with initial price applicability year 2028, the Secretary could also select drugs from initial price applicability year 2026 and subsequent initial price applicability years for renegotiation. The Secretary selected one drug for renegotiation for initial price applicability year 2028.

See:

https://www.cms.gov/files/document/fact-sheet-negotiated-prices-initial-price-applicability-year-2026.pdf.

See:

https://www.cms.gov/files/document/fact-sheet-negotiated-prices-ipay-2027.pdf.

See:

https://www.cms.gov/files/zip/selected-drug-list-negotiated-prices-also-known-maximum-fair-prices-statutezip.zip.

See:

https://www.cms.gov/files/document/factsheet-medicare-negotiation-selected-drug-list-ipay-2028.pdf.

For initial price applicability years 2026 through 2028 of the Negotiation Program, sections 11001(c) and 11002(c) of the IRA direct CMS to implement the Negotiation Program through program instruction and other forms of program guidance. CMS issued initial or draft versions of program guidance for each initial price applicability year 2026,

2027,

and 2028

and requested public comment on each version. CMS then issued a revised or final version of the guidance for each of these program years.

9 10 11

This proposed rule proposes to codify these requirements at parts 423 and 429 to title 42, chapter IV of the Code of Federal Regulations to implement sections 11001 and 11002 of the IRA. The effective date of the proposed provisions are discussed in section I.A.2. of this proposed rule.

See:

https://www.cms.gov/files/document/medicare-drug-price-negotiation-program-initial-guidance.pdf.

See:

https://www.cms.gov/files/document/medicare-drug-price-negotiation-draft-guidance-ipay-2027-and-manufacturer-effectuation-mfp-2026-2027.pdf.

See:

https://www.cms.gov/files/document/ipay-2028-draft-guidance.pdf.

See:

https://www.cms.gov/files/document/revised-medicare-drug-price-negotiation-program-guidance-june-2023.pdf.

See:

https://www.cms.gov/files/document/medicare-drug-price-negotiation-final-guidance-ipay-2027-and-manufacturer-effectuation-mfp-2026-2027.pdf.

See:

https://www.cms.gov/files/document/ipay-2028-final-guidance.pdf.

Consistent with the program instruction requirement of sections 11001(c) and 11002(c) of the IRA, CMS will issue program guidance related to manufacturer effectuation of the MFP for 2028, including with respect to drugs payable under Part B. CMS intends to codify requirements related to MFP effectuation for 2029 and subsequent years in future rulemaking. CMS stated in the Negotiation Program Guidance its intent to codify MFP effectuation policies for 2029 and subsequent years after guidance for 2028 has been finalized.

C. Severability of Provisions

Finally, CMS is clarifying and emphasizing its intent that if any provision of this rule, once finalized, is held to be invalid or unenforceable by its terms, or as applied to any person or circumstance, or stayed pending further agency action, it shall be severable from this rule and not affect the remainder thereof or the application of the provision to other persons not similarly situated or to other, dissimilar circumstances. Through this rule, CMS proposes provisions that are intended to and will operate independently of each other, even if each serves the same general purpose or policy goal. Where a provision is necessarily dependent on another, the context generally makes that clear (such as by a cross-reference to apply the same standards or requirements).

II. Proposed Requirements for the Medicare Drug Price Negotiation Program

A. General Provisions

1. Basis and Scope (§ 429.10)

In proposed § 429.10, we would state that part 429 implements sections 1191 through 1198 of the Act and sections 11001 and 11002 of the IRA, which set forth the requirements of the Medicare Drug Price Negotiation Program. The Medicare Drug Price Negotiation Program requires the Secretary to negotiate and renegotiate, for applicable periods, Medicare prices for certain high expenditure, single source drugs and biological products.

Additionally, in proposed § 429.10(c), we would state that, were any provision of part 429 to be held invalid or unenforceable by its terms, or as applied to any person or circumstance, such provision would be severable from part 429 and the invalidity or unenforceability would not affect the remainder thereof or any other part of this subchapter or the application of such provision to other persons not similarly situated or to other, dissimilar circumstances. While the provisions in part 429 are intended to present a comprehensive approach to implementing the Medicare Drug Price Negotiation Program, we intend that each of them is a distinct, severable provision, as proposed. Through this rulemaking, the proposed policies contained herein are intended to operate independently of each other, even if each serves the same general purpose or policy goal. For example, we intend that the proposed policies related to requests for a biosimilar delay (proposed § 429.110) are distinct and severable from the proposals related to the identification of qualifying single source drugs (proposed § 429.125). As another example, we intend that the proposed policy for additional price exchange opportunities for purposes of providing additional flexibility to extend and consider offers and counteroffers (proposed § 429.530) is distinct and severable from the proposals for CMS and Primary Manufacturers (as defined in proposed § 429.20) to submit written initial offers and statutory written counteroffers, respectively, for purposes of determining an agreed-upon maximum fair price (MFP) (proposed § 429.520(a) and 429.525(a), respectively). Even where one provision makes reference to a second provision, § 429.10(c) clarifies the intent of the agency is that the two provisions would be severable if one provision were to be invalidated in whole or in part. For

example, we would still be able to adjust the preliminary price based on section 1194(e)(1) factors (as defined in proposed § 429.20) as described in proposed § 429.510(f) even if the provision for Primary Manufacturers to submit market data and revenue and sales volume data for the selected drug in the United States is deemed invalid (proposed § 429.505(b)(2)(v)).

2. Definitions (§ 429.20)

In this proposed rule, we would codify the definitions of terms consistent with the meanings given in sections 1191 through 1198 of the Act or established in the Negotiation Program Guidance, as applicable, as well as proposing to codify new definitions based on policies detailed in this proposed rule.

a. Additional Delay Request

We propose to define “Additional Delay Request” as a request to delay the inclusion on the selected drug list of a reference drug for which an initial delay request has been granted for a second initial price applicability year consistent with proposed § 429.110 and section 1192(f)(1)(B)(i)(II) of the Act.

b. Applicable Program Agreement

We propose to define “applicable program agreement” as an agreement under the Manufacturer Discount Program as specified in section 1860D-14C of the Act or a rebate agreement described in section 1927(b) of the Act.

c. Authorized Generic Drug

We propose to define “authorized generic drug” in accordance with the definition of such term at section 1192(e)(2)(B) of the Act. Section 1192(e)(2)(B)(i) of the Act defines an “authorized generic drug” that is a drug as a drug as defined in section 505(t)(3) of the Federal Food, Drug, and Cosmetic (FD&C) Act. Section 1192(e)(2)(B)(ii) of the Act defines an authorized generic drug that is a biological product as a product that has been licensed under section 351(a) of the Public Health Service (PHS) Act and is marketed, sold, or distributed directly or indirectly to the retail class of trade under a different labeling, packaging (other than repackaging as the reference product in blister packs, unit doses, or similar packaging for institutions), product code, labeler code, trade name, or trademark than the reference product.

d. Authorized Representative

We propose to define “authorized representative” as an individual that has the authority or capacity to legally bind the Primary Manufacturer to the terms and conditions of the Negotiation Program Agreement and meets one of the following criteria:

• Chief Executive Officer of the Primary Manufacturer.

• Chief Financial Officer of the Primary Manufacturer.

• An individual with equivalent authority to a Chief Executive Officer or Chief Financial Officer of the Primary Manufacturer.

• An individual that has been granted delegation of signature authority on behalf of one of the individuals specified in paragraphs (1) through (3) of this proposed definition.

We solicit comment on this proposed definition and potential alternative formulations, including whether to adopt a broader definition to account for other contexts within the Negotiation Program, such as an individual making a submission to CMS on behalf of an entity other than a Primary Manufacturer.

e. Average Manufacturer Price (AMP)

We propose to define “average manufacturer price (AMP)” as having the meaning given such term in section 1927(k)(1) of the Act.

f. Average Non-Federal Average Manufacturer Price (non-FAMP)

We propose to define “average non-Federal Average Manufacturer Price (non-FAMP)” as having the meaning set forth in section 1194(c)(6) of the Act.

g. Average Sales Price (ASP)

We propose to define “average sales price (ASP)” as the manufacturer's price for a quarter for a drug represented by a particular 11-digit National Drug Code (NDC-11) determined under § 414.804 and as reported in section 1927(b)(3) of the Act.

h. Billing Unit

We propose to define “billing unit” as the identifiable quantity of a drug or biological product associated with a billing and payment code (for example, a Healthcare Common Procedure Coding System code), as established by CMS.

i. Biologics Licenses Application (BLA)

We propose to define “Biologics License Application (BLA)” as an application submitted under section 351 of the PHS Act.

j. Biosimilar Biological Product or Biosimilar

We propose to define “biosimilar biological product” or “biosimilar” as having the meaning given such term in section 1847A(c)(6) of the Act. For purposes of these regulations, we use the terms “biosimilar biological product” and “biosimilar” interchangeably when describing the requirements of sections 11001 and 11002 of the IRA. Specifically, section 1192(f)(5) of the Act, as added by section 11002 of the IRA, uses the meaning given to “biosimilar biological product” from section 1847A(c)(6) of the Act. Proposed part 429 uses the term “biosimilar” unless otherwise specified, such as related to the “Biosimilar” included in a Biosimilar Delay Request under section 11002 of the IRA in proposed § 429.20.

k. Biosimilar Delay Request

We propose to define “Biosimilar Delay Request” as either an Initial Delay Request or an Additional Delay Request.

l. Biosimilar Manufacturer

We propose to define “Biosimilar Manufacturer” as one of the following:

• The BLA holder for the Biosimilar.

• If a BLA has been submitted to the U.S. Food and Drug Administration (FDA) for review but the Biosimilar has not been licensed, the sponsor of the BLA submitted for review by the FDA.

• If the Biosimilar has not been licensed and the BLA has not been submitted to the FDA, the organization planning to be the sponsor when the BLA is submitted for review by the FDA.

We believe that this approach is appropriate because: (1) it clearly identifies one manufacturer that may submit a Biosimilar Delay Request for a given Biosimilar, avoiding the possibility that we would receive two such requests naming the same Biosimilar for the same initial price applicability year; and (2) the status of the application for licensure for the Biosimilar is material to CMS' consideration of a request for a Biosimilar Delay Request, as described in section II.B.3. of this proposed rule.

m. BLA Holder

We propose to define “BLA holder” as the entity that is the holder of the license(s) permitting marketing of a biological product in accordance with section 351 of the PHS Act.

n. Bona Fide Marketing

We propose to define “Bona Fide Marketing” as having the meaning set forth in proposed § 429.130(a). Further discussion of CMS' review of one or more manufacturers of an approved generic drug or licensed biosimilar engaging in Bona Fide Marketing is included in section II.B.6.d. of this proposed rule.

o. Combined Part B and Part D Amount

We propose to define “combined Part B and Part D amount” as an amount equal to the weighted average of the payment amount under section 1847A(b)(4) of the Act and the sum of the plan-specific enrollment weighted amount as determined by CMS under proposed § 429.420(c).

p. CPI-U

We propose to define “CPI-U” as the monthly Consumer Price Index for All Urban Consumers (United States city average) index level for all items from the Bureau of Labor Statistics.

q. Direct and Indirect Remuneration (DIR)

We propose to define “Direct and Indirect Remuneration (DIR)” as having the meaning set forth in 42 CFR 423.308.

r. Drug Covered Under Part D

We propose to define “drug covered under Part D” as a covered part D drug as defined in section 1860D-2(e) of the Act. We acknowledge that section 1860D-2(e) of the Act defines the term “covered part D drug” rather than “drug covered under Part D”. For purposes of this rule, we use the term “drug covered under Part D” for simplicity and intend this term to be synonymous with the statutory term “covered part D drug”.

s. Drug Payable Under Part B

We propose to define “drug payable under Part B” as a drug or biological product for which payment may be made under part B of Title XVIII of the Act.

t. Estimated Remuneration at Point-of-Sale Amounts (ERPOSA)

We propose to define “estimated renumeration at point-of-sale amounts (ERPOSA)” as the estimated amount of rebates or other price concessions that the Part D plan sponsor is required to apply, or has elected to apply, to the negotiated price as a reduction in the drug price made available to the beneficiary at the point of sale.

u. Extended-Monopoly Drug

We propose to define “extended-monopoly drug” as having the meaning set forth in section 1194(c)(4) of the Act.

v. FDA-Approved Indication

We propose to define “FDA-approved indication” as the information included in drug labeling per 21 CFR 201.57(c)(2) or FDA regulation(s) as applicable.

w. Fixed Combination Drug

We propose to define “fixed combination drug” as having the meaning set forth in 21 CFR 300.50.

x. Generic Drug

We propose to define “generic drug” as a drug approved in an Abbreviated New Drug Application (ANDA) under section 505(j) of the Federal Food, Drug, and Cosmetic Act (“FD&C Act”).

y. Healthcare Common Procedure Coding System (HCPCS) Code

We propose to define “Healthcare Common Procedure Coding System (HCPCS) code” as a billing and payment code, as established by CMS for payment under Part B, used to describe a drug or biological and for which CMS may publish a payment amount.

z. High Likelihood Deadline

We propose to define “High Likelihood Deadline” as the date that is 2 years after the statutorily defined selected drug publication date for the initial price applicability year for which the reference drug would be included on the selected drug list absent a successful Initial Delay Request. This period of time is consistent with time periods specified in sections 1192(f)(1)(A) and (2)(B)(i)(I) of the Act.

aa. Initial Delay Period

We propose to define “Initial Delay Period” as the time period between: (1) the selected drug publication date for the initial price applicability year for which the Reference Drug otherwise would have been included on the selected drug list but for the successful Initial Delay Request, as proposed in § 429.110(g); and (2) the selected drug publication date with respect to the initial price applicability year that is 1 year after the initial price applicability year for which the Reference Drug otherwise would have been included on the selected drug list but for the successful Initial Delay Request as set forth in section 1192(f)(2) of the Act.

ab. Initial Delay Request

We propose to define “Initial Delay Request” as a request to delay the inclusion of a reference drug on the selected drug list by one initial price applicability year consistent with proposed § 429.110(c) and section 1192(f)(1)(B)(i)(I) of the Act.

ac. Initial Price Applicability Year

We propose to define “initial price applicability year” as having the meaning set forth in section 1191(b)(1) of the Act.

ad. Knowingly

We propose to define “knowingly” as having the meaning set forth in 42 CFR 1003.110.

ae. Long-Monopoly Drug

We propose to define “long-monopoly drug” as having the meaning set forth in section 1194(c)(5) of the Act.

af. Manufacturer

We propose to define “manufacturer” as having the meaning set forth in section 1191(c)(1) of the Act.

