I chuckled during the E&C hearing when members were questioning the panelists about the pharmaceutical deals with the Administration. As if these are the people they should be asking. Make a left, make right, go down about a mile – there’s a big white house. Maybe they can help you there.
Parallels Between 340B and Zombies. On February 5, the Department of Health and Human Services (HHS) told a federal court it would scrap the 340B Rebate Model Pilot. On February 6, it filed a prerule notice signaling a new effort around “340B Drug Pricing Program Manufacturer Rebate Models.” The rebate pilot may be dead but alive.
The original pilot would have shifted 340B from upfront point-of-sale discounts to retrospective rebates, moving significant cash-flow risk onto covered entities. The American Hospital Association, the Maine Hospital Association, and several safety-net systems sued. A federal judge in Maine blocked the model days before its January 1 start date, and the First Circuit upheld that ruling. HHS may have walked away from the pilot but not the idea.
The need is still there, and HHS has never built a system or rules that address the concern. Manufacturers want claims-level data and duplicate-discount guardrails. Hospitals argue that rebate mechanics destabilize safety-net liquidity and create operational chaos. The court said the rollout was rushed and legally flawed.
Hospitals won this round. But the prerule notice makes clear HHS isn’t done—they’re planning “models” (plural) through full notice-and-comment rulemaking. The rebate pilot may be dead, but the idea isn’t.it
In other 340B news, on Monday, the Fifth Circuit rejected arguments from AbbVie and AstraZeneca that federal law preempts the state’s 340B contract pharmacy protections.
The statute prohibits manufacturers from denying or restricting delivery of 340B-discounted drugs to contract pharmacies operating under state law. Manufacturers have argued that expanded contract pharmacy arrangements increase program costs and fraud risk. States have increasingly treated contract pharmacy access as a matter of state pharmacy regulation. The Fifth Circuit sided with the state.
This matters beyond Louisiana because contract pharmacy state laws are spreading. If they survive judicial scrutiny, manufacturers lose the ability to treat 340B as purely federal turf.
Two Ways Off the Negotiation List. On Wednesday, AbbVie sued HHS and the Centers for Medicare & Medicaid Services (CMS), arguing Botox should never have been selected for the Medicare Drug Price Negotiation Program list for prices that take effect in 2028. AbbVie says Botox contains human serum albumin sourced from blood plasma and therefore falls under the Inflation Reduction Act’s exclusion for “plasma-derived products.”
CMS also selected Genentech’s Xolair but a lower-cost biosimilar is expected to launch before the negotiation period is over. Under the law, a drug is disqualified if a biosimilar is both licensed and marketed. If a biosimilar enters after selection, CMS has to decide whether it is a real competitor. If yes, CMS has to pull the reference product from negotiation.
Manufacturers are watching both cases closely. Can you litigate your way off the list by challenging CMS’s interpretation of exclusions? Can you count on a biosimilar to trigger disqualification? These eligibility fights determine who negotiates and who doesn’t, which reshapes launch timing, patent strategy, and how manufacturers approach the selection criteria in future rounds.
Cheaper Premiums, Costlier Care. On Monday, CMS released the proposed 2027 Notice of Benefit and Payment Parameters. And politics clearly played a role; the rule is trying to make marketplace plans look cheaper month to month, even if that shifts more cost to patients at the point of care. That is if they bother to get it.
CMS proposes to repeal standardized plan options and the cap on no standard plan designs, which were intended to make comparison shopping easier. CMS also proposes expanding catastrophic coverage, including multi-year catastrophic plan terms up to ten years and broader hardship pathways for people over 30. It proposes allowing non-network plans to qualify as certified marketplace plans if they can demonstrate “sufficient provider choice.”
It’s important to note that CMS does not propose a federal requirement that copay assistance count toward out-of-pocket limits, leaving accumulators to continue to fester.
If premiums are the benchmark of success, this works. But if access matters, 2027 marketplace design is a story of underinsurance by design.
A Room of Their Own. Love the story in Stat News about a new trade-group – the Midsize Biotech Alliance of America. Looking forward to hearing more.
Everything You Wanted To Know. Nice explainer on pharmacy benefit managers (PBMs) from Paragon Health Institute.
Reimbursement Fundamentals: Celebrating a Patient Win
On Tuesday, KFF published new data showing the Inflation Reduction Act’s (IRA) drug negotiation program is doing something nobody’s talking about: it’s forcing Medicare Part D plans to cover drugs they used to skip.
Thus far there has been a lot of focus on the negotiated prices themselves. Januvia dropped 79%, Eliquis dropped 56%, and CMS estimates $6 billion in savings if 2026 prices had applied in 2023. But buried in the IRA is a coverage mandate that might matter just as much: when CMS selects a drug for negotiation and the negotiated price kicks in, every Part D plan has to cover that drug. All dosages, all forms, no exceptions.
Here’s what that delivered in year one. Fiasp, one of the first 10 drugs negotiated, had coverage for 24% of Part D enrollees in 2025. In 2026, when the negotiated price took effect, coverage jumped to 100%. NovoLog went from 32% to universal. Two dosages of Imbruvica went from about 50% to everyone covered. Nine of the first 10 selected drugs saw coverage improvements for at least some dosages or forms.
This matters because formulary coverage has always been the one of the gatekeeping mechanisms in Part D. Plans can technically “cover” a therapeutic class while excluding specific drugs, dosages, or formulations. They do this all the time to extract rebates from manufacturers and steer patients toward preferred products.
The leverage shift here is significant. Right now, manufacturers negotiate rebates with plans partly to avoid getting excluded from formularies or pushed to non-preferred tiers. Plans can credibly threaten to drop the drug. That threat disappears for selected drugs. Once selected and the negotiated price kicks in, plans can’t exclude the drug or tier it unfavorably.
Manufacturers lose the ability to set their price but gain access to every Medicare Part D patient. That matters when formulary exclusions have become a real threat in Part D.
Look at what’s coming in 2027. Wegovy is the fascinating case study. Right now, less than 1% of Part D enrollees have coverage for it because Medicare Part D can only cover Wegovy for cardiovascular disease risk reduction, not for obesity. When the 2027 negotiated price takes effect, every plan has to cover Wegovy for Medicare-approved uses. Six other drugs in round two also see gaps close — Austedo XR goes from 51% coverage to 100%, Otezla from 68%, Breo Ellipta from 74%.
The Wegovy situation points to something important about how the coverage mandate interacts with other Medicare rules. The mandate requires plans to cover selected drugs for Medicare-approved uses. It doesn’t override statutory exclusions like the weight loss drug ban. So Wegovy gets mandatory coverage for cardiovascular disease risk reduction, but the obesity indication stays excluded unless the BALANCE demo and/or legislation move forward.
For patients, the coverage mandate is probably the most tangible near-term benefit. Negotiated prices matter, but they’re theoretical if your plan doesn’t cover the drug or makes you jump through prior authorization to get it. The mandate ensures both price and access happen together.
The coverage mandate also changes the math for plans. They lose the ability to use formulary exclusions as leverage against manufacturers of selected drugs. That’s a revenue hit because rebates negotiated under the threat of exclusion tend to be larger. Whether that trade works out favorably depends on how much rebate revenue they’re giving up versus how much they save from lower negotiated prices.
What KFF’s data makes clear is that the IRA’s negotiation program is doing two things at once: lowering prices and expanding access. The price reductions get all the attention, but the coverage mandate is delivering real access improvements for drugs that weren’t universally covered before.
