Selected drugs, therapeutic alternatives, and price benchmarks for IPAY 2027 Medicare drug price negotiation

Abstract

BACKGROUND:

On or before November 1, 2025, the Centers for Medicare & Medicaid Services (CMS) will report the agreed-upon negotiated prices (maximum fair prices [MFPs]) for the second round of up to 15 Medicare Part D drugs selected for price negotiation (Initial Price Applicability Year 2027).

OBJECTIVE:

To propose guideline-recommended therapeutic alternatives and estimate price benchmarks that may be considered by CMS for negotiation.

METHODS:

We identified US Food and Drug Administration (FDA)–approved indications for the 15 drugs selected for negotiation. We used 2022 Medicare claims data to identify drug-specific beneficiary utilization. Medical claims with International Classification of Diseases, Tenth Revision, Clinical Modification diagnosis codes for each indication were evaluated to estimate relative indication-specific utilization. We examined published clinical guidelines to identify and propose therapeutic alternatives for each drug and the most prevalent, FDA-approved indication. For negotiation price benchmarks, we report (1) the list price, (2) the estimated net price after manufacturer discounts, (3) the minimum statutory discount, and (4) the ceiling of the MFP. All price benchmarks were estimated at the product level, for a 30-day equivalent dosing, using Medicare Part D dashboard and IQVIA data. We also estimated net prices for the proposed therapeutic alternatives.

RESULTS:

Four drugs were identified to have 1 (deutetrabenazine, linaclotide, and nintedanib-esylate) or no (rifaximin) therapeutic alternative. Eight of the 15 selected drugs will have the ceiling price set by the minimum statutory discount. Four products (acalabrutinib, semaglutide, linagliptin, and sitagliptin/metformin) will include therapeutic alternatives and MFPs from the first round of negotiation. The selection of therapeutic alternatives and estimation of price benchmarks by CMS will set the initial conditions for subsequent price negotiation.

CONCLUSIONS:

These analyses identify the likely ceiling price and various initial price offer scenarios for the second round of Medicare price negotiation. We report price benchmarks and likely therapeutic alternatives to improve transparency around the opaque CMS negotiation process.

Plain language summary

Medicare is currently negotiating, for the second time, with pharmaceutical companies for 15 high-cost, single-source drugs. As part of negotiations, Medicare identifies therapeutic alternatives and compares the selected drug’s prices to the prices of therapeutic alternatives. In this article, we offer possible therapeutic alternatives and describe key price benchmarks that are used to inform negotiation.

Implications for managed care pharmacy

The maximum fair prices from the Medicare Drug Price Negotiation Program are likely to influence formulary designs and, ultimately, patient access. Our analyses provide transparency in the key factors and estimates considered in the negotiation program. Managed care professionals can leverage the details and results from our analyses in anticipation of the maximum fair prices, given that the negotiation process remains opaque.

The Inflation Reduction Act of 2022 (IRA) established the Medicare Drug Price Negotiation Program to lower costs for Medicare beneficiaries and reduce federal drug spending. The IRA authorized Medicare, for the first time, to directly negotiate the prices of certain high-expenditure single-source drugs. The intent is to leverage Medicare’s purchasing power to reduce total drug costs to the program and improve the program’s long-term financial sustainability. Implementation began with an initial round of negotiations. In August of 2024, the Centers for Medicare & Medicaid Services (CMS) published prices for the first 10 selected drugs covered under Medicare Part D, with those negotiated prices scheduled to take effect on January 1, 2026 (Initial Price Applicability Year 2026 or IPAY 2026).¹

For the second round of negotiation (IPAY 2027), CMS announced a list of 15 drugs covered under Part D, selected based on their total gross covered Medicare Part D costs and other inclusion and exclusion criteria outlined in statute.^2,3 Notably, this group includes widely used medications for chronic conditions such as type 2 diabetes mellitus (T2DM), respiratory diseases (asthma, interstitial pulmonary fibrosis, and chronic obstructive pulmonary disease), and cancer. Collectively, these 15 drugs accounted for roughly $40 billion in annual gross Part D drug costs and were used by approximately 5.3 million Medicare enrollees in the prior year.² Under the program’s timeline, negotiations with the manufacturers of these selected drugs will take place throughout 2025, and the resulting agreed-to maximum fair prices (MFPs) will be made public no later than November 30, 2025, and are scheduled to go into effect on January 1, 2027.

Once selected, CMS formally invites manufacturers to participate in price negotiations. Participating drug companies must submit detailed evidence packages to CMS that include information such as research and development costs, production costs and distribution expenses, and clinical evidence, including comparative clinical effectiveness and safety data compared with therapeutic alternatives. CMS also considers information on therapeutic alternatives submitted by the public as well as their own research, which includes US Food and Drug Administration (FDA)–approved indications, drug classification systems commonly used in the public and commercial sector for formulary development, CMS-recognized Part D compendia, widely accepted clinical guidelines, the CMS-led literature review, drug or drug class reviews, and peer-reviewed studies. They also consider off-label use if such use is recommended in clinical guidelines or published compendia.

To arrive at a starting point for the initial price offer, CMS sets the ceiling for the MFP, which is a statutory upper limit, representing the maximum allowable price.³ Specifically, the MFP ceiling is defined as the lower of (1) the drug’s actual Part D net price or (2) a statutorily defined discount off non–federal average manufacturer price (non-FAMP) indexed on the length of time the drug has been on the market. The mandatory discounts are 25% for drugs that have been marketed for 9 to 16 years and 60% for those on the market longer than 16 years. The starting point is then defined by (1) the lower of net prices for Part D therapeutic alternatives or their MFPs if they were an IPAY 2026 drug, or average sales price (ASP) for Part B therapeutic alternatives, (2) the ceiling (defined previously), and (3) the “Big Four Agency” or Federal Supply Schedule (FSS) price. That is, if there is more than 1 therapeutic alternative, CMS will interpret the range of prices. If the prices of the therapeutic alternatives are greater than the ceiling or there are no therapeutic alternatives, CMS will use the lower of the “Big Four”/FSS price. If the “Big Four”/FSS price is greater than the ceiling, then CMS will use the ceiling to inform the starting point.

