The latest round of IRA price negotiations has revealed which pharma manufacturers were able to best defend their pricing despite having no walk-away power and limited leverage. By comparing predicted ceiling prices with the final negotiated outcomes, clear patterns begin to emerge. Our experts’ analysis highlights which companies came closest to the best-case scenario and what these early signals may mean for future CMS negotiations.
The negotiation between pharmaceutical manufacturers and the Centers for Medicare & Medicaid Services (CMS) as part of the Inflation Reduction Act (IRA) is different from typical negotiations. In most negotiations, both sides have something to gain from a successful outcome of the process and both sides typically have the power to walk away from the negotiating table if they are unable to come to a mutual agreement. Unfortunately for manufacturers, there is nothing to gain from IRA negotiations as their products are already on the market and are already at a freely set price.
Also as mentioned in our previous discussion on MFP vs MFN pricing and IPAY 2027 outcomes, manufacturers do not have walk-away power as failing to come to an agreement doesn’t only mean that the product in question would not be reimbursed in the Medicare program, but all of the manufacturer’s products would no longer be reimbursed. One thing is certain for manufacturers: whatever is the outcome of the negotiation, they will walk away with a lower price than they have currently.
How ceiling prices are determined
The IRA legislation sets a maximum ceiling price based on one of two price benchmarks. These are a discount off the non–federal average manufacturer price (non-FAMP) of 25% or 60% depending on the length of time the drug has been on the market or the actual Part D net price for the drug in question. After the ceiling price has been determined, CMS then uses either the ceiling price, the part D net prices of potential therapeutic alternatives, or the “Big Four Agency” or Federal Supply Schedule (FSS) price as the starting point for negotiations. CMS will then take a number of other factors into account to adjust that starting point to determine an actual price offer for manufacturers.
It is impossible for outside observers to evaluate how effective manufacturers were in defending their price to CMS using the various factors that goes into CMS’ methodology. However, what we can do is compare what a product’s maximum ceiling price might have been and compare it to the eventual outcome. As there is essentially ‘no where to go but down’ in these negotiations, one could conclude that those manufacturers that came close to the ceiling price probably did about as well as they could.
Predicting the maximum negotiated outcomes
A recent paper by Sullivan et al analyzed potential therapeutic alternatives, and estimated current Part D prices as well as the minimum statutory discounts to determine the likely maximum ceiling price for the 15 drugs which recently concluded their IRA negotiations.
For 7 of the 15 drugs, the authors estimated that benchmarks such as the current Part D net prices or the prices of therapeutic alternatives were lower than the statutory ceiling price and would set the anchor for CMS’ price offer. For the remaining 8 drugs, the authors predicted that minimum statutory discounts would set the maximum ceiling price (Table 1).
Table 1
| Brand name | Generic name | Reference |
|---|---|---|
| Austedo/AustedoXR | Deutetra-benazine | "Big Four" / FSS Price |
| Calquence | Acalabrutinib | 25% discount to non-FAMP |
| Ibrance | Palbociclib | 25% discount to non-FAMP |
| Ofev | Nintedanib-esylate | 25% discount to non-FAMP |
| Pomalyst | Pomalidomide | 25% discount to non-FAMP |
| Vraylar | Cariprazine | 25% discount to non-FAMP |
| Xifaxan | Rifaximin | 60% discount to non-FAMP |
| Xtandi | Enzalutamide | 25% discount to non-FAMP |
Comparing predictions with actual MFPs
While the exact price references that CMS used are only estimated, we can compare these potential benchmarks to the actual outcomes of the negotiations as an overly simplistic way of assessing how ‘successful’ the manufacturers were in defending their current price as these maximum ceiling prices are the best a manufacturer could possibly do (Table 2).
Table 2
| Brand name | Generic name | MFP ceiling | Actual MFP | Discount |
|---|---|---|---|---|
| Xifaxan | Rifaximin | 967 | 1000 | 3% |
| Austedo/AustedoXR | Deutetra-benazine | 4037 | 4093 | 1% |
| Xtandi | Enzalutamide | 7150 | 7004 | -2% |
| Calquence | Acalabrutinib | 9481 | 8600 | -9% |
| Vraylar | Cariprazine | 924 | 770 | -17% |
| Ibrance | Palbociclib | 9791 | 7871 | -20% |
| Ofev | Nintedanib-esylate | 9107 | 6350 | -30% |
| Pomalyst | Pomalidomide | 13086 | 8650 | -34% |
As mentioned above, the actual non-FAMP price reference is not publicly available and is only estimated based on 2022 data, which likely explains how the top two drugs in the table achieved prices above the predicted ceiling price. Interestingly, Xifaxan is one of the drugs in this negotiating round which has been on the market the longest and had a minimum discount of 60%, which might explain how they were able to negotiate a price close to this ceiling. Xtandi shares an overlap in mechanism of action and at least some indications with generic abiraterone, but based on their outcomes it appears that the manufacturer was successful in defending against that potential lower cost comparator.
CMS’ justifications for the other therapies in the list whose outcomes fell well below the potential ceiling price are unknown at this time. We will see in March of 2026 if CMS provides more transparency in the rationale for their price offers.
What comes next
In conclusion, the CMS IRA negotiation process is an arduous process for manufacturers that by law results in a price outcome below what manufacturers are currently perceiving. Comparing the best possible outcome of the minimum discounts gives us some insight into which manufacturers may have been more successful in defending their pricing to CMS.
If CMS shares more information about their decision-making process, we may be able to identify which factors led to these more successful outcomes. Simon Kucher’s IRA Negotiation Center of Excellence will continue to monitor these developments. Stay tuned.