ag. Manufacturer Discount Program

We propose to define “Manufacturer Discount Program” to mean the Medicare Part D Manufacturer Discount Program established under section 1860D-14C of the Act.

ah. Maximum Fair Price (MFP)

We propose to define “maximum fair price (MFP)” as having the meaning set forth in section 1191(c)(3) of the Act.

ai. Medicare Drug Price Negotiation Program (or Negotiation Program)

We propose to define “Medicare Drug Price Negotiation Program (or Negotiation Program)” as the program created by sections 11001 and 11002 of the Inflation Reduction Act and codified in sections 1191 through 1198 of the Act and as amended.

aj. Medicare Drug Price Negotiation Program Agreement (or Negotiation Program Agreement)

We propose to define “Medicare Drug Price Negotiation Program Agreement (or Negotiation Program Agreement)” as the agreement between a Primary Manufacturer and CMS as set forth in proposed § 429.200 of this chapter and section 1193(a) of the Act.

ak. NDA Holder

We propose to define “NDA holder” as the entity that is the holder of the approval(s) to market a drug product in accordance with section 505(c) of the FD&C Act.

al. Negotiation-Eligible Drug

We propose to define “negotiation-eligible drug” as having the meaning set forth in section 1192(d) of the Act. We refer readers to proposed § 429.115 (and related discussion in section II.B.4. of this proposed rule) for CMS' proposals for identifying drugs that meet this statutory definition.

am. Negotiation Period

We propose to define “negotiation period” as having the meaning set forth in section 1191(b)(4) of the Act.

an. Net Part D Plan Payment and Beneficiary Liability

We propose to define “Net Part D Plan Payment and Beneficiary Liability” as, for purposes of the Medicare Drug Price Negotiation Program, the total gross covered prescription drug cost for a selected drug covered under Part D net of direct and indirect remuneration (DIR) and Manufacturer Discount Program payments and excluding prescription drug event (PDE) records for which a compound code indicates the PDE record is for a compounded drug.

ao. New Drug Application (NDA)

We propose to define “New Drug Application (NDA)” as an application submitted under section 505(b) of the FD&C Act.

ap. Off-Label Use

We propose to define “off-label use” as the use for a condition for a selected drug or therapeutic alternative that is not an FDA-approved indication but is included in evidence-based clinical practice guidelines and is a medically accepted indication payable under Part B or covered under Part D or both, taking into consideration major drug compendia, authoritative medical literature, and accepted standards of medical practice, or some combination thereof.

aq. Orphan Drug Designation

We propose to define “orphan drug designation” as the meaning set forth in 21 CFR 316.3(b)(11).

ar. Outcomes

We propose to define “outcomes” as the impact of an intervention, which may be clinical or related to the functioning, symptoms, quality of life, or other aspects of a patient's life.

as. Part B Data

We propose to define “Part B data” as having the meaning of Original Medicare (OM) Part B claims data and Medicare Advantage (MA) encounter data for Part B items or services.

at. Partnership

We propose to define “partnership” as having the meaning set forth in section 1192(f)(1)(C)(ii) of the Act.

au. Personally Identifiable Information (PII)

We propose to define “personally identifiable information (PII)” as having the meaning set forth at 2 CFR 200.1.

av. Plasma-Derived Product

We propose to define “plasma-derived product” as having the meaning set forth in section 1192(e)(3)(C) of the Act.

aw. Preliminary Price

We propose to define “preliminary price” as the numerical dollar amount used by CMS in developing an initial offer in accordance with § 429.510(e) by adjusting the starting point of a selected drug based on section 1194(e)(2) factors.

ax. Price Applicability Period

We propose to define “price applicability period” as having the meaning set forth in section 1191(b)(2) of the Act.

ay. Primary Manufacturer

We propose to define “Primary Manufacturer” as the manufacturer identified by CMS as the NDA holder or the BLA holder for the selected drug.

az. Private Label Distributor

We propose to define “private label distributor” as having the meaning set forth in 21 CFR 207.1.

ba. Protected Health Information (PHI)

We propose to define “protected health information (PHI)” as having the meaning set forth at 45 CFR 160.103.

bb. Qualifying Single Source Drug

We propose to define “qualifying single source drug” as having the meaning set forth in section 1192(e) of the Act. We refer readers to proposed § 429.125 (and related discussion in section II.B.6. of this proposed rule) for CMS' proposals for identifying drugs that meet this statutory definition.

bc. Rare Disease or Condition

Section 1192(e)(3)(A) of the Act describes “rare disease or condition” as having the definition used for such term in section 526(a)(2) of the FD&C Act. Therefore, we propose to define “rare disease or condition” as having the meaning set forth in section 526(a)(2) of the FD&C Act.

bd. Reference Drug

We propose to define “Reference Drug” as a negotiation-eligible drug that includes the reference product for the biosimilar as described in section 1192(f)(1)(B) of the Act.

be. Reference Manufacturer

We propose to define “Reference Manufacturer” as the Primary Manufacturer of the Reference Drug that is named in a Biosimilar Delay Request.

bf. Reference Product

We propose to define “Reference Product” as having the meaning set forth in section 1191(c)(4) of the Act.

bg. Relabeler

We propose to define “relabeler” as having the meaning set forth in 21 CFR 207.1.

bh. Renegotiation-Eligible Drug

We propose to define “renegotiation-eligible drug” as having the meaning set forth in section 1194(f)(2) of the Act.

bi. Repackager

We propose to define “repackager” as having the meaning given the term “repacker” set forth in 21 CFR 207.1.

bj. Request To Terminate

We propose to define “Request to Terminate” as a written request submitted by a Primary Manufacturer to CMS, that CMS determines meets the conditions described in § 429.205(b)(1)(A) and (B), to request termination of its applicable program agreements in the context of a Primary Manufacturer's decision not to enter into or to terminate a Negotiation Program Agreement.

bk. Secondary Manufacturer

We propose to define “Secondary Manufacturer” as a manufacturer of a drug product included in the selected drug, that is not the Primary Manufacturer for the selected drug, and that either: (1) is listed as a manufacturer in an NDA or BLA for the selected drug; or (2) markets the selected drug pursuant to an agreement with the Primary Manufacturer but is not listed on an NDA or BLA of the selected drug. A Secondary Manufacturer includes any manufacturer of any authorized generic drug(s) and any repackager or relabeler of the selected drug that meet either of these criteria.

bl. Second Delay Period

We propose to define “Second Delay Period” as the time period between (1) the publication date of the selected drug list for initial price applicability year that is 1 year after the initial price applicability year for which the Reference Drug would have been included on the selected drug list but for the successful Initial Delay Request and (2) the publication date of the selected drug list for initial price applicability year that is 2 years after the initial price applicability year for which the Reference Drug would have been included on the selected drug list but for the successful Initial Delay

Request as set forth in section 1192(f)(2) of the Act.

bm. Section 1194(e)(1) Factors

We propose to define “section 1194(e)(1) factors” as the factors described in section 1194(e)(1) of the Act.

bn. Section 1194(e)(2) Factors

We propose to define “section 1194(e)(2) factors” as the factors described in section 1194(e)(2) of the Act.

bo. Selected Drug

We propose to define “selected drug” as having the meaning set forth in section 1192(c) of the Act. We refer readers to proposed § 429.105 (and related discussion in section II.B.2. of this proposed rule) for CMS' proposals for identifying drugs that meet this statutory definition.

bp. Selected Drug Publication Date

We propose to define “selected drug publication date” as having the meaning set forth in section 1191(b)(3) of the Act.

bq. Self-Administered Drug

We propose to define “self-administered drug” to mean, a drug or biological that is identified by the U.S. Department of Health and Human Services Office of Inspector General (OIG) as a self-administered drug pursuant to section 1847A(g)(1) of the Act.

br. Sequestration Payment Adjustment

We propose to define “sequestration payment adjustment” to mean, when applicable, the amount that is applied to a Part B claim to determine the Medicare payment amount—after determining coinsurance, deductible, merit-based incentive payment adjustments, and any applicable Medicare Secondary Payment adjustments.

bs. Small Biotech Drug

We propose to define “Small Biotech Drug” as meaning a drug that is determined by CMS under the proposed § 429.440(b)(2), in accordance with section 1192(d)(2) of the Act, as eligible for the Temporary Floor for Small Biotech Drugs.

bt. Specified Manufacturer

We propose to define “Specified Manufacturer” as having the meaning set forth in section 1860D-14C(g)(4)(B)(ii) of the Act, as determined by CMS for the purposes of the Manufacturer Discount Program in accordance with §§ 423.2716, 423.2720, and 423.2724.

bu. Starting Point

We propose to define “starting point” as the numerical dollar amount used by CMS in developing an initial offer in accordance with proposed § 429.510(d) that is then adjusted by CMS based on section 1194(e)(2) factors to determine the preliminary price, per the process described in proposed § 429.510(e).

bv. Temporary Floor for Small Biotech Drugs

We propose to define “Temporary Floor for Small Biotech Drugs” as having the meaning set forth in § 429.440(b)(3). We refer readers to proposed § 429.440(b)(1) and (2) (and related discussion in section II.E.9.b. of this proposed rule) for CMS' proposals for the process for a Primary Manufacturer to request consideration and CMS' determination of eligibility for the Temporary Floor for Small Biotech Drugs.

bw. Therapeutic Advance

We propose to define “therapeutic advance” as a demonstrated improvement in one or more outcomes or other clinical considerations for each identified condition of a selected drug as compared to its therapeutic alternative(s). For purposes of the Negotiation Program, anytime CMS considers therapeutic advance, CMS would consider the extent to which the drug represents a therapeutic advance at the time of consideration based on all available information at such time of consideration

bx. Therapeutic Alternative

We propose to define “therapeutic alternative” as a pharmaceutical product or group of pharmaceutical products other than the selected drug that may be used to treat the same condition or disease state as the selected drug.

by. Total Allowed Charges

We propose to define “total allowed charges” as the amount that is inclusive of the beneficiary coinsurance and Medicare payment for the covered Part B item or service paid for under part B of Title XVIII of the Act, without a sequestration payment adjustment applied.

bz. Total Expenditures

We propose to define “total expenditures” as having the meaning set forth in section 1191(c)(5) of the Act. We refer readers to § 429.120 and section II.B.5. of this proposed rule for CMS' proposals for calculating total expenditures under Part D and total expenditures under Part B that meet this statutory definition.

ca. Total Expenditures Measurement Period

Sections 1192(d)(1)(A) and (d)(1)(B) of the Act require that CMS calculate total expenditures under Part D and Part B, respectively, using data from the most recent 12-month period for which data are available prior to the selected drug publication date with respect to an initial price applicability year, but ending no later than October 31 of the year prior to the year of such drug publication date. To describe this 12-month period, we propose to define “total expenditures measurement period” as the 12-month period ending on October 31 of the year prior to the year of the selected drug publication date with respect to an initial price applicability year.

cb. Total Gross Covered Prescription Drug Costs

Section 1191(c)(5) of the Act specifies that the term “total gross covered prescription drugs costs” is defined at section 1860D-15(b)(3) of the Act. The term “total gross covered prescription drug costs” does not appear at section 1860D-15(b)(3) of the Act, but section 1860D-15(b)(3) of the Act does define the term “gross covered prescription drug costs,” and § 423.308 codifies this term. We therefore propose to define “total gross covered prescription drug costs” as having the meaning given the term “gross covered prescription drug costs” set forth at 42 CFR 423.308.

cc. Unit

We propose to define “unit” as having the meaning set forth in section 1191(c)(6) of the Act.

cd. Unmet Medical Need

We propose to define “unmet medical need” as a circumstance in which the relevant disease or condition is one for which no other treatment options exist, or existing treatments do not adequately address the disease or condition. For purposes of the Negotiation Program, anytime CMS considers an unmet medical need, CMS would consider the extent to which the drug addresses an unmet medical need at the time of consideration based on all available information at such time of consideration.

ce. Wholesale Acquisition Cost (WAC) Unit Price

We propose to define “Wholesale Acquisition Cost (WAC) unit price” as the manufacturer's list price for the drug or biological product to wholesalers or

direct purchasers in the United States, not including prompt pay or other discounts, rebates or reductions in price, for the most recent month for which the information is available, as reported in wholesale price guides or other publications of drug or biological product pricing data (as defined in section 1847A(c)(6)(B) of the Act). The WAC unit price is reported at the NDC-11 level.

3. Limitation on Review (§ 429.30)

Section 1198 of the Act establishes that there shall be no administrative or judicial review of any of the following: (1) the determination of a unit, with respect to a drug or biological product, pursuant to section 1191(c)(6) of the Act; (2) the selection of drugs under section 1192(b) of the Act, the determination of negotiation-eligible drugs under section 1192(d) of the Act, the determination of qualifying single source drugs under section 1192(e) of the Act, and the application of the Biosimilar Delay under section 1192(f) of the Act; (3) the determination of a MFP under subsection (b) or (f) of section 1194 of the Act; and (4) the determination of renegotiation-eligible drugs under section 1194(f)(2) of the Act and the selection of renegotiation-eligible drugs under section 1194(f)(3) of the Act. CMS proposes to codify these limitations on review in proposed § 429.30.

B. Identification of Selected Drugs (§§ 429.100 Through 429.135)

Section 1192 of the Act establishes the requirements governing the publication of the list of selected drugs for an initial price applicability year, the identification of selected drugs, ranking of negotiation-eligible drugs, and the identification of qualifying single source drugs. With respect to initial price applicability years 2026 through 2028, we implemented these requirements through guidance, including, for example with respect to initial price applicability year 2028, section 30 of the Negotiation Program Guidance. With respect to initial price applicability years beginning with initial price applicability year 2029, we are proposing to codify these steps in an order reflecting the sequence of the statutory provisions which these sections are implementing, with proposed revisions as noted in this section, in proposed §§ 429.100 through 429.135.