The purpose of this research is to describe clinical guideline-recommended therapeutic alternatives for the most prevalent FDA-approved indication and to present estimates of the price benchmarks that CMS will consider for the 15 selected drugs and their therapeutic alternatives.

Methods

THERAPEUTIC ALTERNATIVES

To identify therapeutic alternatives, we first identified all FDA-approved indications for the selected drugs using the most recent prescribing label. We applied prior methods to identify the prevalence for each indication using January to December 2022 claims data from a 5% random sample of Medicare beneficiaries (Table 1).⁴

TABLE 1.

Relative Treated Prevalence of Conditions for Which Drugs Subject to Negotiation in IPAY 2027 Have an FDA-Approved Indication Among Part D Beneficiaries

Selected drug and FDA-approved indications	Total (N) and proportion (%) of Medicare Part D beneficiaries using medication in 2022a
Ozempic, Rybelsus, Wegovy (semaglutide)b	964,868c
Adjunct to diet and exercise for T2DM	89.83%
Reduce risk of MACE in T2DM and CVDd	44.23%
Trelegy Ellipta (fluticasone/umeclidinium/vilanterol)	834,046
Maintenance treatment for COPD	86.48%
Maintenance treatment for asthma	31.39%
Xtandi (enzalutamide)	27,803
Prostate cancer	100%
Pomalyst (pomalidomide)	12,682
Multiple myeloma	99.34%
AIDS-related Kaposi sarcoma	0%
Ibrance (palbociclib)	17,497
HR+/HER2− metastatic breast cancer	97.83%
Ofev (nintedanib)	20,686
Idiopathic pulmonary fibrosis	63.37%
Slowing rate of decline in patients with SSc-ILD	2.47%
Chronic fibrosing interstitial lung disease with progressive phenotype	2.25%
Linzess (linaclotide)e	510,755
Chronic idiopathic constipation	69.11%
IBS-C	9.09%
Calquence (acalabrutinib)	16,700
CLL/SLL	88.93%
Mantle cell lymphoma	11.79%
Austedo, Austedo XR (deutetrabenazine)f	15,889
Tardive dyskinesia	62.15%
Huntington disease	7.63%
Breo Ellipta (fluticasone/vilanterol)	605,087
Maintenance treatment for COPD	60.33%
Maintenance treatment for asthma	50.79%
Tradjenta (linagliptin)	305,131
Adjunct to diet and exercise in T2DM	98.81%
Xifaxan (rifaximin)	88,758
Treatment of TD	39.08%
Reduction in risk of overt hepatic encephalopathy	31.43%
Treatment of IBS-D	19.54%
Vraylar (cariprazine)	73,893
Bipolar disorder 1	60.34%
Adjunctive therapy for MDD	48.42%
Treatment of schizophrenia	32.59%
Janumet, Janumet XR (sitagliptin/metformin)f	275,143c
Adjunct to diet and exercise for T2DM	98.46%
Otezla (apremilast)	24,076
Plaque psoriasis	92.77%
Psoriatic arthritis	40.96%
Oral ulcers with Behcet disease	1.69%

^a Values may exceed 100% because indications are not mutually exclusive.

^b No claims for Wegovy were found as Medicare does not cover treatments for chronic weight management; thus, indications reported are those approved for Rybelsus and Ozempic in 2024.

^c Values will double-count beneficiaries who took multiple branded drugs with the same active ingredient.

^d This indication is only found in Ozempic.

^e Linzess also has an indication for functional constipation but was not included in this prevalence analysis given the heterogeneity of that indication.

^f Total number of beneficiaries is the sum of those using the standard-release and extended-release version.

CLL/SLL = chronic lymphocytic leukemia/small lymphocytic lymphoma; COPD = chronic obstructive pulmonary disease; CVD = cardiovascular disease; FDA = US Food and Drug Administration; HER2− = human epidermal growth factor receptor 2 negative; HR+ = hormone receptor positive; IBS-C = irritable bowel syndrome–constipation; IBS-D = irritable bowel syndrome–diarrhea; IPAY = Initial Price Applicability Year; MACE = major adverse cardiovascular events; MDD = major depressive disorder; SSc-ILD = systemic sclerosis-associated interstitial lung disease; T2DM = type 2 diabetes mellitus; TD = travelers’ diarrhea; XR = extended-release.

We reviewed professional society guidelines for all FDA-approved indications for the 15 selected drugs. Therapeutic alternatives were identified based on language in the CMS guidance: prioritizing within the same pharmacologic class, and if none existed, considering FDA-approved and guideline-recommended options for the same indication.⁵ We referenced CMS’ published list of therapeutic alternatives for IPAY 2026 as a framework for our selection.⁶ We considered both single agents and combination therapies as therapeutic alternatives, prioritizing combinations for combination selected products. For cancer drugs, we included only National Comprehensive Cancer Network (NCCN) guideline “preferred” and “other recommended” options, excluding “useful in certain circumstances.”⁷ For noncancer drugs, we considered all therapeutic alternatives from professional society and governmental (eg, Veterans Affairs/Department of Defense) clinical practice guidelines.

Final selection of relevant comparator(s) was based on the most prevalent indication (Table 1), relevant clinical guidelines, therapeutic interchangeability, and prior therapeutic alternatives selected by CMS for IPAY 2026.

