Some weeks it feels like this newsletter writes itself. This is not one of those weeks. Onward.

Caught my Eye

Medicaid Math. Kaiser Family Foundation has a terrific visual of how the One Big Beautiful Bill will impact the uninsured rate by state.

Employer Math. Employers are expecting a big jump in premiums (9%, 7.6% after plan design changes) for 2026 according to a survey done by the Business Group on Health.  The impact is from things like use of GLP-1 medication, increase in cancers and mental health services. Year over year for 20+ years, rising premiums have been a concern with employers having to balance premium contributions with payroll. The survey executive summary has some proposed solutions but, truthfully, we likely need to think bigger to really address the problem. Like crazy ideas like Health Savings Accounts and indemnity plans and nationally negotiated rates. My daydreams are different from other people’s.

Cell and Gene Math. Shrank, Pearson and McClellan. That’s a lineup. They wrote about cell and gene therapies and how to private payers may need to evolve their thinking about paying for them (risk pooling, manufacturers doing longer-term value contracting, etc.). The article does not break new ground, but sums up the issue well.

Import Math. 15% tariffs from Europe for branded pharmaceuticals.

Reviewing the Fundamentals – ASP and Maximum Fair Price

For physician-administered drugs, physicians buy the drug, administer it and then bill the patient’s insurance. Medicare usually reimburses for physician-administered drugs at Average Sales Price + 4.3% (under sequestration). Other payers set their own reimbursement rates but, historically, about half have been paid on ASP plus a percentage.

A call with a former coworker (you know who you are), turned into research on the Average Sales Price reporting and the Medicare Physician Fee Schedule and a question on LinkedIn that confirmed an initial suspicion – things are about to change. As you probably know, because of the Inflation Reduction Act (IRA) Medicare will be negotiating the price of some drugs starting in 2026 with Medicare Part B buy and bill drugs starting in 2028. The new negotiated price is called the Maximum Fair Price (MFP).

There has been a concern that ASP would include MFP sales and that would drag down the ASP. This is a problem because, while providers purchasing for Medicare patients can get the product at the MFP price, the acquisition price (buy) will vary for other sales. This means that while the IRA negotiation targets Medicare, there is concern about the potential “spillover” impact on commercial markets. The MFP price will factor in the product’s ASP, so that providers will potentially make less add-on revenue for patient claims in non-Medicare markets.  This is also true for providers who rely on 340B; the difference between their acquisition price and the reimbursement (whether at MFP or ASP plus a percentage) will be lower.

Another possible scenario would be worse for providers. Depending on the timing, providers may not be able to “catch” the right acquisition price as the ASP goes down and may end up paying more for drugs than they are being reimbursed because they sales will not be made whole like the MFP drugs will be.

What we figured out this week is that the Centers for Medicare & Medicaid Services (CMS) will still be calculating ASP and it will include Maximum Fair Price (MFP) sales, but the ASP for these drugs will not be published. The ASP file will show the allowable Medicare amount (MFP + 6%). This means that any other reimbursement that uses ASP today for these drugs will need to find a new benchmark. When the product stops being negotiated (because of a generic, biosimilar, etc.), then the ASP will be there, ready to go. There will likely be timing issues but that’s for another day.

Providers will need to look to be reimbursed based on alternate pricing mechanisms like Wholesale Acquisition Cost (WAC.) This is an administrative burden for providers. Luckily it sounds like the big fish, Keytruda, will be pushed to 2029 and the roll-out of other Part B drugs sounds a little slow so there is time to figure this out.

For the Files

Sometimes you just need a good reminder, KFF Health Policy 101.