Beginning with respect to initial price applicability year 2029 and in accordance with section 1192 of the Act, we propose in §§ 429.100 through 429.135 to codify the policies for identification of selected drugs described in sections 30 and 40.2 of the Negotiation Program Guidance, subject to proposed modifications as noted herein. As a matter of program operations, we would first identify qualifying single source drugs with respect to each initial price applicability year. As a part of this identification process, CMS would exclude certain drugs as proposed in § 429.125(e). Next, we would identify negotiation-eligible drugs using total expenditures under Part B or Part D of Title XVIII of the Act, as applicable and calculated as set forth in proposed § 429.120, to identify qualifying single source drugs that are Part B high spend drugs, Part D high spend drugs, or both, as proposed in § 429.115. (In these steps, we would also exclude drugs that are already selected drugs in accordance with section 1192(d)(3) of the Act.) As proposed in § 429.105(a), we would rank these negotiation-eligible drugs for an initial price applicability year according to the total expenditures for such drugs. In accordance with section 1192(a) of the Act and subject to the section 1192(f) of the Act (which permits the delay in the selection and negotiation of biological products for biosimilar market entry when certain requirements are met consistent with proposed § 429.110, hereinafter “Biosimilar Delay”), we propose at § 429.105(c) to select up to 20 negotiation-eligible drugs with the highest total expenditures under Part B and Part D of Title XVIII of the Act for negotiation for initial price applicability year 2029 and each initial price applicability year thereafter, and publish the list of selected drugs as proposed at § 429.100. We may also select a drug or drugs for renegotiation based on criteria discussed in detail in section II.G.3. of this proposed rule and in proposed § 429.610.

Finally, as proposed in § 429.100, we would publish the list of drugs selected for negotiation, including the list of drugs selected for renegotiation, if any, not later than the selected drug publication date. We are also proposing to publish a list of the up to 30 top negotiation-eligible drugs (including the up to 20 selected drugs) ranked by combined total expenditures under Part B and Part D. Detailed descriptions of these proposals for initial price applicability year 2029 and each initial price applicability year thereafter is included later in this section. Figure 1 provides a visual depiction of this proposed process.

Figure 1—Diagram of Proposed Process for Selecting Drugs for Negotiation for Initial Price Applicability Years Beginning With Initial Price Applicability Year 2029

EP16JN26.005

1. Publication of the Selected Drug List (§ 429.100)

Section 1192(a)(4) of the Act requires that, not later than the selected drug publication date with respect to the initial price applicability year, in accordance with section 1192(b) of the Act, the Secretary shall select and publish a list of, with respect to the initial price applicability year 2029 or a subsequent year, 20 negotiation-eligible drugs, as described in section 1192(d)(1) of the Act, with respect to such year (or, all (if such number is less than 20) such negotiation-eligible drugs with respect to such year). Proposed § 429.20 defines the term “selected drug publication date” to have the meaning set forth in section 1191(b)(3) of the Act, which provides that the term “selected drug publication date” means, with respect to each initial price applicability year, February 1 of the year that begins 2 years prior to such year. With respect to initial price applicability years 2026 through 2028, we implemented these requirements through guidance, including, for example, section 30.4 of the Negotiation Program Guidance with respect to initial price applicability year 2028.

We are proposing at § 429.100(a) to codify the requirement at section 1192(c)(1) of the Act that each drug included on the selected drug list

for an initial price applicability year is a selected drug with respect to such initial price applicability year and each subsequent year unless and until CMS makes a determination in accordance with proposed § 429.135(a) that such drug will be deselected (as described in further detail in section II.B.6.d. of this proposed rule). We are proposing at § 429.100(b) to codify the requirement that CMS publish the selected drug list and the drugs selected for renegotiation, if any, for each initial price applicability year beginning with initial price applicability year 2029, no later than the selected drug publication date with respect to the initial price applicability year. For example, for initial price applicability year 2029, we would publish this information no later than February 1, 2027. As proposed in § 429.100(b)(1), the selected drug list would include the 20 (or all, if such number is less than 20) drugs payable under Part B, covered under Part D, or both, selected for negotiation for the initial price applicability year as determined in § 429.105(c) and discussed in section II.B.2 of this proposed rule. As proposed in § 429.100(b)(2), we would also publish the list of drugs selected for renegotiation, if any, as set forth in proposed § 429.610.

CMS would publish one list with respect to each initial price applicability year. The list would include the selected drug list of the drugs selected for negotiation for the initial price applicability year, as well as drugs selected for renegotiation, if any.

For each selected drug, we are proposing at § 429.100(b)(3)(i) to add to the MFP file no later than the selected drug publication date the active moiety, active ingredient, antigen component, or, in the case of a potential qualifying single source drug identified under the general fixed combination drug policy proposed at § 429.125(b)(4), the distinct combination of active moieties, active ingredients, or antigen components,

as applicable, identified as set forth in proposed § 429.125(b). For a potential qualifying single source drug identified under § 429.125(b)(4)(i), we are proposing to publish the shared active moiety/active ingredient identified under § 429.125(b)(4)(i), plus any additional active moiety/active ingredient included in new formulations of such potential qualifying single source drug. We are proposing at § 429.100(b)(4)(i) to take the same approach for each drug selected for renegotiation, if any, except we would publish the active moiety/active ingredient previously identified for the initial price applicability year for which the drug was originally selected for negotiation. We are proposing at § 429.100(b)(3)(ii) and (b)(4)(ii) to add to the MFP file no later than the selected drug publication date the NDC-11s identified in accordance with § 429.100(c)(1) and the corresponding NDC-9s and HCPCS codes, as applicable, for the selected drug and the drug selected for renegotiation, if any. For drugs selected for renegotiation, the NDC-11s (and corresponding NDC-9s

and HCPCS codes) added to the MFP file would also reflect information previously submitted by the Primary Manufacturer, including submissions in accordance with proposed § 429.100. At § 429.100(c), we propose the process we would use to identify the list of NDC-11s described in the prior sentences for each selected drug and each drug selected for renegotiation, if any. As proposed at § 429.100(f), the agency's list of NDC-11s would be used in the administration of the Negotiation Program, including to identify the NDC-11s of the selected drug that are subject to the negotiation process set forth in proposed subpart F and the renegotiation process set forth in proposed subpart G (as applicable), identify the NDC-11s of the selected drug to which the MFP (if one is agreed to by CMS and the Primary Manufacturer) applies for the price applicability period, to calculate the ceiling set forth in proposed § 429.410 for drugs selected for negotiation, to calculate the ceiling set forth in proposed § 429.620(b) for drugs selected for renegotiation, and to calculate how to apply the MFP, if one is agreed to by CMS and the Primary Manufacturer, and to the extent data are available to support such calculations, across dosage forms and strengths set forth in proposed § 429.700 for selected drugs and proposed § 429.600(b)(2) for drugs selected for renegotiation.

For simplicity, we hereinafter use the term “active moiety/active ingredient” to refer to the active moiety, active ingredient, antigen component, or, in the case of a potential qualifying single source drug identified under the general fixed combination drug policy proposed at § 429.125(b)(4), the distinct combination of active moieties, active ingredients, or antigen components, that we propose to identify as specified at proposed § 429.125(b)(1) through (b)(4). In limited cases, we refer to active moieties, active ingredients, and antigen components in the plural (that is, “active moieties/active ingredients/antigen components” or “active moiety(ies)/active ingredient(s)/antigen component(s)) when we believe such terminology provides greater clarity to the discussion.

To identify the list of NDC-11s of the selected drug, including for a drug selected for renegotiation, set forth at proposed § 429.100(c), we propose at § 429.100(c)(1) to first identify NDC-11s associated with the NDA(s)/BLA(s) of the selected drug. We would compile all NDC-11s belonging to the selected drug associated with HCPCS codes that appear on NDC-HCPCS code crosswalks published by CMS

for the most recent quarter in the total expenditures measurement period (as such term is defined in proposed § 429.20), and all NDC-11s belonging to the selected drug that had Part D PDE utilization in the total expenditures measurement period. We would also identify any additional NDC-11s associated with the NDA(s)/BLA(s) of the selected drug as found in recent updates of the NDC Structured Product Labeling (SPL) Data Elements file (NSDE) file or the NDC Directory (including its NDC Excluded Drugs Database file). In section 30.4 of the Negotiation Program Guidance, we stated that we will remove any NDC-11s for which CMS has evidence suggesting a lack of coverage under Part D and Part B. Based on lessons learned from policy implementation in initial price applicability years 2026 through 2028, we are proposing to remove such requirement for initial price applicability year 2029 and subsequent years. Starting with a more comprehensive list of NDC-11s holds utility for CMS and Primary Manufacturers, as it reduces the number of NDC-11s that a Primary Manufacturer must identify as missing from the list, as required in proposed § 429.100(d)(1). We would publish the selected drug list, as well as the list of drugs selected for renegotiation, in a form and manner of CMS' choosing, which may be on the CMS website.

See:

https://www.cms.gov/medicare/payment/part-b-drugs/asp-pricing-files.

We are proposing at § 429.100(c)(2) to transmit the list of NDC-11s identified at proposed § 429.100(c)(1) to the Primary Manufacturer. As proposed at § 429.100(c)(3), we may revise our list of NDC-11s of each selected drug, including without limitation using information submitted by the Primary Manufacturer in accordance with proposed § 429.100.

In accordance with a Primary Manufacturer's responsibility under section 1193(a)(4)(B) of the Act and under the Negotiation Program Agreement (set forth in proposed § 429.200 and described in section II.C.1. of this proposed rule), we propose in § 429.100(d) that a Primary Manufacturer must review the list of NDC-11s provided by CMS at proposed § 429.100(c) and provide information on each NDC-11 on the list of NDC-11s that make up a selected drug as a part of their data submission. More specifically, we propose at § 429.100(d) that a Primary Manufacturer must review the list of NDC-11s and provide proposed revisions to the list, as needed, by adding any NDC-11s associated with the NDA(s)/BLA(s) of the selected drug that do not appear on the agency's list of NDC-11s of the selected drug, including any missing NDC-11s of a Secondary Manufacturer. A Primary Manufacturer must also provide identifying information for any NDC-11 that appears on the list of NDC-11s, including any NDC-11s added by the Primary Manufacturer, on whether NDC-11(s): are for products distributed by or under the name of a private label distributor; are not manufactured, marketed, controlled or sold by the Primary Manufacturer or a Secondary Manufacturer; represent a sample package; represent an inner package or an outer package; and whether an NDC-11 has been discontinued. As described in proposed § 429.100(c)(3), we may revise the list of NDC-11s that make up the selected drug based on this information submitted by the Primary Manufacturer.

In accordance with a Primary Manufacturer's responsibility under section 1193(a)(5) of the Act and under the Negotiation Program Agreement (set forth in proposed § 429.200), we propose in § 429.100(e) that a Primary Manufacturer has an ongoing obligation to report, at least 30 calendar days prior to the change taking effect, any changes to the information provided in § 429.100(d) to ensure the list of NDC-11s of the selected drug identified in accordance with proposed § 429.100(c) remains complete and accurate. For example, under proposed § 429.100(e), a Primary Manufacturer must report to CMS any new NDC-11s of the selected drug at least 30 days prior to their first marketed date by or on behalf of the Primary Manufacturer or any Secondary Manufacturer(s) of such selected drug. Failure to provide timely reporting of changes to the list of NDC-11s of the selected drug as described in proposed § 429.100(e) may be considered a violation of the Negotiation Program Agreement under section 1193(a)(5) of the Act and proposed § 429.200(b).

Since the Negotiation Program's inception, interested parties have recommended greater transparency into the process for selecting drugs. In response to these recommendations and in accordance with policy established in the Negotiation Program Guidance, we published a list of the 50 top negotiation-eligible drugs for initial price applicability year 2028 (including the 15 selected drugs for initial price applicability year 2028).

To harmonize the request from interested parties for greater transparency into the process for selecting drugs with CMS operations, for initial price applicability year 2029 and subsequent years, we are proposing to publish a list of the up to 30 top negotiation-eligible drugs (including the up to 20 selected drugs) ranked by combined total expenditures under Part B and Part D, as determined under proposed § 429.105(a), and information on the NDC-9s, NDC-11s, and HCPCS codes for these negotiation-eligible drugs, as applicable and to the extent feasible. The purpose of publishing a list of negotiation-eligible drugs beyond selected drugs was, and remains, to promote transparency in the drug selection process. The conditions that determine which drugs meet the statutory requirements for a drug to become a qualifying single source drug, negotiation-eligible drug, or selected

drug for a given initial price applicability are not static. Such list was not, and is not, intended to predict or replicate the selected drug list for future initial price applicability years. The honed focus on the up to 30 top drugs would continue to provide transparency into the drug selection process. We believe the prior policy of publishing negotiation-eligible drugs with rankings lower than 30 (that is, #31 through #50) provided less meaningful transparency into the drug selection process for a given initial price applicability year, as identifying such drugs provides little insight into the criteria and conditions that were material to the identification of the selected drug list for that initial price applicability year. Finally, consistent with prior policy, we propose that the list of top drugs based on combined total expenditures would reflect the removal of negotiation-eligible drugs that qualify for the Biosimilar Delay.

See:

https://www.cms.gov/files/document/factsheet-medicare-top-50-negotiation-eligible-drug-list-ipay-2028.pdf.

2. Selection of Drugs for Negotiation (§ 429.105)

Section 1192(b)(1)(A) of the Act requires that, in carrying out section 1192(a) of the Act, the Secretary shall, with respect to an initial price applicability year, rank negotiation-eligible drugs, as described in section 1192(d)(1) of the Act, according to the total expenditures for such drugs under parts B and D of Title XVIII, as determined by the Secretary, during the most recent period of 12 months prior to the selected drug publication date (but ending not later than October 31 of the year prior to the year of such drug publication date), with respect to such year, for which data are available, with the negotiation-eligible drugs with the highest total expenditures being ranked the highest. Section 1192(b)(1)(B) of the Act requires that the Secretary select from such ranked drugs with respect to such initial price applicability year the negotiation-eligible drugs with the highest such rankings. With respect to initial price applicability years 2026 through 2028, we implemented these requirements through guidance, including, for example, section 30.3 of the Negotiation Program Guidance with respect to initial price applicability year 2028.

We are proposing at § 429.105 to select 20 (or all, if such number is less than 20) negotiation-eligible drugs for negotiation for each initial price applicability year.

First, with respect to an initial price applicability year, we are proposing at § 429.105(a) to rank the list of negotiation-eligible drugs identified at proposed § 429.115 by combined total expenditures under both Part B and Part D in descending order: the negotiation-eligible drug with the highest total expenditures under Part B and Part D would be listed first, and the negotiation-eligible drug with the lowest total expenditures under Part B and Part D would be listed last (the proposed methodology for the calculation of total expenditures under Part B and total expenditures under Part D is described in proposed § 429.120 and section II.B.5. of this proposed rule). If a negotiation-eligible drug appears on both the Part D high-spend drug list and Part B high-spend drug list (set forth in proposed § 429.115(a)(1) and (a)(2), respectively, and described in section II.B.4. of this proposed rule), it would receive only one ranking for purposes of selection, according to its combined total expenditures under both Part B and Part D. If a negotiation-eligible drug appears on only one high-spend list, CMS would still combine total expenditures under both Part B and Part D.