PRICE BENCHMARKS

We estimate or obtain from public sources the price benchmarks that CMS will consider during negotiation. These include (1) the list price at the wholesale acquisition cost as the weighted average spend per dose from the CMS Part D dashboard; (2) the price after applying the minimum statutorily defined discount; (3) the estimated Part D net price or the Q4 2022 Part B ASP for any Part B therapeutic alternatives; (4) the ceiling of the MFP (the lower of the last 2); and (5) the FSS and “Big Four” prices.^8,9

The minimum statutorily defined discount was estimated as the product of the non-FAMP and the minimum discount based on years since FDA approval. The ceiling price is defined as the lower of the net price or the price set by minimum statutory discount. The non-FAMP was estimated using a peer-reviewed methodology.¹⁰

Net Price Estimation.

Per-unit Part D net prices were estimated using a published method.⁸ Briefly, total discounts for each drug were calculated as the difference between gross and net sales. Gross sales were derived by multiplying the 2024 list price by the number of units sold. The 2024 list price was obtained from the Medicare Part D dashboard, number of units sold from IQVIA National Sales Perspective database, and net sales from SSR Health.

From this gross-to-net difference, we subtracted discounts to the Medicare Part D coverage gap, Medicaid, and 340B program. Medicare Part D coverage gap discounts were estimated from 2022 claims data in a 5% random sample of Part D beneficiaries. Medicaid discounts were calculated as the Medicaid discount per unit multiplied by the number of units reimbursed by Medicaid, from Medicaid state drug utilization data. The Medicaid discount per unit was estimated using a published method that incorporates the Best Price provision and the Medicaid rebate cap, with base rebates for branded drugs equal to the greater of 23.1% of the average manufacturer price or the largest discount offered to any purchaser.^11–13

We projected the proportion of units eligible for 340B discounts using Medicare Part D data and estimated the number of Medicaid-reimbursed units from Medicaid state drug utilization data.¹⁴ 340B discounts were calculated as the product of the Medicaid discount per unit and the number of units subject to 340B discounts, with eligibility estimated by extrapolating the proportion of drug units subject to 340B discounts in a 5% random sample of Medicare data to the entire market. The method for identifying units subject to 340B discounts in Medicare Part D has been previously described and relies on address matching of Health Resources and Services Administration lists of 340B-covered entities and pharmacies to the prescribers and dispensing pharmacy national provider identifiers observed in claims.¹⁵

The remaining gross-to-net difference after subtracting Medicare Part D coverage gap, Medicaid, and 340B discounts was attributed to commercial discounts negotiated between payers and manufacturers.

30-Day Equivalent Estimation.

For Part D brand-name products, we report estimated Part D net price in 2022 per 30-day supply equivalents (30DES) following the methods identified in the CMS guidance. To estimate 30DES units, we applied the 42 C.F.R. § 423.104(d)(2)(iv)(A)(2) methods to the 5% sample of Medicare claims. Specifically, we assume that all claims with 34 days supply or fewer are equivalent to exactly one 30DES. Any claims with above 34 days supply have a 30DES calculated as the number of days supply reported divided by 30. The units in a claim are multiplied by the 30DES, giving the units per 30DES for each claim. This number is then averaged at the drug level to estimate the number of units used in a 30-day supply. Finally, we multiply the per-unit cost with the 30DES to arrive at our price benchmark per 30-day supply.

For generic therapeutic alternatives, we use the 30DES methodology applied directly to the total cost of a claim to calculate the 30-day price benchmark. For Part B therapeutic alternatives, we use the ASP as the per-unit price and maintenance dosing schedule to estimate the 30-day price benchmark.

Results

THERAPEUTIC ALTERNATIVES

The primary indications for the oncology products enzalutamide, pomalidomide, palbociclib, and acalabrutinib are for different stages of prostate cancer (100%), relapsed/refractory multiple myeloma (99.34%), hormone receptor–positive/human epidermal growth factor receptor 2–negative metastatic breast cancer (97.82%), and chronic lymphocytic leukemia/small lymphocytic lymphoma (88.93%), respectively. The selection of therapeutic alternatives for enzalutamide and palbociclib was informed by NCCN guidelines, where we identified preferred or other recommended Category 1 or 2A regimens within the same indication as the selected product.^16,17 For pomalidomide, which is primarily indicated in relapsed/refractory multiple myeloma following lenalidomide exposure, we considered regimens recommended by NCCN for patients who are proteasome inhibitor exposed and lenalidomide refractory.¹⁸ Only regimens that did not include pomalidomide as part of the combination therapy were considered. The final list of therapeutic alternatives was determined based on the utilization of combination regimens in a real-world treatment pattern study.¹⁹ Acalabrutinib is primarily used in all lines of therapy for chronic lymphocytic leukemia/small lymphocytic lymphoma, and its associated therapeutic alternatives are all as equally recommended as acalabrutinib (Category 1) per 2025 NCCN guidelines.²⁰ This list aligns with CMS’s published list for ibrutinib, excluding the ibrutinib and venetoclax combination owing to ibrutinib’s selection for IPAY 2026.⁶

For respiratory products, fluticasone/umeclidinium/vilanterol (F/U/V) and fluticasone/vilanterol (F/V) are both indicated for asthma and chronic obstructive pulmonary disease (COPD), although COPD is the primary indication for F/U/V (86.48%). We limited alternatives to inhaled therapies but recognize that the phosphodiesterase-4 inhibitor, roflumilast, is indicated for COPD and is used in some patients. For F/U/V, our selection was limited to combination triple therapy; for F/V, both COPD and asthma products were considered, and dual therapies were prioritized. These selections are consistent with relevant professional society guidelines.^21,22 We compared therapeutic alternatives for these drugs with the ICER Special Assessment Report on COPD and asthma inhalers.²³

