On Tuesday, September 30, the Centers for Medicare & Medicaid Services (CMS) issued final guidance for the third cycle of negotiations under the Medicare Drug Price Negotiation Program (Negotiation Program). According to the news release, the guidance includes significant policy updates based on public feedback, with a particular focus on increasing transparency, and enacts expanded protections for orphan drugs introduced in the Working Families Tax Cuts Act. 

The main provisions include:

• Enhanced Orphan Drug Protections: CMS broadens exclusions from negotiation for products designated by the Food and Drug Administration (FDA) as drugs for one or more rare diseases or conditions.
• Medicare Advantage Integration in Drug Selection: The final guidance outlines a framework for incorporating both Medicare Advantage (MA) encounter data for Part B items and services, as well as traditional Fee-for-Service (FFS) Part B claims data, into Total Expenditure calculations under Part B. 
• Treatment of Vaccines for Infectious Disease(s): CMS’s final guidance addresses how CMS will identify a potential qualifying single-source drug that is a vaccine based on its antigen component(s).

“CMS is working to lower healthcare and prescription drug costs for Americans while ensuring the negotiation process is open, fair, and responsive to changes in the market and patient needs,” said CMS Administrator Dr. Mehmet Oz in a statement. “We've listened to stakeholders, and their feedback helped us make the Negotiation Program more transparent, more workable for manufacturers, and more responsive to the needs of Medicare beneficiaries.”

The third cycle of negotiations will take place in 2026, with negotiated maximum fair prices (MFPs) becoming effective on January 1, 2028. CMS will announce up to 15 additional drugs covered under Part D and/or payable under Part B for potential negotiation by February 1, 2026, along with any other drugs selected for the first cycle of renegotiation.