Medicare proposed rules include government pricing surprises: ASP changes and maximum fair price, new bona fide service fee and bundled sale standards, updates to the inflation rebate programs, including 340B deduplication, and more.

Every July, the Centers for Medicare & Medicaid Services (CMS) publishes two proposed rules relating to how it plans to administer the Medicare Part B program for the next calendar year: the physician fee schedule (PFS) proposed rule and the outpatient prospective payment system (OPPS) and ambulatory surgical center (ASC) proposed rule. Usually those rules don't include much for the government pricing (GP) community. Not this year. The calendar year 2026 versions include a number of new proposed regulations that span the average sales price (ASP) calculation, the Inflation Reduction Act's maximum fair price (MFP) requirement, the bona fide service fee (BFSF) definition, the treatment of bundled sale arrangements, new ASP documentation and submission requirements, Medicare inflation rebates, and even the 340B program. If you are part of the GP community, these proposed rules are now part of your beach reading. Comments are due September 12th for the PFS proposed rule and September 15th for the OPPS proposed rule.

The PFS proposed rule is published online here, with a press release here and fact sheet here.

The OPPS/ASC proposed rule is published online here, with a press release here and fact sheet here.

One final note: each of these proposed rules is hundreds of pages long. Most of what is in them is not related to GP. We're highlighting here only the key GP components of these two proposed rules.

MFP Units Included in ASP: In the PFS proposed rule, CMS is “clarifying” two issues with respect to the MFP applicable to selected drugs under the Drug Price Negotiation Program:

• CMS believes MFP units should be included in the calculation of a manufacturer’s ASP given their inclusion in the calculation of Best Price (BP).
• When CMS publishes the payment limit for Part B drugs in quarterly pricing files going forward, which typically is based on ASP, CMS instead would publish an MFP-based payment limit for a selected drug. As a result, there would no longer be a published ASP-based payment limit for a selected drug while it is subject to an MFP.

New ASP Bundled Sale and BFSF Standards: The PFS proposed rule also includes a number of changes to the calculation of ASP and references a 2022 Department of Health and Human Services Office of the Inspector General (OIG) report as a reason for doing so. That report highlighted a number of areas where manufacturers had requested additional guidance. CMS’s proposals include:

• Bundled Sale Definition for ASP: While this term has long been defined in Medicaid regulations for purposes of the Average Manufacturer Price (AMP) and BP calculations, CMS explicitly declined to adopt a definition of this term for purposes of the ASP calculation back in the calendar year 2007 PFS rulemaking. The PFS proposed rule now takes on this topic, with the following proposal:
  • A definition that (almost) mirrors the Medicaid definition. CMS is proposing to define a bundled sales arrangement for ASP purposes as “an arrangement regardless of physical packaging under which the rebate, discount, or other price concession is conditioned upon the purchase of the same drug or biological or other drugs or biologicals or another product or some other performance requirement (for example, the achievement of market share, inclusion or tier placement on a formulary, purchasing patterns, prior purchases), or where the resulting discounts or other price concessions are greater than those which would have been available had the bundled drugs or biologicals been purchased separately or outside the bundled arrangement.”
  • Reallocating all the discounts in the bundle may mean non-contingent discounts too. In terms of reallocating the discounts in the bundled sale, the proposed definition states: “The discounts in a bundled arrangement . . . including those discounts resulting from a contingent arrangement, are allocated proportionately to the dollar value of the units of all drugs or products sold under the bundled arrangement.” In a parenthetical, CMS reads this language to require that non-contingent discounts be allocated along with contingent discounts: (i.e., “the ‘unbundling’ of both contingent and non-contingent discounts is appropriate because ‘all the discounts’ in the bundled arrangement should be proportionally allocated”). CMS also expressly solicits comment on whether other methods of allocating discounts in bundled arrangements might be more appropriate.
  • No guidance on VBPs. Finally, CMS expressly noted that it is declining “to adopt the portion of the Medicaid definition of bundled sale stating that value-based purchasing arrangements may qualify as a bundled sale.” CMS indicates that it is still evaluating how these arrangements should be considered in ASP with respect to drugs payable under Part B.
• BFSF Test and Documentation Requirements for ASP: As a reminder, a BFSF currently is defined in ASP regulation as follows: “fees paid by a manufacturer to an entity, that represent fair market value [(FMV)] for a bona fide, itemized service actually performed on behalf of the manufacturer that the manufacturer would otherwise perform (or contract for) in the absence of the service arrangement, and that are not passed on in whole or in part to a client or customer of an entity, whether or not the entity takes title to the drug.”