The primary indication for sitagliptin/metformin, linagliptin, and semaglutide is T2DM, whereas semaglutide is also indicated for risk reduction of major adverse cardiovascular events in patients with T2DM and cardiovascular diseases. Semaglutide received additional FDA approval for chronic weight management and chronic kidney disease, although Medicare does not reimburse for chronic weight management and chronic kidney disease was only approved in 2025. Based on 2023 American Diabetes Association clinical guidelines, we included therapeutic alternatives with the same pharmacological classes (ie, glucagon-like peptide-1 receptor agonists, dipeptidyl peptidase-4 inhibitors, or sodium-glucose co-transporter 2 [SGLT-2] inhibitors), provided they are used as add-on therapy to metformin.²⁴ For semaglutide, our selection is limited to glucagon-like peptide-1 receptor agonists and SGLT-2 inhibitors as these agents offer the most comparable benefit in patients with T2DM and cardiovascular diseases per the 2023 American Diabetes Association clinical guidelines.²⁴ Although CMS included metformin monotherapy as a therapeutic alternative for empagliflozin, dapagliflozin, and sitagliptin in IPAY 2026, we exclude it, assuming these agents are used alongside, not instead of, metformin.⁶

Linaclotide, a guanylate cyclase-C agonist, is primarily indicated in chronic idiopathic constipation (69.11%). Thus, our list of therapeutic alternatives was limited to other guanylate cyclase-C agonists indicated in chronic idiopathic constipation, which includes plecanatide.²⁵ Apremilast is primarily indicated in plaque psoriasis (92.77%). Following CMS precedent, which limited therapeutic alternatives for etanercept and ustekinumab to biologics, we limit our list to oral small-molecule drugs that are equally recommended in the dermatology guidelines.^6,26 Rifaximin, an oral antibiotic therapy, does not have a therapeutic alternative as antibiotics are not routinely used as first-line therapy for the FDA-approved indications.^27–30 Notably, CMS did not report travelers’ diarrhea as an indication for rifaximin in their published list of selected drugs.² Therefore, we identify overt hepatic encephalopathy as the primary indication (Table 2). Pirfenidone and nintedanib-esylate are both antifibrotic agents indicated for idiopathic pulmonary fibrosis, the primary indication (63.37%). We note that clinical recommendations for idiopathic pulmonary fibrosis have not been updated since 2011. Deutetrabenazine is primarily used for tardive dyskinesia (62.15%). The only FDA-approved drug in the same pharmacological class is valbenazine. Tetrabenazine was excluded as it lacks FDA approval for tardive dyskinesia and its off-label use is not considered standard of care. Finally, cariprazine is most used in bipolar 1 disorder (60.34%). Cariprazine is a second-generation (atypical) antipsychotic.^31,32 As such, we limit our selection of therapeutic alternatives to those. Further details on therapeutic alternative selection can be found in the Supplementary Materials ^{(193.2KB, pdf)} (available in online article).

TABLE 2.

Therapeutic Alternatives to the Drugs Selected for IPAY 2027

Selected drug	Primary indication	Therapeutic alternative
Ozempic, Rybelsus, Wegovy (semaglutide)	T2DM, MACE risk reduction in T2DM and CVD	Bydureon Bcise, Byetta (exenatide) Trulicity (dulaglutide)a Adlyxin (lixisenatide) Saxenda, Victoza (liraglutide)a Mounjaro (tirzepatide) Jardiance (empagliflozin)a,b Farxiga (dapagliflozin)a,b Invokana (canagliflozin)a
Trelegy Ellipta (fluticasone/umeclidinium/vilanterol)	Maintenance treatment for COPD	Breztri Aerosphere (budesonide/glycopyrrolate/formoterol) Symbicort, Breyna, Symbicort Aerosphere (budesonide/formoterol) + Spiriva, Spiriva Respimat (tiotropium) Advair Diskus, Wixela Inhubc (fluticasone/salmeterol) + Spiriva, Spiriva Respimat (tiotropium) Breo Ellipta (fluticasone/vilanterol) + Spiriva, Spiriva Respimat (tiotropium)
Xtandi (enzalutamide)	Prostate cancer	Erleada (apalutamide) Nubeqa (darolutamide) Zytiga (abiraterone acetate)c Taxotere (docetaxel)c Jevtana (cabazitaxel)
Pomalyst (pomalidomide)	Multiple myeloma	Darzalex + Kyprolis + Decadron (daratumumab + carfilzomib + dexamethasone) Darzalex + Velcadec + Decadron (daratumumab + bortezomib + dexamethasone) Kyprolis + Decadron (carfilzomib + dexamethasone) Cytoxanc + Velcadec + Decadron (cyclophosphamide + bortezomib + dexamethasone)
Ibrance (palbociclib)	HR+/HER2− metastatic breast cancer	Kisqali (ribociclib) Verzenio (abemaciclib)
Ofev (nintedanib-esylate)	Idiopathic pulmonary fibrosis	Esbriet (pirfenidone)
Linzess (linaclotide)	Chronic idiopathic constipation	Trulance (plecanatide)
Calquence (acalabrutinib)	CLL/SLL	Brukinsa (zanubrutinib)a Imbruvica +/− Venclexta (ibrutinibb +/− venetoclax) Venclexta + Gazyva (venetoclax + obinutuzumab)a Venclexta + Rituxan (venetoclax + rituximab)a
Austedo, Austedo XR (deutetrabenazine)	Tardive dyskinesia	Ingrezza (valbenazine)
Breo Elliptac (fluticasone/vilanterol)	Maintenance treatment for COPD	Breyna, Symbicort, Symbicort Aerosphere (budesonide/formoterol) Advair HFA, Advair Diskus, Airduo Respiclick, Wixela Inhubc (fluticasone/salmeterol) Dulera (mometasone/formoterol)
	Maintenance treatment for asthma
Tradjenta (linagliptin)	Adjunct to diet and exercise in T2DM	Farxiga (dapagliflozin)a,b Jardiance (empagliflozin)a,b Trulicity (dulaglutide)a Ozempic, Rybelsus, Wegovy (semaglutide)a Amaryl (glimeperide)a,c Glucotrol XL (glipizide)c Januvia (sitagliptin)b Nesina (alogliptin) Onglyza (saxagliptin) Metformina,c Actos (pioglitazone)a,c
Xifaxan (rifaximin)	Reduction in risk of overt hepatic encephalopathy	No therapeutic alternatives
Vraylar (cariprazine)	Bipolar disorder 1	Abilify (aripiprazole)c Saphris (asenapine)c Caplyta (lumateperone) Latuda (lurasidone) Zyprexa (olanzapine)c Seroquel, Seroquel XR (quetiapine)c Risperdal (risperidone)c Geodon (ziprasidone)c
Janumet, Janumet XR (sitagliptin/metformin)	T2DM	Kazano (alogliptin/metformin) Jentadueto, Jentadueto XR (linagliptin/metformin) saxagliptin/metformin Invokamet, Invokamet XR (canagliflozin/metformin) Xigduo XR (dapagliflozin/metformin) Synjardy, Synjardy XR (empagliflozin/metformin) Segluromet (ertugliflozin/metformin)
Otezla (apremilast)	Plaque psoriasis	Sotyktu (deucravacitinib) Trexall, Jylamvo, Otrexup, Rasuvo, Xatmep (methotrexate)c Soriatane (acitretin)c Gengraf, Neoral, Sandimmune (cyclosporine)c