Second, with respect to an initial price applicability year, we are proposing at § 429.105(b) to remove any biological products that qualify for delayed selection under section 1192(f) of the Act, as proposed at § 429.110 and described in section II.B.3. of this proposed rule.

Finally, we propose at § 429.105(c) to select for negotiation the 20 (or all, if such number is less than 20) highest ranked negotiation-eligible drugs remaining on the ranked list for the initial price applicability year. In guidance for initial price applicability years 2026, 2027 and 2028, including, for example, section 30.3 of the Negotiation Program Guidance, we established that for initial price applicability years 2026, 2027, and 2028, in the event that two or more negotiation-eligible drugs had the same total expenditures to the dollar, and such total expenditures were the 10th or 15th highest among negotiation-eligible drugs, as applicable for the initial price applicability year, we will rank those negotiation-eligible drugs based on which drug had the earlier approval or licensure date, as applicable, associated with the earliest-approved FDA application belonging to the NDA/BLA holder and containing the drug's active moiety/active ingredient, and select based on that ranking until there were 10 or 15 (as applicable) selected drugs (or until all drugs were selected, if the number of negotiation-eligible drugs was less than 10 or 15, as applicable). In this proposed rule, we are proposing to modify this methodology. We propose that to determine whether two or more negotiation-eligible drugs have the same total expenditures, and such total expenditures are the 20th highest among negotiation-eligible drugs (or the highest, if the number is less than 20), we would evaluate such total expenditures to the cent, rather than to the dollar as under prior policy. We believe that determining total expenditures to the cent, rather than the dollar, is more precise for purposes of determining the selected drug list. For such drugs with the same combined total expenditures under Part B and Part D to the cent, we would continue to rank those negotiation-eligible drugs based on which drug has the earliest-approved FDA application belonging to the NDA/BLA holder and containing the drug's active moiety/active ingredient, and select based on that ranking until there are 20 selected drugs (or until all drugs are selected, if the number of negotiation-eligible drugs is less than 20).

3. Request for a Biosimilar Delay (§ 429.110)

a. Overview of the Requirements for a Delay in the Selection and Negotiation of Certain Biological Products With High Likelihood of Biosimilar Market Entry

Section 1192(b)(1)(C) of the Act requires the Secretary to remove from the ranked list of negotiation-eligible drugs (described in proposed § 429.105 and section II.B.2. of this proposed rule) any negotiation-eligible drug for which the inclusion on the selected drug list is delayed in accordance with section 1192(f) of the Act. Specifically, section 1192(f)(1)(B) of the Act allows the manufacturer of a biosimilar biological product (defined at proposed § 429.20 as the “Biosimilar Manufacturer” of a Biosimilar) to submit a request, prior to the selected drug publication date for an initial price applicability year, for CMS' consideration to delay the inclusion of a negotiation-eligible drug that includes the reference product for the Biosimilar (defined at proposed § 429.20 as a “Reference Drug”) on the selected drug list for such given initial price applicability year (which we refer to as a “Biosimilar Delay”).

Section 1192(f) of the Act provides for two potential requests for a Biosimilar Delay: (1) a request to delay the inclusion of a Reference Drug by one initial price applicability year (“Initial Delay Request” as defined in proposed § 429.20) under section 1192(f)(1)(B)(i)(I) of the Act; and (2) a request to delay the inclusion of a Reference Drug for which an Initial Delay Request has been granted for a second initial price applicability year

(“Additional Delay Request”) under section 1192(f)(1)(B)(i)(II) of the Act. Together, CMS refers to an Initial Delay Request and an Additional Delay Request as “Biosimilar Delay Requests” as defined in proposed § 429.20. Proposed § 429.110(b) through (f) address the requirements for a Biosimilar Manufacturer to submit a Biosimilar Delay Request and for CMS to determine if the inclusion of the Reference Drug on the selected drug list should be delayed due to such Biosimilar Delay Request. As set forth in proposed § 429.110(a), for purposes of the provisions at proposed § 429.110 and in our discussion of this section herein, all references to “marketed” or “marketing” mean Bona Fide Marketing as defined in proposed § 429.20 and set forth at proposed § 429.130(a). We discuss Bona Fide Marketing further in section II.B.6.d. of this proposed rule.

Biosimilar Manufacturers that believe that the Reference Drug of their Biosimilar may be a selected drug for an initial price applicability year may submit an Initial Delay Request for the first year and an Additional Delay request for the second year, and CMS would disregard that request if the Reference Drug would not, in fact, be a selected drug for an initial price applicability year. Biosimilar Manufacturers are encouraged to consult publicly available data on expenditures for drugs payable under Part B and/or covered under Part D, including data published by CMS, including but not limited to data on the Medicare Part B Drug Spending Dashboard

and the Medicare Part D Drug Spending Dashboard,

which may allow them to determine the likelihood that a given drug may be a selected drug.

Available at:

https://data.cms.gov/tools/medicare-part-b-drug-spending-dashboard.

Of note, this dashboard excludes MA data for Part B beneficiaries.

Available at:

https://data.cms.gov/tools/medicare-part-d-drug-spending-dashboard.

As discussed in further detail in section IV. of this proposed rule, we are also proposing revisions to a currently approved information collection for a manufacturer to submit an Initial Delay Request, titled the Negotiation Program Drug Selection for Initial Price Applicability Year 20XX under Section 11001 and 11002 of the Inflation Reduction Act Information Collection Request (ICR) (CMS-10844, OMB 0938-1443) (hereinafter, the “Drug Selection ICR”), for a 60-day public comment period concurrently with this proposed rule. A form and manner for submitting a Biosimilar Delay Request, consistent with proposed § 429.110(f), would be specified in the ICR for an initial price applicability year for an Initial Delay Request or an Additional Delay Request. As discussed in further detail in the accompanying 60-day package, we are including questions specific to an Initial Delay Request only within the ICR because CMS did not grant an Initial Delay Request for initial price applicability year 2028 and thus we are not including questions pertaining to submitting an Additional Delay Request for initial price applicability year 2029. We will expand the collection to include questions pertaining to an Additional Delay Request when necessary for an upcoming initial price applicability year when there is a Biosimilar Manufacturer that would be eligible to submit an Additional Delay Request after the granting of an Initial Delay Request. Information submitted in a Biosimilar Delay Request that is trade secret or confidential commercial or financial information will be protected from disclosure if the information meets the requirements set forth under Exemptions 3 and/or 4 of the Freedom of Information Act (FOIA) (5 U.S.C. 552(b)(3), (4)).

For an Initial Delay Request, if we determine that an otherwise negotiation-eligible drug should be delayed from selection because of the requirements proposed in § 429.110(c), but the Biosimilar is not licensed and marketed based on the requirements proposed in § 429.110(h)during the Initial Delay Period (which we propose to define in § 429.20 as the time period between (1) the selected drug publication date for the initial price applicability year for which the Reference Drug otherwise would have been included on the selected drug list but for the successful Initial Delay Request, and (2) the selected drug publication date with respect to the initial price applicability year that is 1 year after the initial price applicability year for which the Reference Drug otherwise would have been included on the selected drug list but for the successful Initial Delay Request), the Biosimilar Manufacturer would have the opportunity to submit an Additional Delay Request consistent with proposed § 429.110(e). If the Biosimilar Manufacturer fails to submit an Additional Delay Request or submits an Additional Delay Request that we determine does not meet all the requirements proposed in § 429.110(e), as proposed in § 429.110(h)(1)(ii), the Reference Drug would be included on the selected drug list for the initial price applicability year that is 1 year after the initial price applicability year for which the Reference Drug would have been included on the selected drug list if not for the successful Initial Delay Request. However, we would not include the Reference Drug on such list if another biosimilar of the Reference Drug is marketed before the publication date of the list.

If the Biosimilar named in a successful Additional Delay Request is not licensed and marketed during the Second Delay Period (which we propose to define in § 429.20 as the time period between (1) the publication date of the selected drug list for initial price applicability year that is 1 year after the initial price applicability year for which the Reference Drug would have been included on the selected drug list but for the successful Initial Delay Request, and (2) the publication date of the selected drug list for initial price applicability year that is 2 years after the initial price applicability year for which the Reference Drug would have been included on the selected drug list but for the successful Initial Delay Request), as proposed in § 429.110(h)(2), the Reference Drug would be included on the selected drug list for the initial price applicability year that is 2 years after the initial price applicability year for which the Reference Drug would have been included on the selected drug list if not for the successful Initial Delay Request(s). However, if another biosimilar of the Reference Drug is marketed prior to the publication date of such list, we would not include the Reference Drug on the list.

Additionally, as proposed in § 429.110(i)(1), if CMS delayed the selection and negotiation of a Reference Drug for 1 or 2 years, but the Biosimilar was not licensed and marketed, and the Reference Manufacturer agrees to an MFP for the Reference Drug, the Reference Manufacturer would owe a rebate to the Federal Supplementary Medical Insurance Trust Fund for drugs payable under Part B or the Medicare Prescription Drug Account for drugs covered under Part D for the years that the manufacturer would have provided access to the MFP for the Reference Drug but for the successful Biosimilar Delay Requests. Consistent with section 1192(f)(4) of the Act and as described in section II.B.3.c. of this proposed rule, proposed § 429.110(i) includes the proposed requirements for the calculation of the rebate.

Consistent with section 1198(2) of the Act and proposed § 429.30, there would no administrative or judicial review of CMS' determinations under section 1192(f) of the Act and in proposed § 429.110 regarding a Biosimilar Delay Request.

b. Requirements for Granting a Biosimilar Delay Request (§ 429.110(c) Through (f))

Section 1192(f)(1)(B)(ii)(I) of the Act requires that the request for the delay be made by the Biosimilar Manufacturer and cannot be initiated by a separate party, such as CMS or the Reference Manufacturer. The Biosimilar Manufacturer, as defined in proposed § 429.20, that is specifically eligible to submit the request is the BLA holder for the Biosimilar or, if the Biosimilar has not yet been licensed, the sponsor of the BLA submitted for review by the FDA. Also included in the definition of “Biosimilar Manufacturer” at proposed § 429.20, if neither the Biosimilar has been licensed nor the BLA has been submitted to FDA, the Biosimilar Manufacturer eligible to submit the request is the organization planning to be the sponsor of the BLA submitted for review by FDA. This approach, which is consistent with the policies for implementation as described in sections 30.3.1 through 30.3.1.5 of Negotiation Program Guidance, is appropriate because: (1) it clearly identifies one manufacturer that may submit a Biosimilar Delay Request for a given Biosimilar, avoiding the possibility that CMS would receive two such requests naming the same Biosimilar for the same initial price applicability year; and (2) the status of the application for licensure for the Biosimilar is material to CMS' consideration of a Biosimilar Delay Request, as described in proposed § 429.110. For both an Initial Delay Request and an Additional Delay Request, certain requirements must be met for CMS to grant such requests. These requirements are included in proposed § 429.110(c) for an Initial Delay Request and proposed § 429.110(e) for an Additional Delay Request.

Section 1192(f)(1)(B)(ii)(I) and (II) of the Act requires the Biosimilar Manufacturer to make the request prior to the selected drug publication date for the initial price applicability year for which the Biosimilar Manufacturer is requesting a Biosimilar Delay. As such, we are proposing at § 429.110(f) that a Biosimilar Manufacturer may submit to CMS a request for a Biosimilar Delay at the time and in a form and manner specified by CMS. Consistent with the process and timeline for previous initial price applicability years, CMS intends to collect requests via the CMS Health Plan Management System (CMS HPMS) and provide for a 30-day submission period as discussed in the Drug Selection ICR. We will not consider late or incomplete submissions. Upon receipt of a complete Biosimilar Delay Request, CMS will consider whether the requirements are met, as applicable, in proposed 429.110(c) for an Initial Delay Request or proposed § 429.110(e) for an Additional Delay Request.

With respect to Initial Delay Requests, we would first determine if the proposed requirements under proposed § 429.110(c)(1) have been met. Section 1192(f)(1)(A) of the Act and, as described in proposed § 429.110(c)(1)(i), requires that the Reference Drug would be an extended-monopoly drug, as defined in section 1194(c)(4) of the Act and proposed § 420.20, included on the selected drug list for the initial price applicability year, absent the Biosimilar Delay. For Initial Delay Requests, this means that the Reference Drug must have received its initial BLA licensure at least 12 years, but fewer than 16 years, prior to the start of the relevant initial price applicability year. Section 1194(c)(4)(B)(ii) of the Act specifies that selected drugs for which a manufacturer had an agreement under the Negotiation Program for an initial price applicability year prior to 2030 are excluded from the definition of extended-monopoly drugs (definition proposed at § 429.20). Importantly, however, an Initial Delay Request must be submitted by a Biosimilar Manufacturer before the selected drug publication date for an initial price applicability year and before the Reference Manufacturer would have entered into an agreement under the Negotiation Program. Therefore, we continue to believe the exception to the definition of “extended-monopoly drug” in section 1194(c)(4)(B)(ii) of the Act would not apply at the time that a delay would be requested for initial price applicability year 2029. Accordingly, we believe the Biosimilar Delay Request process under section 1192(f) of the Act is applicable for future initial price applicability years. As such, Biosimilar Manufacturers may submit an Initial Delay Request for initial price applicability year 2029, provided that the Reference Drug named in the request would have been licensed for at least 12 years but fewer than 16 years prior to the start of the initial price applicability year beginning on January 1, 2029.

Additionally, to qualify for an Initial Delay Request, section 1192(f) of the Act requires the following (as proposed in § 429.110(c)):

• In accordance with section 1192(f)(1)(A) of the Act and as described in proposed § 429.110(c)(1)(ii), the Reference Drug must include the reference product identified in the Biosimilar's application for licensure under section 351(k) of the PHS Act that has been approved or accepted for review by FDA. We note that to grant a Biosimilar Delay Request, the licensure application for the Biosimilar does not need to include all of the dosage forms, strengths, and indications for which the Reference Drug has received approval. With respect to the reference product, the Initial Delay Request may list the brand name and/or the name of the reference product's active ingredient.

• In accordance with section 1192(f)(2)(D)(iii) of the Act and as described in proposed § 429.110(c)(iii), a Biosimilar Delay Request would not be granted if more than 1 year has elapsed since the licensure of the Biosimilar and marketing of the Biosimilar has not commenced.