  CMS is proposing a number of changes to that BFSF definition for purposes of ASP, including the creation of new documentation requirements, namely:

  • Specific requirements as to the type of FMV methodology that must be used, based on the type of fee arrangement.
    • For “fees paid by a manufacturer to an entity that do not vary directly with the amount of drug sold or price of a manufacturer's drug, fair market value must be determined either based on comparable market transactions that generally reflect current market conditions or the cost of the service plus a reasonable markup to the total cost” (emphasis added).
    • For fees “that vary directly with the amount of drug sold or price of a manufacturer's drug, the fair market value must be determined by using the cost of the service and adding a reasonable markup to the total cost,” except where a “material portion of cost data is not available” in which case “manufacturers should follow a market-based approach based on verifiable market data until such time as sufficient cost data becomes available” (emphasis added). CMS is further proposing that assessments for these types of fees must be performed by an independent third-party valuator.
  • FMV reassessments to occur at minimum with the renewal frequency of an agreement. CMS is proposing that FMV reassessments should be conducted and documented “at a frequency no less than the renewal frequency of the agreement (that is, annually for annual renewals).”
  • Fees presumed to be price concessions instead of BFSFs. CMS is proposing that percentage-based fees and “fixed fees that are designed in such a way as to approximate percentage-based fees” are presumed to be price concessions unless such fees are determined to be BFSFs. Specifically, CMS is proposing to add to the list of price concessions in the ASP calculation regulation “[f]ees paid by a manufacturer to an entity that vary directly with the amount of the manufacturer's drug sold or price of a manufacturer's drug unless it meets the definition of [BFSF].”
  • Satisfaction of the pass-through prong of the BFSF test must be certified. CMS is proposing “that it is no longer appropriate that a manufacturer may presume, in absence of any evidence or notice to the contrary, that a fee paid is not passed on to an affiliate, client, or customer of any entity.” Instead, CMS is proposing that “the manufacturer be responsible for obtaining a certification or warranty from the entity receiving the fee stating that such fee will not be passed on to an affiliate, client, or customer of any entity.”
  • Expansion of entity types to which the pass-through prohibition applies. CMS clarifies that a BFSF “must not be passed on in whole or in part to an affiliate, client, or customer of an entity whether or not the entity takes title to the drug,” adding the term “affiliate” to the BFSF definition. CMS specifies in the preamble to the proposed rule that an affiliate “means an affiliate of an entity that is receiving the fee the tis [sic] providing the service.”
  • CMS also stakes out its position on specific categories of fees that it believes do not qualify as BFSFs, indicating that:
    • Credit card fees paid for by manufacturers when customers use credit cards to purchase the manufacturer's product(s) do not qualify as BFSFs.
    • In relation to cell and gene therapies in particular, “any payment by the manufacturer to an entity for tissue procurement is not considered a BFSF.”
    • Certain data sharing fees should not qualify as BFSFs because they appear to exceed FMV or “because the data is required for legal compliance and audit purposes under the services agreement.”
    • Certain fees for distribution services that CMS believes appear to exceed FMV.

New Reasonable Assumption and Documentation Submission Requirements: The PFS proposed rule acknowledges that CMS historically has allowed but not required manufacturers to submit their ASP reasonable assumptions to CMS. Going forward, CMS is proposing the mandatory submission of reasonable assumptions on a quarterly basis as part of the ASP reporting process. This change is all the more notable as the Medicaid Drug Rebate Program has long discouraged manufacturers from submitting their reasonable assumptions to that program.

In addition to the mandatory submission of a manufacturer’s ASP reasonable assumptions more generally, the PFS proposed rule specifically calls out two new categories of documentation to be submitted:

• Documentation of the FMV analysis for BFSFs: The reasonable assumptions in support of ASP that must be submitted by the manufacturer must “includ[e] documentation of the methodology used to determine fair market value and periodic reviews of fair market value.”
• Pass-through compliance certifications: These reasonable assumptions must also include the “certification letter from the recipient of a bona fide service fee . . . as evidence that the fee is not passed on in whole or in part to an affiliate, client or customer of the recipient of the fee, whether or not the entity takes title to the drug.”

Medicare Inflation Rebate Programs: In the PFS proposed rule, CMS is proposing several new policies with respect to Medicare Part B and Part D inflation rebates.