^a Products that were identified in the Centers for Medicare & Medicaid Services list of therapeutic alternatives to the drugs selected for IPAY 2026.

^b Products that were selected for negotiation in IPAY 2026 and thus have a negotiated price (maximum fair price) published.

^c Also available as a generic.

CLL/SLL = chronic lymphocytic leukemia/small lymphocytic lymphoma; COPD = chronic obstructive pulmonary disease; CVD = cardiovascular disease; HR = hormone receptor; HER2− = human epidermal growth factor receptor 2 negative; HR+ = hormone receptor positive; IPAY = Initial Price Applicability Year; MACE = major adverse cardiovascular events; T2DM = type 2 diabetes mellitus; XR = extended-release.

PRICE BENCHMARKS

All IPAY 2027 products, except for rifaximin and sitagliptin/metformin, have been on the market for 9 to 16 years, and thus, the statutorily defined discount would be 25% off of non-FAMP. Our analyses suggest that 8 of the 15 products will have their MFP ceilings set by the statutory discount and not the current net price (Table 3; Figure 1). These include the oncology products (enzalutamide, pomalidomide, palbociclib, and acalabrutinib), used for central nervous system disorders (deutetrabenazine and cariprazine), the antifibrotic agent nintedanib-esylate, and the antibiotic rifaximin. The remaining 7 products will have the ceiling defined by their Part D net price (Table 3; Figure 2). These products include the 2 respiratory agents (F/U/V and F/V), the immunological product apremilast, the gastrointestinal agent linaclotide, and the 3 glucose-lowering agents (semaglutide, sitagliptin/metformin, and linagliptin).

TABLE 3.

2022 Price Benchmarks for a 30-Day Equivalent Supply for IPAY 2027 Selected Drugs

Brand name	Generic name	List price	Part D net price	Estimated rebate (%)	Big Four/FSS price	Non-FAMP	Price based on the minimum statutory discount	MFP ceiling
Products whose ceiling may be defined by the minimum discount
Xtandi	Enzalutamide	$12,339	$9,470	23	$7,909	$9,533	$7,150	$7,150
Pomalyst	Pomalidomide	$20,409	N/A	N/A	$13,536	$17,449	$13,086	$13,086
Ibrance	Palbociclib	$14,426	$12,130	16	$10,193	$13,055	$9,791	$9,791
Calquence	Acalabrutinib	$13,990	$13,431	4	$10,323	$12,642	$9,481	$9,481
Austedo/Austedo XR	Deutetra-benazine	$6,198	$4,812	22	$4,511	$5,382	$4,037	$4,037
Vraylar	Cariprazine	$1,323	$994	25	$940	$1,232	$924	$924
Ofev	Nintedanib-esylate	$12,081	$10,643	12	$6,609	$12,142	$9,107	$9,107
Xifaxan	Rifaximin	$2,558	$2,186	15	$1,711	$2,417	$967a	$967
Products whose ceiling may be defined by the estimated Part D net price
Trelegy Ellipta	Fluticasone/Umeclidinium/Vilanterol	$642	$305	53	$438	$617	$463	$305
Breo Ellipta	Fluticasone/Vilanterol	$395	$158	60	$271	$374	$281	$158
Otezla	Apremilast	$4,193	$2,223	47	$2,620	$3,842	$2,881	$2,223
Linzess	Linaclotide	$508	$244	52	$344	$475	$357	$244
Ozempic/Wegovy/Rybelsus	Semaglutide	$1,017	$428	58	$626	$880	$660	$428
Janumet/Janumet XR	Sitagliptin/Metformin	$503	$141	72	$361	$421	$168a	$141
Tradjenta	Linagliptin	$461	$194	58	$304	$420	$315	$194

^a Denotes drugs where the minimum statutory discount is 40% of the non-FAMP. All other drugs have a minimum statutory discount set by 75% of the non-FAMP.

FSS = Federal Supply Schedule; MFP = maximum fair price; N/A = not applicable; non-FAMP = non–federal average manufacturer price; XR = extended-release.

FIGURE 1.

Price Benchmarks for Products With Ceiling Defined by Statutory Discount

(A) Oncology products. Price benchmarks for the drugs selected for negotiation are shown in the upper half of each panel and include the list price, net price, Big Four/Veterans Affairs price, and the maximum price based on the minimum statutory discount applied to the non-FAMP. The ceiling of the maximum fair price is represented by a dashed green line, which represents the lower of the net price or the maximum price based on the minimum statutory discount. Net pricing for pomalidomide (Pomalyst) was not possible because of underreporting of units. The non-FAMP for pomalidomide was calculated using the average discount given to its drug class. ³³ The lower half of the graph represents prices of therapeutic alternatives identified in Table 2. For brand-name products used primarily in Medicare Part D, the prices represent either net prices (red circle) or the previously negotiated 30-day MFP (green circle with red X). For brand-name products used primarily in Medicare Part B, the prices represent the ASP multiplied by the number of dosage units needed for 30 days. For generic products, the prices represent the average reimbursement for a 30-day supply in 2022 Medicare claims data. All price benchmarks are estimated using 2022 data and represent a 30-day supply equivalent.