• In accordance with section 1192(f)(2)(D)(iv) of the Act and as described in proposed § 429.110(c)(1)(iv)(A), the Biosimilar Manufacturer must not be the same as the Reference Manufacturer and must not be treated as being the same under section 1192(f)(1)(C) of the Act. For the purposes of this determination, all persons treated as a single employer under subsection (a) or (b) of section 52 of the Internal Revenue Code (IRC), or in a partnership, shall be treated as one manufacturer in accordance with section 1192(f)(1)(C) of the Act. For the purposes of this determination, “partnership” (as proposed at § 429.20) is defined at section 1192(f)(1)(C)(ii) of the Act as a syndicate, group, pool, joint venture, or other organization through or by means of which any business, financial operation, or venture is carried on by the Reference Manufacturer and the Biosimilar Manufacturer.

• In accordance with section 1192(f)(2)(D)(iv) of the Act and as described in proposed § 429.110(c)(1)(iv)(B), the Biosimilar Manufacturer and the Reference Manufacturer must not have entered into an agreement that—

++ Requires or incentivizes the Biosimilar Manufacturer to submit a Biosimilar Delay Request; or

++ Directly or indirectly restricts the quantity of the Biosimilar that may be sold in the United States over a specified period of time.

We would consider any agreement between the Biosimilar Manufacturer and the Reference Manufacturer that directly or indirectly restricts the quantity of the Biosimilar that the Biosimilar Manufacturer may sell during any period of time on or after the selected drug publication date for the initial price applicability year for which the Biosimilar Manufacturer is requesting a Biosimilar Delay, as failing to meet this requirement.

Once we determine the requirements proposed in § 429.110(c)(1) are met, we would then determine if there is a high likelihood, as required in section 1194(f)(1)(A) of the Act and as proposed in § 429.110(c)(2), that the Biosimilar will be licensed and marketed before the date that is 2 years after the statutorily defined selected drug publication date for the initial price applicability year for which the Reference Drug would be included on the selected drug list absent a successful Initial Delay Request (“High Likelihood Deadline,” as defined in proposed § 429.20). For example, the High Likelihood Deadline for an Initial Delay Request for initial price applicability year 2029 would be February 1, 2029. Specifically, in accordance with section 1192(f)(3) of the Act and consistent with implementation of the policies in section 30.3.1.3 of Negotiation Program Guidance Program, we propose in § 429.110(d) that there is a high likelihood the Biosimilar will be licensed and marketed before the High Likelihood Deadline if each of the following criteria are met:

• An application for licensure under section 351(k) of the PHS Act for the Biosimilar has been accepted for review or licensed by FDA.

• Clear and convincing evidence that the Biosimilar will be marketed before the High Likelihood Deadline.

We propose at § 429.110(d)(1) that CMS will specify the due date by which the application for licensure must be accepted for review or approved by the FDA, which will be a date before the selected drug publication date for the initial price applicability year for which the Biosimilar Manufacturer requests a Biosimilar Delay in order to permit sufficient time for CMS to review the information and finalize the selected drug list prior to publishing the selected drug list for the initial price applicability year. This would enable CMS to use the most recent possible data to make this determination, while still allowing for sufficient time for such requests to inform the selected drug list prior to the selected drug publication date as required by section 1192(a) of the Act. If the Biosimilar's application for licensure has not been accepted for review by the specified date, including in the case where the Biosimilar Manufacturer submitted an application for licensure that has not been accepted for review by FDA or for which a filing determination is pending, we would deny the Initial Delay Request. Additionally, CMS would consider an application for licensure under section 351(k) of the PHS Act that has been accepted for review and received a complete response letter from the FDA to meet the section 1192(f)(3)(A) requirement that an application for licensure under section 351(k) for the biosimilar biological product has been accepted for review by FDA.

To demonstrate clear and convincing evidence that the Biosimilar will be marketed before the High Likelihood Deadline, we propose at § 429.110(d)(2) that the Biosimilar Delay Request must include information to demonstrate both: (1) that patents related to the Reference Drug are unlikely to prevent the Biosimilar from being marketed; and (2) that the Biosimilar Manufacturer will be operationally ready to market the Biosimilar. These requirements address the two primary contributing factors to delays in marketing of biosimilars approved in the U.S. to date, and so we believe that evidence showing that a Biosimilar meets these two requirements is sufficient to establish clear and convincing evidence that the Biosimilar will be marketed.

First, regarding the proposal at § 429.110(d)(2)(i) that the Biosimilar Delay Request must clearly demonstrate that patents related to the Reference Drug are unlikely to prevent the Biosimilar from being marketed before the High Likelihood Deadline: we will only consider patents relating to the reference product included in the Reference Drug that are applicable to the Biosimilar. For example, if a Biosimilar Manufacturer has obtained licensure with biosimilar labeling that omits a patent-protected indication or other patent-protected information, then such patents that cover the omitted indication or the omitted information will not be considered to be “applicable to the Biosimilar”. Specifically, we propose at § 429.110(d)(2)(i)(A) through (D) that the Biosimilar Manufacturer must demonstrate that patents related to the Reference Drug are unlikely to prevent the Biosimilar from being marketed before the High Likelihood Deadline through any of four pathways specified. The first option the Biosimilar Manufacturer may demonstrate is that there will be no unexpired patents relating to the reference product included in the Reference Drug that are applicable to the Biosimilar. The second option the Biosimilar Manufacturer may demonstrate is that one or more court decisions or decisions by the United States Patent and Trademark Office (USPTO)'s Patent Trial and Appeal Board (PTAB) establish the invalidity, unenforceability, or non-infringement of any potentially applicable unexpired patents relating to the reference product included in the Reference Drug that a patent holder asserted was applicable to the Biosimilar. The third option the Biosimilar Manufacturer may demonstrate is that neither a court nor PTAB has adversely ruled against the Biosimilar Manufacturer's patent assertion(s) pertaining to unexpired patent(s) relating to the reference product included in the Reference Drug applicable to the Biosimilar, and the Biosimilar Manufacturer has publicly announced a precise launch date for the Biosimilar that is both a calendar date before the High Likelihood Deadline and is not contingent on the outcome of pending litigation. Finally, the fourth option the Biosimilar Manufacturer may demonstrate is that the Biosimilar Manufacturer has a signed agreement with the Reference Manufacturer that permits the Biosimilar Manufacturer to market the Biosimilar before the High Likelihood Deadline, without improper constraints on the Biosimilar Manufacturer. In accordance with the parameters set forth in section 1192(f)(2)(D)(iv) of the Act and proposed § 429.110(c)(1)(iv) of this section, an improper constraint includes, but is not limited to: circumstances in which the Biosimilar Manufacturer is the same as the Reference Manufacturer or is treated as being the same pursuant to section 1192(f)(1)(C) of the Act; an instance in which the Biosimilar Manufacturer has entered into an agreement with the Reference Manufacturer that requires or incentivizes the Biosimilar Manufacturer to submit a Biosimilar Delay Request; and an instance in which a Biosimilar Manufacturer has entered into an agreement with the Reference Manufacturer that directly or indirectly restricts the quantity of the Biosimilar sold in the United States on or after the selected drug publication date of the initial price applicability year for which the Biosimilar Manufacturer is requesting a Biosimilar Delay.

Second, regarding the proposal at § 429.110(d)(2)(ii) that the Biosimilar Delay Request must clearly demonstrate that the Biosimilar Manufacturer will be operationally ready to market the Biosimilar before the High Likelihood Deadline, to assess this requirement, we propose to consider the Biosimilar Manufacturer's progress against the actions, activities, and milestones that are typical of the normal course of business leading up to the marketing of a drug as evidenced by both: (1) disclosures about capital investment, revenue expectations, and actions consistent with the normal course of business for marketing of a biosimilar biological product before the High Likelihood Deadline; and (2) a

manufacturing schedule that is consistent with the public-facing statements and demonstrates readiness to meet revenue expectations. We propose these criteria because we believe they are indicative of operational readiness and should be available in the elements that CMS must consider in making this determination as required by section 1192(f)(1)(B)(ii) of the Act.

In accordance with sections 1192(f)(3)(B), CMS must use information from items described in sections 1192(f)(1)(B)(ii)(I)(bb) and (III) of the Act submitted to CMS by the Biosimilar Manufacturer requesting the Biosimilar Delay to identify if there is clear and convincing evidence that the Biosimilar will be marketed before the High Likelihood Deadline. Consistent with these statutory requirements and the policies implementing section 30.3.1.3 of the Negotiation Program Guidance, we propose at § 429.110(f)(1)(i) through (iii) the information we would review for such “clear and convincing evidence,” which must include—

• All agreements related to the Biosimilar filed with the Federal Trade Commission (FTC) or the Assistant Attorney General under subsections (a) and (c) of section 1112 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003;

• To the extent available, the manufacturing schedule for the Biosimilar submitted to FDA during its review of the application for licensure under section 351(k) of the PHS Act for the Biosimilar; and

• To the extent available, the Biosimilar Manufacturer's disclosures pertaining to the marketing of the Biosimilar (for example, in filings with the Securities and Exchange Commission required under section 12(b), 12(g), 13(a), or 15(d) of the Securities Exchange Act of 1934 or comparable documentation distributed to the shareholders of privately held companies) about capital investment, revenue expectations, and other actions typically taken by a manufacturer in the normal course of business in the year (or the 2 years, as applicable) before marketing of a Biosimilar.

To illustrate what information specifically that CMS might identify within such documentation to potentially demonstrate that the Biosimilar has a high likelihood of being marketed before the High Likelihood Deadline, we provide three examples of “clear and convincing evidence” that might be included in the documentation required at section 1192(f)(3)(B) of the Act and proposed in § 429.110(f)(1)(i) through (iii). These examples are illustrative but alone may not always constitute “clear and convincing evidence” of a high likelihood of being marketed. First, we provide two examples of evidence that could potentially demonstrate that a patent (or patents) related to the Reference Drug are unlikely to prevent the Biosimilar from being marketed: (1) the listing of a signed agreement between the Biosimilar and Reference Drug Manufacturers under “Legal Proceedings” or another section, as appropriate, in a Form 10-K, along with a copy of the agreement if required to be filed with the Federal Trade Commission (FTC) or the Assistant Attorney General under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, and (2) the lack of any adverse actions from a court or PTAB under “Legal Proceedings” or another section, as appropriate, in a Form 10-K pertaining to a Biosimilar Manufacturer's patent assertion(s) of an unexpired patent or patent(s) relating to the reference product included in the Reference Drug applicable to the Biosimilar, and the Biosimilar Manufacturer publicly announced a precise launch date for the Biosimilar by a calendar date prior to the High Likelihood Deadline within the operational preparations and/or other steps to market and/or produce the Biosimilar under “Management's Discussion and Analysis (MD&A)” or another section, as appropriate, in a Form 10-K. Second, we provide one example of evidence that could potentially demonstrate that the Biosimilar Manufacturer is operationally ready: information regarding the operational preparations and/or other steps to market and/or produce the Biosimilar under “MD&A” or another section, as appropriate, in a Form 10-K. These distinct examples are intended to be for illustrative purposes only and do not supersede the requirements of the originating authorities for the required documentation (for example, the Securities Exchange Act of 1934 governing disclosure requirements). Consistent with section 1192(f)(1)(B)(ii)(III)(bb) of the Act, comparable documentation that is distributed to the shareholders of privately held companies could be provided in lieu of any examples of disclosures required under the Securities Exchange Act of 1934 for publicly traded companies. These examples are not exhaustive of the information that might be included in the documentation required at section 1192(f)(3)(B) of the Act and in a submission for a request for an Initial Delay Request necessary to demonstrate “clear and convincing evidence”.

Finally, consistent with section 1192(f)(1)(B)(ii)(II) of the Act and at proposed § 429.110(f)(2), we may request additional information from the Biosimilar Manufacturer as necessary to make a determination with respect to the Initial Delay Request after reviewing an Initial Delay Request. Any such written request would specify the additional information required, a form and manner in which the Biosimilar Manufacturer must provide the additional information, and the deadline for providing such information.

As proposed at § 429.110(g)(1), we would provide in writing a notice of determination, on or after the selected drug publication date for the initial price applicability year by a specific date to be set forth by CMS, to the Biosimilar Manufacturer that requested the Initial Delay Request regarding whether the request was successful or unsuccessful. If unsuccessful, we would specify the reason for the unsuccessful request. Such reasons provided may include: (1) failure to submit all elements of the Biosimilar Delay Request by the applicable deadline (CMS-10844, OMB 0938-1443); (2) failure to meet another statutory requirement for granting a request (other than the high likelihood requirement), including in the case that the Reference Drug would not have been a selected drug for the initial price applicability year absent the Initial Delay Request; or (3) failure to demonstrate a high likelihood that the Biosimilar will be licensed and marketed before the High Likelihood Deadline. We also propose at § 429.110(g)(1)(i)(B) to notify each Reference Manufacturer named in a successful Biosimilar Delay Request. We propose that such notification would be in writing and would identify the Reference Drug that would have been a selected drug in the initial price applicability year, absent the successful Initial Delay Request. Reference Manufacturers named in unsuccessful Initial Delay Requests would not be notified. We will publish the number of Reference Drugs that would have been selected drugs for the initial price applicability year, absent successful Initial Delay Requests, as part of publishing the selected drug list as proposed in § 429.100 and described in section II.B.1. of this proposed rule (see proposed § 429.110(g)(2)).

Section 1192(f)(2)(B) of the Act requires CMS to determine whether each Biosimilar named in a successful Initial Delay Request is licensed and

marketed during the Initial Delay Period. CMS proposes at § 429.110(h)(1) that we would determine whether each Biosimilar named in a successful Initial Delay Request was licensed and marketed during the Initial Delay Period. If we determine that the Biosimilar is not licensed and marketed during the Initial Delay Period, we propose at § 429.110(h)(1)(i) that the Biosimilar Manufacturer will have the opportunity to submit an Additional Delay Request. In proposed § 429.110(g)(3), for successful Initial Delay Requests submitted with respect to the initial price applicability year, we propose to notify a Biosimilar Manufacturer if CMS has determined that the Biosimilar named in the Biosimilar Manufacturer's successful Initial Delay Request is licensed and marketed during the Initial Delay Period by a date to be specified by CMS in technical guidance, which will be no later than the end of October of the calendar year of the selected drug publication date for the initial price applicability year for which the Biosimilar Manufacturer submitted the successful Initial Delay Request. For example, if CMS determined that a Biosimilar Manufacturer's Initial Delay Request was successful for initial price applicability year 2029, CMS would provide this notification to the Biosimilar Manufacturer no later than the end of October 2027.

