President Donald Trump, alongside Secretary of Health and Human Services Robert F. Kennedy Jr. and Medicare and Medicaid Administrator Mehmet Oz. The Trump administration looks to close loopholes in the Inflation Reduction Act provisions concerning Medicare prescription drug negotiations. (Photo by SAUL LOEB / AFP) (Photo by SAUL LOEB/AFP via Getty Images)
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Last month, the Trump administration proposed revising an important element in determining eligibility of pharmaceuticals for Medicare price negotiations. Specifically, the Centers for Medicare and Medicaid Services is closing a loophole that drugmakers could use to avoid negotiations when they add active ingredients to drugs.
CMS is also seeking to codify regulations on drug price negotiations, to make them permanent, beginning with the initial price applicability year 2029. This would govern every phase of the negotiation cycle from drug selection to the offer and counteroffer process to publication of so-called maximum fair prices.
If newly added active ingredients allow existing products to be administered in a different way, CMS intends to group the original and new formulation together. The proposal applies to biologics that have been reformulated from intravenous to subcutaneous injectable products. Adding the ingredient hyaluronidase, for instance, makes a new route of administration possible, namely, subcutaneous injections.
As the Trump administration sees it, the new CMS proposed rule change strengthens the Inflation Reduction Act by effectively closing a loophole that drugmakers could use to avoid having their products selected for price negotiation.
Price negotiations are a core provision included in the IRA of 2022. For the first time, the federal government is negotiating prices of select sets of prescription drugs on behalf of the Medicare program for seniors over 65 and certain disabled individuals. The first round of 10 pharmaceuticals selected for negotiation in 2023 had their maximum fair prices go into effect in January of this year. To be eligible to be picked for price negotiation, small molecule drugs must be at least seven years post launch and not face “bona fide” generic competition, and large molecule biologics must be 11 years post launch and not have bona fide biosimilar competition. Furthermore, the pharmaceuticals chosen are from the top 50 drugs in terms of total Medicare Part D expenditures, and beginning with this year’s selections, from the top 50 drugs with the highest aggregate Medicare Part B spending.
As originally conceived, biologics, which become eligible for negotiations 11 years after their approval by the Food and Drug Administration, could have their clock reset if a manufacturer reformulates a drug. Moving forward, this will no longer be the case if the rule becomes finalized.
And so, subcutaneous injections of the blockbuster cancer immunotherapies Keytruda and Opdivo would be subject to Medicare price negotiations at the same time as their intravenous counterparts under the proposed rule.
Keytruda and Opdivo treat a wide array of cancers. Their intravenous formulations are approaching patent expiration in 2028. While Medicare could exempt newer formulations from negotiations should biosimilars of the intravenous version enter the market, biosimilar entry isn’t likely to occur until the end of 2028 at the earliest. A biosimilar is a biologic that is highly similar to an already approved originator product. Biosimilars and their reference products have no clinically meaningful differences in terms of safety, purity and potency.
In all probability, CMS won’t consider the expected biosimilar competition coming in late 2028 sufficiently bona fide to exempt Keytruda and Opdivo from being selected for price negotiation by February 2027. Both medications are therefore expected to be included in upcoming rounds, as part of the next batch of 20 outpatient (Part D) and physician-administered (Part B) drugs in the Medicare program. with maximum fair prices to be implemented in January 2029.
Laws such as the IRA can temporarily leave some discretion to federal agencies such as the CMS to operationalize certain provisions as they see fit. And so, CMS has periodically since 2023 guidance documents on how it’s implementing the law, including how it makes selections of prescription pharmaceuticals for negotiation.
The Trump administration now wants to codify regulations to make them permanent. beginning with the initial price applicability year 2029. This would govern every phase of the negotiation cycle, including drug selection, manufacturer agreement requirements, the offer-and-counteroffer process between the government and drugmakers, renegotiation criteria and the publication of maximum fair prices.
The proposed rule opened a 60-day public comment period, with comments due by Aug, 17, 2026. CMS is expected to finalize the rule at some point this autumn.