(B) Central nervous system, antifibrotic, and antibiotic products. Price benchmarks for the drugs selected for negotiation are shown in the upper half of each panel and include the list price, net price, Big Four/Veterans Affairs price, and the maximum price based on the minimum statutory discount applied to the non-FAMP. The ceiling of the maximum fair price is represented by a dashed green line, which represents the lower of the net price or the maximum price based on the minimum statutory discount. The lower half of the graph represents prices of therapeutic alternatives identified in Table 2. For brand-name products, the prices represent net prices. For generic products, the prices represent the average reimbursement for a 30-day supply in 2022 Medicare claims data. All price benchmarks are estimated using 2022 data and represent a 30-day supply equivalent.

ASP = average sales price; CyBorD = cyclophosphamide + bortezomib + dexamethasone; D(f)Kd = daratumumab and hyaluronidase-fihj + carfilzomib + dexamethasone; D(f)Vd = daratumumab and hyaluronidase-fihj + bortezomib + dexamethasone; DKd = daratumumab + carfilzomib + dexamethasone; DVd = daratumumab + bortezomib + dexamethasone; Kd = carfilzomib + dexamethasone; MFP = maximum fair price; non-FAMP = non–federal average manufacturer price.

FIGURE 2.

Price Benchmarks for Products With Ceiling Defined by Estimated Net Price

(A) Respiratory, immunologic, and gastrointestinal products. Price benchmarks for the drugs selected for negotiation are shown in the upper half of each panel and include the list price, net price, Big Four/Veterans Affairs price, and the maximum price based on the minimum statutory discount applied to the non-FAMP. The ceiling of the maximum fair price is represented by a dashed green line, which represents the lower of the net price or the maximum price based on the minimum statutory discount. The lower half of the graph represents prices of therapeutic alternatives identified in Table 2. For brand-name products used primarily in Medicare Part D, the prices represent net prices. For brand-name products used primarily in Medicare Part B, the prices represent the ASP multiplied by the number of dosage units needed for 30 days. Deucravacitinib could not be estimated because of inconsistencies between SSR health and IQVIA. For generic products, the prices represent the average reimbursement for a 30-day supply in 2022 Medicare claims data. All price benchmarks are estimated using 2022 data and represent a 30-day supply equivalent.

(B) Glucose-lowering agents. Price benchmarks for the drugs selected for negotiation are shown in the upper half of each panel and include the list price, net price, Big Four/Veterans Affairs price, and the maximum price based on the minimum statutory discount applied to the non-FAMP. The ceiling of the maximum fair price is represented by a dashed green line, which represents the lower of the net price or the maximum price based on the minimum statutory discount. The lower half of the graph represents prices of therapeutic alternatives identified in Table 2. For brand-name products used primarily in Medicare Part D, the prices represent either net prices (red circle) or the previously negotiated 30-day MFP (green circle with red X). For brand-name products used primarily in Medicare Part B, the prices represent the ASP multiplied by the number of dosage units needed for 30 days. For generic products, the prices represent the average reimbursement for a 30-day supply in 2022 Medicare claims data. All price benchmarks are estimated using 2022 data and represent a 30-day supply equivalent.

aEstimated for 30-day supply equivalents cost for 2023.

ASP = average sales price; non-FAMP = non–federal average manufacturer price.

Products Whose Ceiling Will Be Defined by the Statutory Discount.

Among the oncology products, 30DES net prices for enzalutamide, pomalidomide, palbociclib, and acalabrutinib range from $9,470 to $13,431, with estimated rebates of 4% to 23% off list price. In each case, the net price is higher than the non-FAMP with a minimum statutory discount applied (Table 3; Figure 1). Notably, the units for pomalidomide and enzalutamide were underreported in IQVIA because of data restrictions. Given data restrictions for pomalidomide, we were unable to directly estimate the Part D net price. For enzalutamide, we adjusted the units by applying a ratio (Supplementary Methods ^{(193.2KB, pdf)} ). The non-FAMP was calculated using the average discount given to its drug class reported by the Congressional Budget Office in 2021.³³ Thus, in the case of pomalidomide, we assume the ceiling is set by the minimum statutory discount of $13,086 (Table 3; Figure 1). We believe this is a safe assumption because products within protected classes typically exhibit lower rebates, thus triggering the non-FAMP with the minimum statutory discount as the MFP ceiling.^14,34

For the oncology products, we report multiple therapeutic alternatives (Table 2). Notably, ibrutinib, a therapeutic alternative to acalabrutinib, was selected for IPAY 2026 with an MFP implemented in 2026. Therefore, we use the reported 2026 MFP price as a price benchmark. For enzalutamide, pomalidomide, and acalabrutinib, we show the range of prices for therapeutic alternatives (Figure 1; Supplementary Table 1 ^{(193.2KB, pdf)} ). These will play an important role for CMS as they determine an initial price offer. For palbociclib, both the net prices to the therapeutic alternatives and the “Big Four”/FSS price fall above the estimated ceiling price.

For the central nervous system agents deutetrabenazine and cariprazine, the minimum statutory discount applied to the non-FAMP ($4,037 and $924, respectively) is marginally lower than the net price ($4,812 and $994, respectively) and thus will set the MFP ceiling. The estimated rebate from the list price is 22% and 25%, respectively (Table 3; Figure 1). The extended-release version of deutetrabenazine, which per statute would be considered alongside the standard-release version, had not been released in 2022,³⁵ which is the year in which our prices are reported. As such, our estimated price benchmarks for deutetrabenazine apply only to the standard-release version. The net price of the therapeutic alternative, valbenazine, and the “Big Four”/FSS price fall above the ceiling for deutetrabenazine (Figure 1; Supplementary Table 1 ^{(193.2KB, pdf)} ).