If the Biosimilar Manufacturer chooses to submit an Additional Delay Request, sections 1192(f)(2)(B)(i)(I) and (iii) include requirements for an Additional Delay Request. We propose these requirements in § 429.110(e), along with the corresponding documentation requirements in § 429.110(f). Consistent with section 1192(f)(2) of the Act, to first be eligible for an Additional Delay Request, we would need to determine that the Biosimilar listed in the Additional Delay Request was identified in a successfully granted Initial Delay Request (consistent with proposed § 429.110(c)) and the licensure and marketing under section 351(k) of the PHS Act has not commenced between the publication date of the selected drug list for the initial price applicability year for which the Initial Delay Request was granted and the date that is 1 year following that publication date. We propose these requirements at § 429.110(e)(1)(i) and (ii). Additionally, as a threshold requirement, we would determine that the requirements proposed at § 429.110(c)(1)(ii) through (iv) for an Initial Delay Request, in accordance with sections 1192(f)(1) and (2) of the Act, remain met for purposes of the Additional Delay Request (see proposed § 429.110(e)(1)(iii)). Further, in accordance with section 1192(f)(2)(D)(ii) of the Act and as described in proposed § 429.110(e)(1)(iv), a Biosimilar named in the Biosimilar Manufacturer's successful Initial Delay Request is not eligible for an Additional Delay Request if the status of the Reference Drug would change to a long-monopoly drug (as defined in proposed § 429.20), with respect to the initial price applicability year for which the Biosimilar Manufacturer is submitting an Additional Delay Request. If the requirements proposed in § 429.110(e)(1)(i) through (iv) are met, we would then reevaluate and determine whether the requirements in proposed § 429.110(d) regarding whether there is a high likelihood that the Biosimilar will be licensed and marketed before the High Likelihood Deadline continue to be met as proposed in § 429.110(e)(2). Finally, in accordance with section 1192(f)(2)(B)(i)(II) of the Act and as described in proposed § 429.110(e)(3), we must determine, on the basis of clear and convincing evidence, that the Biosimilar Manufacturer has made a significant amount of progress towards both licensure and marketing of the Biosimilar since the Biosimilar Manufacturer's submission of the successful Initial Delay Request. In accordance with section 1192(f)(2)(B)(i)(II) of the Act, CMS is required to use information from the following items when assessing whether there is clear and convincing evidence that the Biosimilar Manufacturer has made a significant amount of progress towards licensure and marketing of the Biosimilar since the Biosimilar Manufacturer's submission of the successful Initial Delay Request for the Biosimilar: (1) all agreements related to the Biosimilar filed with the FTC or the Assistant Attorney General pursuant to subsections (a) and (c) of section 1112 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (as described in section 1192(f)(1)(B)(ii)(I)(bb) of the Act); and (2) additional information and documents that CMS may request after CMS has reviewed the information required for submission of the Additional Delay Request necessary to make a determination about an Additional Delay Request (as described in section 1192(f)(1)(B)(ii)(II) of the Act).

Consistent with implementation of policies in section 30.3.1.4 of the Negotiation Program Guidance, recognizing that approximately 1 year has passed since submission of the successful Initial Delay Request, we would consider whether the Biosimilar Manufacturer demonstrates that the Biosimilar will be licensed and marketed before the High Likelihood Deadline. Specifically, we propose at § 429.110(e)(3) that the determination of whether a significant amount of progress has been made by the Biosimilar Manufacturer towards licensure and marketing of the Biosimilar since the successful Initial Delay Request submission for such Biosimilar will be based on a holistic review of the documentation submitted with the Additional Delay Request (as described in proposed § 429.110(f)(1), including any follow-up documentation requests from CMS to the manufacturer described in proposed § 429.110(f)(2)). Within the request we would consider if the Biosimilar Manufacturer can demonstrate affirmative progress towards being operationally ready to market the Biosimilar, meaning that we would consider the Biosimilar Manufacturer's progress on the actions, activities, and milestones that are typical of the normal course of business leading up to the marketing of a drug since the successful Initial Delay Request submission for the Biosimilar evidenced in any updates or supplements to the documents specified in section 1192(f)(1)(B)(ii)(III) of the Act and as described in proposed § 429.110(f)(1). Additionally, we would consider if the manufacturing schedule (as provided in § 429.110(f)(1)(ii)) is consistent with the public-facing statements (that may be identified within the information provided in the materials set forth at proposed § 429.110(f)(1)(iii)) and demonstrates readiness to meet revenue expectations.

After completing our review of an Additional Delay Request, similar to the process for notification after an Initial Delay Request, we would notify the Biosimilar Manufacturer that submitted the Additional Delay Request regarding CMS' determination of whether the Additional Delay Request was successful or unsuccessful (see proposed § 429.110(g)(1)(i)(A)). We also propose to notify the Reference Manufacturer of a successful Additional Delay Request (see proposed § 429.110(g)(1)(i)(B)) and would publish the number of Reference Drugs that would have been selected drugs for the initial price applicability year if they had not been determined eligible by CMS for a Biosimilar Delay Request for that initial price applicability year (see proposed § 429.110(g)(2)).

(c) Review For Failure of the Biosimilar To be Licensed and Marketed; Rebate Owed for Failure of a Biosimilar To be Licensed and Marketed (§ 429.110(h) through (i))

As discussed previously, CMS proposes at § 429.110(h)(1) that we would determine whether each Biosimilar named in a successful Initial Delay Request was licensed and marketed during the Initial Delay Period. If we determine that the Biosimilar is not licensed and marketed during the Initial Delay Period, we propose at § 429.110(h)(1)(i) that the Biosimilar Manufacturer will have the opportunity to submit an Additional Delay Request. In proposed § 429.110(h)(1)(ii), we propose that if the Biosimilar Manufacturer chooses not to submit an Additional Delay Request, or submits an Additional Delay Request that CMS determines does not meet all requirements in proposed § 429.110(e), CMS would include the Reference Drug on the selected drug list for the initial price applicability year that is 1 year after the initial price applicability year for which the Reference Drug would have been included on the selected drug list if not for the successful Initial Delay Request (for example, the selected drug list for initial price applicability year 2030 for successful Initial Delay Requests for initial price applicability year 2029), unless a different biosimilar biological product is marketed before the publication of the selected drug list for the applicable initial price applicability year, in which case CMS could also determine, in accordance with section 1192(c) of the Act and described in sections II.B.6.d. of this proposed rule, that the Reference Drug no longer meets the criteria to be a selected drug and will be excluded from such applicable list of drugs selected for an initial price applicability year. Further, in accordance with section 1192(f)(2)(C) of the Act and as described in proposed § 429.110(h)(2), CMS must determine whether each Biosimilar named in a successful Additional Delay Request is licensed and marketed during the Second Delay Period. We propose at § 429.110(h)(2)(i) that if CMS determines that the Biosimilar is not licensed and marketed during the Second Delay Period, unless a different biosimilar biological product is marketed, CMS would include the Reference Drug on the selected drug list for the initial price applicability year that is 2 years after the initial price applicability year for which the Reference Drug would have been included on the selected drug list if not for the successful Initial Delay Request.

In accordance with sections 1192(f)(2)(B)(ii), 1192(f)(2)(C), and 1192(f)(4)(A) of the Act and as described in proposed § 429.110(i)(1), if (1) CMS delayed the selection and negotiation of a Reference Drug for 1 or 2 years, (2) CMS determined that the Biosimilar was not licensed and marketed, and (3) the manufacturer of the Reference Drug agrees to an MFP for the Reference Drug, the Reference Manufacturer is required to pay a rebate for the years that the manufacturer would have provided access to the MFP for the Reference Drug but for the delay. In accordance with section 1192(f)(4)(B) of the Act, we specify in proposed § 429.110(i)(4) that the rebate owed by the Reference Manufacturer, for the year for which an Initial Delay Request and, if applicable, an Additional Delay Request was granted will be calculated as follows:

• In accordance with section 1192(f)(4)(B)(i) of the Act and as described in proposed § 429.110(i)(4)(ii), in the case of a Reference Drug that is a drug covered under Part D, 75 percent of the difference between the AMP, with respect to each of the calendar quarters of the price applicability period, and the MFP negotiated for the Reference Drug multiplied by the number of units dispensed under Part D for the Reference Drug in each calendar quarter of the price applicability period that would have applied but for the delay.

• In accordance with section 1192(f)(4)(B)(ii) of the Act and as described in proposed § 429.110(i)(4)(iii), in the case of a Reference Drug payable under Part B, 80 percent of the difference between the payment amount under section 1847A(b) of the Act, with respect to each of the calendar quarters of the price applicability period, and the MFP negotiated for the Reference Drug, multiplied by the number of units of the billing and payment code of the Reference Drug administered or furnished under Part B (excluding units that are packaged into the payment amount for an item or service and are not separately payable under Part B) for each calendar quarter of the price applicability period that would have applied but for the delay.

• As described in proposed § 429.110(i)(4)(iv), in the case of a Reference Drug that is a drug covered under Part D and payable under Part B, the rebate amount will be calculated by summing the rebate amount for the units payable under Part B as specified in proposed § 429.110(i)(4)(iii) and the rebate amount for units covered under Part D as specified in proposed § 429.110(i)(4)(ii).

For the year for which an Additional Delay Request was granted, we will adjust the MFP as described in section 1195(b)(1)(A) of the Act to account for changes in the CPI-U. Additionally, before applying a rebate as described in proposed § 429.110(i)(5), we will determine if the Reference Drug transitioned to a long monopoly drug, at the time of its inclusion on the selected drug list for the initial price applicability year. For drugs payable under Part B and covered under Part D, we would calculate the rebate for the units payable under Part B following the Part B formula and we would calculate the rebate for the units covered under Part D following the Part D formula.

In the case of a Reference Drug that CMS determines transitioned to a long-monopoly drug during the delay, in accordance with section 1192(f)(4)(C) of the Act and as described in proposed § 429.110(i)(5) through (6), the rebate calculation will substitute the MFP negotiated for the Reference Drug with the following amount. The amount will be equal to 65 percent of the average non-FAMP (consistent with proposed § 429.20 and defined in 38 U.S.C. 8126(h)(5)) for 2021 (or the first full year following market entry if there is no non-FAMP for 2021) increased by the percentage increase in the CPI-U from September 2021 (or December of such first full year following the market entry) to September of the year prior to the selected drug publication date for the initial price applicability year that would have applied but for the Initial Delay Request. For example, if inclusion of the Reference Drug on the selected drug list is delayed until initial price applicability year 2030 due to a successful Initial Delay Request, and the Reference Drug transitions to a long-monopoly drug, the rebate calculation will use September of the year prior to the selected drug publication date for initial price applicability year 2029 (September 2026) for the purposes of adjusting for inflation the average non-FAMP for 2021. As described in proposed § 429.110(i)(6), the rebate calculation will substitute the MFP negotiated for the Reference Drug with the amount that is further adjusted by the annual percentage increase in the CPI-U for the 12-month period ending with July of the calendar year that is 2 years before the initial price applicability year for which the Additional Delay Request was granted.

In accordance with section 1192(f)(4)(B) of the Act and as described in proposed § 429.110(i)(4)(i), we intend to apply the MFP to the rebate calculation for all the previous initial applicability years where the Reference

Drug would have been on the selected drug list if not for the successful Biosimilar Delay Request. For example, if the Reference Drug would have been on the list for initial price applicability years 2029 and 2030 but for the approval of an Initial Delay Request and an Additional Delay Request, and CMS determines the Biosimilar was not licensed and marketed, we will use the MFP agreed to for initial price applicability year 2031 to calculate the rebate amount for initial price applicability years 2029 and 2030.

In accordance with section 1192(f)(4)(D) of the Act and as described in proposed § 429.110(i)(3), the rebates paid for drugs payable under Part B would be deposited in the Federal Supplementary Medical Insurance Trust Fund established under section 1841 of the Act. The rebates paid for drugs covered under Part D would be deposited in the Medicare Prescription Drug Account established under section 1860D-16 of the Act, which is within the Federal Supplementary Medical Insurance Trust Fund. Under proposed § 429.110(i)(2), we would specify a form and manner for the administration of rebates, including the timing and mechanism for notifying manufacturers when a rebate is owed and the process for payment, in future rulemaking.

4. Identification of Negotiation-Eligible Drugs (§ 429.115)

Section 1192(d)(1) of the Act requires that a “negotiation-eligible drug” means, with respect to the selected drug publication date with respect to an initial price applicability year, a qualifying single source drug, as defined in section 1192(e) of the Act, that is either a Part D high spend drug or a Part B high spend drug. Section 1192(d)(1)(A) of the Act describes a Part D high spend drug as a qualifying single source drug that is among the 50 qualifying single source drugs with the highest total expenditures under part D of Title XVIII, as determined by the Secretary in accordance with section 1192(d)(3) of the Act, during the most recent 12-month period for which data are available prior to such selected drug publication date (but ending no later than October 31 of the year prior to the year of such drug publication date). Section 1192(d)(1)(B) of the Act describes a Part B high spend drug as a qualifying single source drug that is among the 50 qualifying single source drugs with the highest total expenditures under part B of Title XVIII, as determined by the Secretary in accordance with section 1192(d)(3) of the Act, during such most recent 12-month period describes in section 1192(d)(1)(A) of the Act. With respect to initial price applicability years 2026 through 2028, we implemented these requirements through guidance, including, for example, section 30.2 of the Negotiation Program Guidance with respect to initial price applicability year 2028.

We are proposing to codify the statutory requirements in section 1192(d) of the Act at § 429.115, including that a negotiation-eligible drug for an initial price applicability year is a qualifying single source drug, as identified under proposed § 429.125, that is among the 50 qualifying single source drugs with the highest total expenditures under Part D, or among the 50 qualifying single source drugs with the highest total expenditures under Part B. We are proposing to codify our process for identifying the negotiation-eligible drugs for each initial price applicability year, consistent with the process implemented through prior guidance, as follows.

We propose at § 429.115(a)(1) to identify Part D high spend drugs described in section 1192(d)(1)(A) of the Act using the following steps. We would first remove from negotiation eligibility any qualifying single source drugs that are already selected drugs in accordance with section 1192(d)(3)(A)(i) of the Act. Next, for remaining qualifying single source drugs, CMS would calculate a qualifying single source drug's total expenditures under Part D using the methodology set forth at proposed § 429.120(a) and described in section II.B.5. of this proposed rule and rank those qualifying single source drugs by total expenditures under Part D during the total expenditures measurement period. Finally, we would identify the 50 qualifying single source drugs that have the highest total expenditures under Part D during the total expenditures measurement period (that is, Part D high spend drugs).

Then, we are proposing at § 429.115(a)(2) to identify Part B high spend drugs described in section 1192(d)(1)(B) of the Act using the following steps. As with Part D high spend drugs, we would first remove from negotiation eligibility any qualifying single source drugs that are already selected drugs in accordance with section 1192(d)(3)(A)(i) of the Act.