• Part B Inflation Rebates
  • Calculation of the benchmark quarter payment amount.
    • CMS is proposing that where data needed to calculate the benchmark quarter payment amount is not available, it would use the “third full calendar quarter after a drug is assigned a billing and payment code as the payment amount benchmark quarter, no earlier than the calendar quarter beginning July 1, 2021, or the third full calendar quarter after such drug’s first marketed date, whichever is later.”
    • CMS also proposes new policies governing the calculation of the payment amount in the payment amount benchmark quarter if a published payment limit is not available:
      • “If a published payment limit is not available for the applicable payment amount benchmark quarter, CMS calculates the payment amount in the payment amount benchmark quarter using positive ASP or positive WAC data from the ASP Data Collection System.”
      • If such data is also not available, “CMS calculates the payment amount in the payment amount benchmark quarter using WAC data from other public sources.”
  • Drugs covered as additional preventive services (DCAPS). CMS is clarifying that DCAPS meet the definition of a Part B rebatable drug and are therefore eligible for Part B inflation rebates.
• Part D Inflation Rebates
  • Exclusion of 340B units.Beginning January 1, 2026, 340B units are required to be excluded from the Part D rebate calculation. In the 2024 PFS final rule, CMS backed away from a proposal to exclude 340B units from the Part D inflation rebate using an estimation methodology. Instead, CMS explained that it would consider several other proposals including establishing a 340B repository. This year’s proposed rule includes both a proposed methodology for estimating 340B units and the establishment of a claims repository.
    • Claims-based methodology. The PFS proposed rule proposes to employ a claims-based methodology to estimate and remove 340B units. Specifically, CMS intends to evaluate whether a Prescription Drug Event (PDE) record is potentially 340B-eligible based on: “(1) the affiliation of the National Provider Identifier (NPI) of the prescriber associated with that PDE record with a registered 340B covered entity, and (2) the designation of the dispensing pharmacy associated with that PDE as a 340B contract pharmacy.”
      • CMS acknowledges that the 340B Office of Pharmacy Affairs Information System (OPAIS) database may not list all pharmacies that dispense 340B drugs, including covered entity in-house pharmacies that are not registered in the database or AIDS Drug Assistance Programs (ADAPs) that collect 340B rebates, and solicits comments on how best to account for this limitation in identifying 340B dispenses.
      • CMS intends to establish a list of providers considered to be 340B-affiliated as follows:
        • First, CMS would create a list of prescriber NPIs from PDE records that contain dates of service within each applicable period, generated at the prescriber-month level.
        • Next, CMS would crosswalk the list of prescriber NPIs and months to the provider fields located on Medicare Fee-For Service (FFS) Part A inpatient claims and Part B outpatient claims and professional claims in order to identify the Medicare Provider Numbers (MPNs) for which each prescriber NPI billed in each month they were active in the PDE data.
        • The list of prescriber NPI and MPN combinations would then be filtered using the OPAIS database, which lists the available MPNs for 340B covered entity.
        • Finally, “[e]ach prescriber NPI affiliated with an MPN that was also an active 340B covered entity listed on the OPAIS database for that particular month would be considered a 340B-affiliated prescriber for the month within the applicable period.”
      • CMS acknowledges several scenarios where this methodology may be limited in identifying 340B-affiliated providers, such as where a covered entity does not have an MPN or report such MPN in OPAIS, and proposes several alternative measures aimed at addressing these concerns.
    • Claims data repository. CMS is also proposing to establish a 340B claims data repository for covered entities to voluntarily submit Part D claims with dates of service on or after January 1, 2026, which CMS says would allow the agency to begin testing the feasibility of the repository.
    • CMS clarifies that it would not utilize the data submitted by covered entities during the testing period to exclude units the Part D inflation rebates unless and until it finalizes a policy to use such data to exclude 340B units.
    • CMS states it is also issuing an Information Collection Request regarding the data elements to the 340B repository.
  • Other changes. CMS proposes several other changes and clarifications related to calculation of Part D inflation rebates, including clarifying that the payment amount benchmark period for subsequently approved drugs cannot precede the benchmark period.

Last But Not Least: The OPPS/ASC Proposed Rule

• Drug Acquisition Cost Survey: CMS provides notice of its intent to conduct “a survey of the acquisition costs for each separately payable drug acquired by all hospitals paid under the OPPS.” This implements a directive contained in the President’s Executive Order on Drug Pricing from April.
  • CMS previously reduced reimbursement for 340B-acquired drugs under the OPPS, but the Supreme Court in American Hospital Association v. Becerra invalidated the reductions in part because the agency had not conducted a survey of hospitals’ acquisition costs to support a policy of varying reimbursement rates by hospital group. That CMS is now conducting that survey could have implications for 340B covered outpatient drugs and other outpatient drugs as well, as the agency continues to carry out the Executive Order providing for the survey results to inform the proposal of “any appropriate adjustments that would align Medicare payment with the cost of acquisition.”
  • The OPPS/ASC proposed rule states that the survey would open from late 2025 to early 2026, and CMS “intend[s] for the survey to be completed in time for inform policy making beginning with” next year’s OPPS/ASC rulemaking.
  • CMS specifically seeks comment on whether to make the survey mandatory for all hospitals paid under the OPPS and on how to approach payment for drugs in the absence of hospital responses to the survey.
• Part B Drugs Without Medicaid National Drug Rebate Agreements (NDRAs): The Medicaid Drug Rebate Statute has long provided that having an NDRA in place is a prerequisite for payment to be available under Part B. The OPPS/ASC proposed rule showcases CMS’s latest efforts to enforce that requirement. CMS identifies 20 Healthcare Common Procedure Coding System (HCPCS) codes describing drugs for which “Medicare Part B payment will no longer be available” because they are manufactured by labelers without NDRAs. These HCPCS codes would be assigned to an OPPS status indicator and an ASC payment indicator that designate the codes as non-payable, unless a product’s labeler “promptly enter[s] into a Medicaid NDRA.”

We recommend that you carefully review the proposed rules to identify all issues relevant to your organization and areas on which you may wish to comment.