The non-FAMP with a minimum statutory discount applied for nintedanib-esylate is lower than the net price ($9,107 and $10,643, respectively), thus setting the ceiling. The estimated rebate from the list price is 12% (Table 3; Figure 1). We identify only 1 therapeutic alternative to nintedanib-esylate, pirfenidone, whose net price is marginally higher than the non-FAMP with minimum statutory discount of nintedanib-esylate (Figure 1; Supplementary Table 1 ^{(193.2KB, pdf)} ). Given that pirfenidone’s net price is greater than the statutory ceiling to nintedanib-esylate, we look to the “Big Four”/FSS price, which we report to be lower than the ceiling.

Finally, for rifaximin, the non-FAMP with the minimum statutory discount applied is estimated at $967, whereas its net price is $2,186 (Table 3; Figure 1). Rifaximin is one of 2 selected products that qualify for the 60% minimum statutory discount given that its approval dates to 2004. We did not identify any therapeutic alternatives for rifaximin. Once again, per the CMS guidance, if no therapeutic alternatives are identified, CMS will rely on the lower of the “Big Four”/FSS prices to define an initial price offer if it does not exceed the statutory ceiling.⁵ In the case of rifaximin, the “Big Four”/FSS exceeds the statutory ceiling.

Products Whose Ceiling Will Be Defined by Estimated Net Price.

The respiratory combination products F/U/V and F/V have net prices of $305 and $158, respectively, reflecting rebates of 53% and 60% off list price (Table 3; Figure 2). The net prices fall below the non-FAMP with the minimum statutory discount, thereby setting the MFP ceiling. The therapeutic alternatives include single agents as part of the combination therapies, several of which, such as Breyna (budesonide/formoterol) and Wixela (budesonide/salmeterol), are branded generics to their originator products. Because of data restrictions, we could not estimate the net price for Breyna.

Similarly, apremilast’s net price of $2,223 is only marginally lower than the estimated non-FAMP with the minimum discount applied, $2,881 (Table 3; Figure 2), thus setting the ceiling. All therapeutic alternatives to apremilast are available as generics, except for deucravacitinib. Therefore, their 30-day average reimbursement price is considerably lower. The net price for linaclotide was estimated to be $244, demonstrating a 52% discount from the list price. The non-FAMP with the minimum statutory discount applied was $357; thus, the ceiling is set by the net price (Table 3; Figure 2). Linaclotide has one therapeutic alternative, plecanatide, whose net price is only marginally higher than ceiling, at $250 (Figure 2; Supplementary Table 1 ^{(193.2KB, pdf)} ). The “Big Four”/FSS price also remains higher than the ceiling.

Finally, we estimated the net prices for the glucose-lowering agents semaglutide, linagliptin, and sitagliptin/metformin to be $428, $194, and $141, respectively. The rebates from the list price are some of the highest in the cohort of selected drugs, at 58%, 58%, and 72%, respectively (Table 3; Figure 2). Notably, sitagliptin/metformin is eligible for the 60% minimum statutory discount applied to the non-FAMP owing to its approval date. Furthermore, it should be noted that the glucose-lowering agents have therapeutic alternatives that were previously selected for IPAY 2026. As such, we also report the published MFP for these products.

Discussion

We set out to propose therapeutic alternatives for the most prevalent indication and estimate price benchmarks that may guide CMS during negotiations of the 15 selected drugs for IPAY 2027. In proposing therapeutic alternatives, we used similar methods to our previously published work for IPAY 2026 and expanded our learnings based on CMS’s published list of therapeutic alternatives.^4,8 For IPAY 2027, we encountered several challenges that CMS is likely to encounter.

In their published list of therapeutic alternatives, CMS provided scant detail regarding justification for selected alternatives. Yet we found CMS to be more inclusive in their selection, although the broader list of alternatives may not fully align with clinical guidelines. Examples are the SGLT-2 inhibitors, empagliflozin and dapagliflozin. CMS guidance indicates they will prioritize drugs within the same pharmacologic class and select those most clinically comparable to the selected drug.⁵ CMS is also to consider place in therapy. Metformin was included as a therapeutic alternative for the SGLT-2 inhibitors for T2DM. However, metformin is used as first-line therapy for most patients, and SGLT-2 inhibitors are often added to metformin when monotherapy fails to control blood glucose.²⁴ In proposing therapeutic alternatives for IPAY 2027, we chose an approach that more strictly and, therefore, conservatively aligned with clinical guidelines.

Another key challenge is the selection of therapeutic alternatives for fixed-dose combination therapies. For example, F/V is a combination of an inhaled corticosteroid and long-acting β-agonist approved for maintenance therapy in COPD and asthma. Per Global COPD (GOLD) and Asthma (GINA) clinical guidelines, long-acting β-agonist–inhaled corticosteroid combination maintenance therapy can be given as either single-agent inhalers or fixed-dose combination inhalers.²¹ In the CMS guidance for IPAY 2027, CMS does not discuss the selection of therapeutic alternatives for combination therapies. Should both the combination therapies and their single agents be included as therapeutic alternatives? Fixed-dose combination therapies may be preferred by providers and patients over 2 or 3 single agents, as they can improve adherence. However, patients often face access issues because of high prices.^21,22 For this study, if the selected drug was a fixed-dose combination product, we limited our selection to other fixed-dose combination therapies and not the phosphodiesterase-4 products or the recently approved biologic, dupilumab.