Next, for remaining qualifying single source drugs, CMS would calculate a qualifying single source drug's total expenditures under Part B using the methodology set forth at proposed § 429.120(b) and described in section II.B.5. of this proposed rule and rank the remaining qualifying single source drugs by total expenditures under Part B during the total expenditures measurement period. Finally, we would identify the 50 qualifying single source drugs that have the highest total expenditures under Part B during the total expenditures measurement period (that is, Part B high spend drugs).

This removal would encompass qualifying single source drugs that have been selected for initial price applicability years 2026 and 2027 based on Part D total expenditures.

We are proposing at § 429.115(b) that, when identifying Part D high spend drugs and Part B high spend drugs as proposed at § 429.115(a)(1)(iv) and (a)(2)(iv), respectively, if two or more qualifying single source drugs have the same total expenditures to the cent under Part D or Part B, and such total expenditures are the 50th highest among qualifying single source drugs under Part D or Part B, we would rank the qualifying single source drugs based on which drug has the earlier approval or licensure date, as applicable, associated with the earliest-approved FDA application belonging to the NDA/BLA holder and containing the active moiety/active ingredient in the drug, until we have identified 50 Part D high spend drugs and Part B high spend drugs, respectively. These 50 Part D high spend drugs and 50 Part B high spend drugs, identified in accordance with proposed § 429.115(a)(1) and (a)(2), respectively, would be the negotiation-eligible drugs for the initial price applicability year. This proposal is a modification from Negotiation Program Guidance, which established that for initial price applicability years 2026, 2027, and 2028, we would identify qualifying single source drugs with the same total expenditures to the dollar. As noted in section II.B.2. of this proposed rule, we believe that using information to the cent, rather than to the dollar as under prior policy, is more precise for purposes of determining negotiation-eligible drugs.

5. Calculation of Total Expenditures (§ 429.120)

As described in sections II.B.2., II.B.4., and II.B.6.c.2. of this proposed rule, we are proposing at §§ 429.105(a), 429.115(a), and 429.125(e)(2) to calculate total expenditures under Part B and Part D as a step in the processes for identifying selected drugs, negotiation-eligible drugs, and drugs eligible for the low-spend Medicare drug exclusion, respectively. Section 1191(c)(5) of the Act defines the term “total expenditures” to include, in the case of expenditures with respect to Part D, the total gross covered prescription

drug costs (as defined in section 1860D-15(b)(3) of the Act). In the case of “total expenditures” with respect to Part B, section 1191(c)(5) of the Act specifies that such term excludes expenditures for a drug or biological product that are bundled or packaged into the payment for another service. With respect to initial price applicability years 2026 through 2028, we explained through guidance how we will implement the statutory requirement to calculate total expenditures under Part B and total expenditures under Part D, including, for example, section 30 of the Negotiation Program Guidance with respect to initial price applicability year 2028. We are proposing to codify the definition of total expenditures in section 1191(c)(5) of the Act at § 429.20, and we propose how we would calculate total expenditures under Part B and Part D at § 429.120.

a. Calculation of Total Expenditures Under Part D

At § 429.120(a), we propose to calculate total expenditures under Part D for a given potential qualifying single source drug, qualifying single source drug, negotiation-eligible drug, or selected drug, as the sum of gross covered prescription drug costs for each PDE record for such drug that meets the criteria in proposed § 429.120(a)(1) through (a)(5). CMS would identify these PDE records as follows: (1) the dates of service are during the total expenditures measurement period (to allow a reasonable time for Part D plan sponsors to submit PDE data, we would use PDE data for the dates of service in the total expenditures measurement period that are available in CMS' data repository by the November 30 following the total expenditures measurement period (or the first business day following November 30 if November 30 does not fall on a business day)); (2) total gross covered prescription drug costs on the PDE record is greater than zero dollars; (3) the PDE record is considered final action;

(4) the drug coverage status code indicates the PDE record is for a drug covered under Part D; and (5) the compound code indicates the PDE record is not for a compounded drug.

A PDE record is considered final action based on the final action indicator for the claim and claim line.

As described in Negotiation Program Guidance, we provide that, for operational reasons at this time, MFP refunds would not be required for PDE records for selected drugs that were billed as compounds. For alignment, we provide in proposed § 429.120 that PDE records with a compound code indicating the PDE record is for a compounded drug would be excluded from the PDE data used to calculate total expenditures under Part D used for the low-spend Medicare drug exclusion (proposed § 429.125(e)(2)) and to identify negotiation-eligible drugs and selected drugs (proposed §§ 429.115 and 429.105). We are proposing to apply this same exclusion to the ceiling for the MFP (proposed § 429.410), the Net Part D Plan Payment and Beneficiary Liability of a therapeutic alternative(s) (proposed §§ 429.20 and 429.510(d)), and the application of the MFP across dosage forms and strengths (proposed § 429.700). A PDE record for a selected drug billed as a compound refers to a PDE record with a compound code field equal to “2=Compound.” We would only use PDE records with a compound code field equal to “1=Not a Compound.” A Part B claim billed as a compounded drug refers to Part B claims billed with HCPCS code J7999. For consistency with the treatment of compounded drugs covered under Part D, we also would exclude Part B claims billed as compounded drugs when calculating the low-spend Medicare drug exclusion, the identification of negotiation-eligible drugs and selected drugs, the ceiling for the MFP, and the application of the MFP across dosage forms and strengths.

b. Calculation of Total Expenditures Under Part B

At § 429.120(b), we propose a methodology for calculating total expenditures under Part B for a given potential qualifying single source drug, qualifying single source drug, negotiation-eligible drug, or selected drug. This methodology would use a combination of total allowed charges from Original Medicare (OM) Part B claims data (inclusive of beneficiary coinsurance and Medicare payment) and a comparable amount calculated using Medicare Advantage (MA) encounter data for Part B items and services, which would reflect the amount that would have been applicable under OM. Then, we would sum total expenditures under Part B based on OM Part B claims data and total expenditures under Part B for MA encounter data. To allow a reasonable time for providers and suppliers to submit OM Part B claims data and Medicare Advantage Organizations to submit MA encounter data for Part B items and services, we would use Part B data for the dates of service in the total expenditures measurement period that are available in CMS' data repository by November 30 following the total expenditures measurement period (or the first business day following November 30 if November 30 does not fall on a business day).

We received many comments on the draft guidance for initial price applicability year 2028 and manufacturer effectuation of the MFP in 2026, 2027, and 2028 suggesting that CMS should account for expenditures on drugs payable under Part B and administered to MA enrollees when identifying Part B high spend drugs. In response to these comments, we stated in the Negotiation Program Guidance that we agreed with these commenters that MA expenditures for such drugs should be accounted for and included in the calculation of total expenditures under Part B, and we described CMS' methodology, consistent with the previous paragraph, for including such expenditures in the calculation of total expenditures under Part B. In this proposed rule, we reiterate and expand upon the discussion in the Negotiation Program Guidance.

More than half (54 percent

) of Medicare enrollees were enrolled in MA plans in 2025. We would therefore exclude a significant portion of total spending on drugs payable under Medicare Part B by only using Part B claims data in the calculation of total expenditures under Part B. Such an approach would skew the negotiation-eligible drug list toward drugs with high expenditures under Part D and away from drugs with high expenditures under Part B and therefore could misrepresent the highest spend drugs. There is no indication that statute intends the negotiation-eligible drug list to skew towards drugs with high expenditures under Part D; rather, section 1192(d)(1) of the Act indicates equal treatment of drugs with high expenditures under Part D and drugs with high expenditures under Part B, requiring CMS to identify 50 Part D high spend drugs and 50 Part B high spend drugs beginning in initial price applicability year 2028.

Nancy Ochieng et al., “Medicare Advantage in 2025: Enrollment Update and Key Trends,” KFF (July 28, 2025)

https://www.kff.org/medicare/medicare-advantage-enrollment-update-and-key-trends/.

Consistent with the policy adopted in Negotiation Program Guidance, in this proposed rule we propose that the term “total expenditures under part B of Title XVIII” as defined at section 1191(c)(5) of the Act and as used in the Negotiation Program, is best read to include MA expenditures for drugs payable under Part B and administered to MA enrollees. In the case of expenditures with respect to Part B, section 1191(c)(5) of the Act provides only that the term “total expenditures” excludes expenditures for a drug or biological product that are bundled or packaged into the payment for another service.

Statutory language in Title XVIII of the Act and sections 11001 and 11002 of the IRA suggest MA expenditures ought to be included in “total expenditures under part B of title XVIII” for purposes of the Negotiation Program. First, section 1852(a)(1) of the Act requires MA plans to provide to enrollees the “benefits under the original [M]edicare [Fee-For-Service]

program option,” including, as relevant here, drugs payable under Part B. For purposes of determining “total expenditures” with respect to Part B for purposes of the Negotiation Program, we believe that MA expenditures for drugs payable under Part B may thus be understood as expenditures provided under this requirement to provide benefits available under Part B, and appropriately included in total expenditures under Part B for such drugs.

Further, section 1191(c)(2)(B) of the Act requires that, for purposes of the Negotiation Program, a “maximum fair price eligible individual” includes “in the case such drug is furnished or administered to the individual by a hospital, physician, or other provider of services or supplier, an individual who is enrolled under part B of title XVIII, including an individual who is enrolled in an MA plan under part C of such title, if payment may be made under part B for such selected drug.” Including MA expenditures in the definition of total expenditures under Part B is consistent with the statutory approach reflected in this definition, which considers “individual[s] enrolled in an MA plan” to be “include[ed]” within the reference to individuals “enrolled under part B of Title XVIII” to the extent “payment may be made under part B” for a selected drug.

Finally, section 1191(c)(5) of the Act's definition of total expenditures under Part B identifies explicitly one exclusion—expenditures where payment for the drug is bundled with payment for another Part B service—but does not similarly exclude MA expenditures. As noted previously, the exclusion of MA expenditures would result in far more significant consequences for the identification of negotiation-eligible and selected drugs under the Negotiation Program than the exclusion that is identified explicitly. In light of the statutory indicia favoring inclusion of MA expenditures discussed previously and the significant consequences with respect to the Negotiation Program should MA expenditures be excluded, we believe the absence of clear statutory language excluding such expenditures weighs in favor of including MA expenditures in the definition of total expenditures under Part B.

For these reasons, we are proposing at § 429.120(b) a methodology to include MA expenditures in the calculation of total expenditures under Part B. As we noted in the Negotiation Program Guidance, MA encounter data for Part B items and services does not reliably include the actual amount paid by the MA plan sponsor. Due to this gap in MA encounter data for Part B items and services, we believe it appropriate to estimate MA expenditures for drugs payable under Part B by using MA encounter data for Part B items and services to identify the units of drugs payable under Part B that were administered under MA and then determining what Medicare would have paid for such units under OM Part B. Accordingly, we propose to use the following methodology to calculate total expenditures under Part B:

•

Total expenditures under Part B based on OM Part B claims data

would equal the sum of the total allowed charges for each OM Part B claim for a qualifying single source drug that meets the following criteria: (1) date of service is during the total expenditures measurement period; (2) the claim type is associated with an OM Part B claim in an outpatient setting (including but not limited to clinics, Federally Qualified Health Centers, and ambulatory surgical centers), a professional services claim, or durable medical equipment claim (currently, these claim type codes are 40, 71, 72, 81, or 82); (3) the total allowed charges (defined as the amount that is inclusive of the beneficiary coinsurance and Medicare payment for covered Part B items and services) for the claim line is greater than $0; (4) the claim is considered final action;

(5) the claim is not billed as a compounded drug; and (6) the claim is not for a drug or biological product that is bundled or packaged into the payment for another service under Part B OM. We have identified rare instances where claims for separate payment have been submitted for drugs payable under Part B when such claims are typically payable only as part of a bundled payment. We are proposing to exclude such separately billed claims.

An OM Part B claim is considered final action based on the final action indicator for the claim and claim line.

•

Total expenditures under Part B based on MA encounter data for Part B items

would equal the sum of the total allowed charges that would have been applicable under OM Part B for each MA encounter data record for Part B services for such drug that meets the following criteria: (1) date of service is during the total expenditures measurement period; (2) the claim type is associated with an MA encounter record in an outpatient setting (including but not limited to clinics, Federally qualified health centers, and ambulatory surgical centers), professional services, or durable medical equipment record, as determined by CMS (currently, these claim types are 4012, 4013, 4014, 4022, 4023, 4032, 4034, 4071, 4072, 4073, 4074, 4075, 4076, 4077, 4079, 4083, 4085, 4087, 4089, 4700, and 4800); (3) the reported total number of units on the MA encounter data record line is greater than zero; (4) the encounter data record is considered final action;

(5) the encounter data record is not denied; (6) the encounter data record is not a chart review record; (7) the encounter data record line is not for a supplemental benefit; (8) the encounter data record is not reported as a compounded drug; and (9) the encounter data record is not for a drug or biological product that is bundled or packaged into the payment for another service under Part B OM. In instances where an encounter data record for separate payment is submitted for a drug payable under Part B when such a claim is typically payable under Part B OM payment rules only as part of a bundled payment, such claim will be considered to be bundled or packaged into the payment for another service and will not be included in the total allowed charges calculation. To calculate the total allowed charges that would have been applicable under OM Part B for each of the aforementioned MA encounter data records, we would first adjust the unit field in MA encounter data for Part B items and services by referencing the Medically Unlikely Edits (MUEs), which are designed to reduce improper payments.

Because Medicare Administrative Contractors apply these edits to OM Part B claims, this would bring the MA encounter data for Part B items and services into closer alignment. We would then multiply the adjusted units by the appropriate published payment limit (for example, Average Sales Price (ASP)-based) or payment rate (for example, Outpatient Prospective Payment System (OPPS), Ambulatory Surgical Center (ASC)) to calculate what would have been applicable for the Part B items and services under OM.

Final action for MA encounter data for Part B items and services indicates the encounter was accepted by CMS and not subsequently voided by the Medicare Advantage organization or superseded by another encounter accepted by CMS.

See:

https://www.cms.gov/medicare/coding-billing/ncci-medicare.

Typically, “single source drugs and biologicals” as defined in section 1847A(c)(6)(D) of the Act are assigned to unique HCPCS codes; however, there may be cases where a qualifying single source drug is assigned to a HCPCS code with other products. In such cases, we are proposing to use the apportionment

methodology proposed in § 429.120(b)(3) wherein CMS would use ASP sales volume data to apportion Part B total expenditures based on the ratio of reported sales volume of the qualifying single source drug compared to reported sales volume of all products assigned to the HCPCS code to calculate the total expenditures under Part B.

6. Identification of Qualifying Single Source Drugs (§ 429.125)

Section 1192(e)(1) of the Act requires that the term “qualifying single source drugs” means, with respect to an initial price applicability year, subject to sections 1192(e)(2) through 1192(e)(4) of the Act, a covered part D drug (as defined in section 1860D-2(e) of the Act) that is described in section 1192(e)(1)(A) or section 1192(e)(1)(B) of the Act, or a drug or biological product for which payment may be made under part B of title XVIII that is described in section 1192(e)(1)(A) or section 1192(e)(1)(B) of the Act. With respect to initial price applicability years 2026 through 2028, we implemented these requirements through guidance, including, for example section 30.1 of the Negotiation Program Guidance with respect to initial price applicability year 2028.

We are proposing that, with respect to each initial price applicability year, a qualifying single source drug is a drug covered under Part D, a drug payable under Part B, or both, as such terms are defined at proposed § 429.20, that meets the statutory criteria set forth in section 1192(e) of the Act. Specifically, we propose in § 429.125(a)(1) to codify the requirements in section 1192(e)(1)(A) of that Act that, for drug products, a qualifying single source drug is a drug covered under Part D, payable under Part B, or both: (1) that is approved under section 505(c) of the FD&C Act and marketed pursuant to such approval; (2) for which, as of the selected drug publication date with respect to a given initial price applicability year, at least 7 years have elapsed since the date of such approval; and (3) that is not the listed drug for any drug approved and marketed under an Abbreviated New Drug Application (ANDA) under section 505(j) of the FD&C Act. We propose in § 429.125(a)(2) to codify the requirements in section 1192(e)(1)(B) of the Act that, for biological products, a qualifying single source drug is a drug covered under Part D, payable under Part B, or both: (1) that is licensed under section 351(a) of the Public Health Service Act (“PHS Act”) and marketed pursuant to such licensure; (2) for which, as of the selected drug publication date with respect to a given initial price applicability year, at least 11 years have elapsed since the date of such licensure; and (3) that is not the reference product for any biological product that is licensed and marketed under section 351(k) of the PHS Act.

a. Identification of Potential Qualifying Single Source Drugs (§ 429.125(b))

To identify drugs or biological products for purposes of identifying qualifying single source drugs that meet the criteria in section 1192(e) of the Act, we propose to identify drugs and biological products that are potential qualifying single source drugs as described at proposed § 429.125(b).

Sections 11001 and 11002 of the IRA do not define what a “drug” or “biological product” is for purposes of identifying whether such a drug or biological product is a qualifying single source drug. However, the Act provides that a drug or biological product may have multiple dosage forms, strengths, formulations, package sizes, or package types, and multiple applications and approvals. Specifically, for purposes of determining whether a qualifying single source drug is a negotiation-eligible drug under section 1192(d)(1) of the Act, section 1192(d)(3)(B) of the Act states that CMS shall use data that is aggregated across dosage forms and strengths of the drug, including new formulations of the drug, such as an extended release formulation, and not based on the specific formulation, package size, or package type of the drug. Likewise, section 1192(d)(3)(B) of the Act's aggregation rule applies to the calculation of a drug or biological product's total expenditures for purposes of determining whether such drug or biological product meets the low-spend Medicare drug exclusion from a qualifying single source drug, described in section 1192(e)(3)(B) of the Act. Similarly, section 1196(a)(2) of the Act directs CMS to establish procedures “to compute and apply the MFP different strengths and dosage forms of a selected drug and not based on the specific formulation or package size or package type of such drug.” In addition, section 1194(e)(1)(D) of the Act instructs CMS, for purposes of the negotiation process (discussed in further detail in section II.F. of this proposed rule), to consider, among other information, “applications and approvals under section 505(c) of the Federal Food, Drug, and Cosmetic Act or section 351(a) of the Public Health Service Act,” in the plural, for the “drug,” in the singular.

Different dosage forms and strengths, as well as different formulations, of a drug or biological product, containing the same active moiety/active ingredient, may be approved or licensed in multiple NDAs or BLAs. Defining a potential qualifying single source drug on the basis of a single NDA/BLA, and thereby excluding from such potential qualifying single source drug dosage forms and strengths and new formulations of the drug or biological product approved or licensed under other NDAs/BLAs, would be inconsistent with these statutory provisions. To give full effect to all relevant provisions of the statute, including sections 1192(d)(3)(B), 1192(e), 1194(e)(1)(D), and 1196(a)(2) of the Act, we are proposing at § 429.125(b) a process, consistent with policies for implementation as described in, for example, section 30.1 of the Negotiation Program Guidance subject to proposed modifications as noted herein, to identify a potential qualifying single source drug, for purposes of identifying qualifying single source drugs that meet the statutory criteria under section 1192(e) of the Act, using the specific constituent dosage forms and strengths (at the NDC-9 or NDC-11 level) that are identified as aggregated under the same NDA/BLA holder for the same active moiety/active ingredient.

The policies proposed in § 429.125(b), like the policies in, for example, section 30.1 of the Negotiation Program Guidance, would address how CMS is interpreting the statutory directive in section 1192(e) of the Act to identify “drug[s]” or “biological product[s]” for purposes of evaluating whether such drug or biological product satisfies the criteria for qualifying single source drugs.

In the context of identifying qualifying single source drugs and calculating total expenditures for purposes of identifying negotiation-eligible drugs and selected drugs, in this proposed rule we use the term “aggregation” to refer to the process of identifying the formulations and dosage forms and strengths that constitute a qualifying single source drug, and that, if applicable, CMS will use to calculate total expenditures when determining whether such drug is a negotiation-eligible drug or selected drug.

For drugs, we are proposing at § 429.125(b)(1) to identify a potential qualifying single source drug using all dosage forms and strengths of the drug with the same active moiety and the same holder of an NDA, inclusive of products that are marketed pursuant to different NDAs. If there are multiple NDAs with the same active moiety that include non-identical names reported for the NDA holder, including situations where it appears the NDA holder name has not yet been updated, we are proposing that we may further investigate whether such NDA(s) are held by the same entity for the purposes

of identifying a potential qualifying single source drug using FDA sources as well as relevant publicly available information as CMS deems appropriate. The potential qualifying single source drug would also include all dosage forms and strengths of the drug with the same active moiety and marketed pursuant to the same NDA(s) described in the prior sentences that are: (1) repackaged and relabeled products (defined at proposed § 429.20 to be consistent with 21 CFR 207.1) that are marketed pursuant to such NDA(s); (2) authorized generic drugs (defined in section 1192(e)(2)(B)(i) of the Act and at proposed § 429.20 and described further later in this section) that are marketed pursuant to such NDA(s); or (3) multi-market approval (MMA)

products imported under section 801(d)(1)(B) of the FD&C Act that are marketed pursuant to such NDA(s). Any dosage forms and strengths of the drug with the same active moiety that are distributed by a private label distributor and marketed pursuant to such NDAs would also be aggregated in the potential qualifying single source drug of that NDA holder consistent with the policies for implementation as described in, for example, section 30.1 of the Negotiation Program Guidance.

See:

https://www.fda.gov/regulatory-information/search-fda-guidance-documents/importation-certain-fda-approved-human-prescription-drugs-including-biological-products-and.

For biological products, we are proposing at § 429.125(b)(2) to identify a potential qualifying single source drug using all dosage forms and strengths of the biological product with the same active ingredient and the same holder of a BLA, inclusive of products that are marketed pursuant to different BLAs. If there are multiple BLAs with the same active ingredient (or the same antigen component for a biological product that is a vaccine for infectious disease(s), as further described later in this section) that include non-identical names reported for the BLA holder, including situations where it appears the BLA holder name has not yet been updated, we are proposing that we may further investigate whether such BLA(s) are held by the same entity for the purposes of identifying a potential qualifying single source drug using FDA sources as well as relevant publicly available information as CMS deems appropriate. The potential qualifying single source drug would also include all dosage forms and strengths of the biological product with the same active ingredient and marketed pursuant to the same BLA(s) described in the prior sentences that are: (1) repackaged and relabeled products that are marketed pursuant to such BLA(s); (2) authorized generic drugs, the definition of which at section 1192(e)(2)(B)(ii) of the Act and proposed § 429.20 (described further later in this section) includes unbranded biological products that are marketed pursuant to such BLA(s); or (3) MMA products imported under section 801(d)(1)(B) of the FD&C Act that are marketed pursuant to such BLA(s). Any dosage forms and strengths of the biological product with the same active ingredient that are distributed by a private label distributor and marketed pursuant to such BLAs would also be aggregated in the potential qualifying single source drug of that BLA holder consistent with the policies for implementation as described in, for example, section 30.1 of the Negotiation Program Guidance.

Although assessing biological products on the basis of their active ingredient is appropriate in most circumstances, we understand that a discrete category of biological products—namely, vaccines for infectious disease(s)—are more appropriately assessed using their antigen component due to the evolving nature of pathogen strains over time. Therefore, and as proposed at § 429.125(b)(3), in the context of vaccines for infectious disease(s), we would identify a potential qualifying single source drug on the basis of such vaccines' antigen component on such vaccines' labeling, as accessed in public sources such as those discussed later in this section. We believe our proposal to identify drugs based on their active moiety and biological products based on their active ingredient, subject to the proposal for vaccines for infectious disease(s), is the best reading of the statutory directives in sections 1192(d)(3)(B), 1192(e), 1194(e)(1)(D), and 1196(a)(2) of the Act as they relate to identifying qualifying single source drugs. We note further that in the context of drugs, “active moiety” (as contrasted with “active ingredient”) describes the active molecule or ion in the drug, as this term excludes those appended portions of the molecule that cause the drug to be an ester, salt (including a salt with hydrogen or coordination bonds), or other noncovalent derivative (such as a complex, chelate, or clathrate) of the molecule.

The term “active moiety” is not applicable in the context of biological products, and it is thus appropriate to evaluate biological products based on their active ingredient.

See 21 CFR 314.3(b) (defining the terms “active ingredient” and “active moiety”).

Consistent with the policies for implementation as described in Negotiation Program Guidance, we are proposing to use public sources such as, but not limited to, RxNorm, OpenFDA, FDALabel, DailyMed, and FDA's Active Ingredient-Active Moiety Relationship/Basis of Strength file to identify the active ingredient/active moiety/antigen component of the drug or biological product. We may also consult with FDA as appropriate, for example, to clarify whether a suffix or prefix in an active moiety/active ingredient/antigen component name represents a genuine difference in active moiety/active ingredient/antigen component.

Section 1192(e)(2)(A) of the Act states that an authorized generic drug and the qualifying single source drug that includes the listed drug or reference product of that authorized generic drug shall be treated as the same qualifying single source drug. An authorized generic drug is defined in section 1192(e)(2)(B) of the Act and in proposed § 429.20 as: (1) in the case of a drug, an authorized generic drug (as such term is defined in section 505(t)(3) of the FD&C Act); and (2) in the case of a biological product, a product that has been licensed under section 351(a) of the PHS Act

and is marketed, sold, or distributed directly or indirectly to the retail class of trade under a different labeling, packaging (other than repackaging as the reference product in blister packs, unit doses, or similar packaging for institutions), product code, labeler code, trade name, or trademark than the reference product. We are proposing at § 429.125(b)(1)(iii) that a potential qualifying single source drug that is a drug is inclusive of authorized generic drugs that are marketed under the NDA(s) described therein, and at proposed § 429.125(b)(2)(iii) that a potential qualifying single source drug that is a biological product is inclusive of authorized generic drugs that are marketed under the BLA(s) described therein.

CMS is interpreting the reference to “licensed under section 351(a) of such Act” to mean licensed or deemed licensed under section 351(a) of the PHS Act. Section 351(a) of the PHS Act addresses the licensure of a biological product.

(1) Fixed Combination Drugs

At proposed § 429.125(b)(4), for the purpose of identifying potential qualifying single source drugs and subject to the narrow modification for certain fixed combination drugs proposed at § 429.125(b)(4)(i) to clarify our treatment of new formulations, we

propose that if a drug is a fixed combination drug (defined in proposed § 429.20) with two or more active moieties, active ingredients, or, for vaccines for infectious disease(s), antigen components, the distinct combination of active moieties, active ingredients, or antigen components would generally be treated as one active moiety, active ingredient, or antigen component. Therefore, all formulations with this distinct combination offered by the same NDA/BLA holder would be aggregated across all dosage forms and strengths of the fixed combination drug (that is, all formulations and dosage forms and strengths of this distinct combination would be considered the same potential qualifying single source drug and, if applicable, CMS would aggregate total expenditures for all such formulations and dosage forms and strengths when determining whether such drug is a negotiation-eligible drug or selected drug). Under this proposal, a product containing only one (but not all) of the active moieties, active ingredients, or antigen components that is offered by the same NDA/BLA holder would generally not be aggregated with the formulations of the fixed combination drug and would be considered a separate potential qualifying single source drug. For example, a corticosteroid inhaler would not be aggregated with a fixed combination inhaler from the same NDA/BLA holder that contains the same corticosteroid combined with a long-acting beta agonist. In this example, the corticosteroid inhaler would be considered as a separate potential qualifying single source drug from the fixed combination inhaler.

In the draft guidance for initial price applicability year 2028 and manufacturer effectuation of the MFP in 2026, 2027, and 2028, we stated our belief that treating distinct combinations of active moieties/active ingredients as one active moiety/active ingredient for the purpose of identifying potential qualifying single source drugs is generally appropriate. However, we acknowledged that there may exist fixed combination drugs for which one of the active ingredients or active moieties contained is not biologically active against the disease state(s) the drug is indicated for and thus does not result in a clinically meaningful difference. We solicited comments on whether the addition of drugs payable under Part B may impact the fixed combination drug policy described in the draft guidance. In particular, we solicited comments on how CMS might consider grouping such fixed combination drug products with products containing at least one but not all of the active moiety(ies)/active ingredient(s) into the same potential qualifying single source drug for both drugs payable under Part B and/or covered under Part D, including input on terminology that could facilitate the effectuation of such a policy.

We received many comments in response to this comment solicitation. Some commenters supported a modification to the fixed combination drug policy as a way to close a loophole for manufacturers to avoid selection by making minor changes to existing drugs, specifically citing the addition of hyaluronidase to drugs payable under Part B. Other commenters opposed such a modification, citing concerns that CMS lacks the statutory authority to do so, that the approach described in the comment solicitation does not align with how FDA regulates and reviews the approvals o

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