This challenge can also be applied to selected drugs that are typically given in combination. In oncology, for example, clinical guidelines often recommend chemotherapy agents to be given in combination to decrease the likelihood of recurrence and improve treatment effectiveness. If a selected drug is part of a combination regimen, how will CMS address its selection of therapeutic alternatives and the various price benchmarks? That is, the value of some medications might stem from combination use, not individual use. This challenge will become more pronounced in IPAY 2028 as CMS expands to Part B drugs, many of which are used in oncology and as part of multidrug regimens.

Our analyses estimate key price benchmarks that may inform both the ceiling and starting point for the initial price offers under IPAY 2027. For 8 of the selected products, the ceiling price will be determined by the statutory discount, and for the other 7, by the Part D net price. We also estimate the Part D net prices or Part B ASPs for therapeutic alternatives given that the starting point is defined as the lower of the price benchmarks for therapeutic alternatives or ceiling. We predict the starting point will be defined by the ceiling in 4 products: palbociclib, deutetrabenazine, rifaximin, and linaclotide. The starting point for nintedanib-esylate, which has no alternative, will likely rely on the “Big Four”/FSS price.

The price benchmarks used in IPAY 2027 negotiations are expected to present further challenges compared with IPAY 2026. First and most notably, this is the first time CMS will use MFPs from IPAY 2026. The CMS guidance states that the lower of the net price or the MFP should be used for a therapeutic alternative.⁵ At face value, the net price is defined as the price paid to manufacturers inclusive of rebates and concessions. However, the net price also reflects competition, negotiating powers, and other market dynamics, which in turn should capture some dimension of net clinical benefit. In IPAY 2026, CMS developed the MFPs by referencing the net price of the therapeutic alternatives. Yet the introduction of prior-round MFPs for therapeutic alternatives adds complexity to how the price benchmarks are interpreted. Although the MFP may reflect comparative effectiveness, it may include factors like manufacturer production costs and unmet clinical need. How CMS is to reconcile and disentangle the interpretations of each of these prices remains to be seen. More complete and detailed postnegotiation transparency from CMS would provide better clarity to the entire process for stakeholders.

Further, our analyses demonstrate that the products whose ceiling is set by net price are also products that are heavily rebated, with greater than 30% rebate from the list price. This has important downstream effects on realized savings. A ceiling set by the net price signifies that the estimated savings from negotiation would likely lead to lower program savings because the drug is already deeply discounted. This is a result of market dynamics, where highly rebated drugs are those found within competitive markets. Thus, through the process of negotiation, which compares with the price benchmarks of therapeutic alternatives, the margin is likely to be smaller than for products that are not as highly rebated. On top of that, manufacturers with negotiated drugs are exempt from mandatory manufacturer discounts (replacing the coverage gap discount program in 2025), applied to the list price. Instead, CMS is liable for covering those amounts. According to a previous study, this results in an offset in absolute savings to Medicare, particularly for highly rebated products, because of CMS liability.³⁶ That said, new in IPAY 2027, net prices for therapeutic alternatives will account for some of the historical coverage gap discount payments.

Finally, this may be the first time CMS will employ the “Big Four”/FSS pricing directly. Rifaximin, for example, is an antibiotic indicated for the reduction in risk of overt hepatic encephalopathy, and treatment for travelers’ diarrhea and irritable bowel disease with diarrhea. In all these indications, antibiotics are not clinically recommended, except for first-line therapy with rifaximin for overt hepatic encephalopathy (Supplementary Materials ^{(193.2KB, pdf)} ). The language around the use of the “Big Four”/FSS price in the case of no therapeutic alternatives is well baked into the guidance and therefore will likely play an important role for rifaximin. Nevertheless, we predict the ceiling price to be less than the “Big Four”/FSS price, therefore defining the starting point.

LIMITATIONS

This study has several limitations, consistent with our prior estimations.^4,8,37 First, CMS does not publish its initial price offers, limiting our ability to validate our estimates directly. Second, we are unable to incorporate additional data elements (eg, research and development costs, manufacturing expenses, and the degree of unmet medical need) that CMS may consider in developing their initial offers. Third, given a lag in publicly available data, our estimates are based on 2022 data, whereas CMS will incorporate 2023 to 2024 data when developing initial price offers. Although CMS may account for utilization for selected drugs with multiple indications, we limited therapeutic alternatives to each drug’s primary indication.

Moreover, we were unable to estimate pricing of certain drugs because of limitations related to the IQVIA and SSR Health databases. For instance, pomalidomide’s net price could not be estimated as IQVIA’s database does not capture the majority of Medicare utilization; thus, it was estimated based on an average discount given to specialty drugs from a Congressional Budget Office report.²⁸ Although the inability to estimate a net price for pomalidomide is a limitation, we expect that the minimum statutory discount of 25% off of non-FAMP will be lower than its net price. This would be consistent with the 3 other drugs used to treat a form of cancer in IPAY 2027 (acalabrutinib, enzalutamide, and palbociclib), which all have an MFP ceiling set by the minimum statutory discount. The net prices of certain therapeutic alternatives (eg, darolutamide, ertugliflozin, zanubrutinib, and deucravacitinib) could not be estimated as they were not captured consistently in both datasets. We adjusted units and sales volume where data limitations necessitated such changes (see Supplementary Methods ^{(193.2KB, pdf)} for details).

Conclusions

Our analyses (1) identified and proposed therapeutic alternatives and (2) estimated various price benchmarks likely to inform the starting point to the initial price offer for the 15 IPAY 2027 products. This study comes in the wake of the second negotiation round, where both policymakers, including CMS, and other stakeholders will have learned from the first negotiation round. CMS published justifications for the MFPs in the first round, yet their documents contained limited or redacted details. We report price benchmarks and likely therapeutic alternatives to improve transparency around the opaque CMS negotiation process.

Disclosures

This study was funded by the Commonwealth Fund (grant 24-24321). The funder had no influence over the study design, execution, or decision to publish. Dr Sullivan reports receiving consulting fees from Pfizer, Neurocrine, and Novo Nordisk outside the submitted work.