Beyond Medicare: How Part B drug negotiation may reshape commercial reimbursement

Background

Under the Medicare Drug Price Negotiation Program (MDNP), the Centers for Medicare & Medicaid Services (CMS) negotiates a maximum fair price (MFP) for selected drugs and requires manufacturers to make that price available to providers treating Medicare beneficiaries in the applicable Initial Price Applicability Year (IPAY). Beginning January 1, 2028, MFPs will take effect for selected Part B products, marking the first year that negotiated prices under the MDNP will apply to drugs covered under Part B.

Additionally, in the 2026 Medicare Physician Fee Schedule final rule, CMS confirmed that units of negotiated Part B drugs sold at MFP will be included in the calculation of Average Sales Price (ASP) and clarified that it will only publish the new payment limit (106% of MFP) in the CMS payment limit pricing file. As a result, once an MFP is in effect for a selected Part B drug, CMS will no longer publish the ASP for that product.

These dynamics are likely to extend beyond Medicare fee-for-service to Medicare Advantage (MA) and commercial payers. Specifically, MA and commercial contracts often tie drug reimbursement to ASP, creating the potential for spillover effects in the commercial market since the only published CMS price benchmark will be the MFP.

Analysis overview

To assess how commercial payers may react to these market changes, Avalere Health surveyed 50 payer decision makers to understand the prevalence of ASP-based contract methodologies, likely alternative benchmarks to replace ASP if no longer published for negotiated products, and current payer understanding of expected MFP dynamics.

Finding 1. Commercial payer contracted rates in provider-payer contracts commonly reference Medicare Allowable and ASP-based benchmarks. Three-quarters (37 of 50) of survey respondents indicated that commercial contracts most commonly reference ASP and 52% indicated that contracts most commonly reference the Medicare Allowable Amount (Note: Respondents could select more than one payment benchmark in their response). The survey found that median add-on payment for ASP-based contracts was 6%, with responses as high as 60% for some negotiated rates.

Potential market implication: Contracts tied to these benchmarks may require adjustment following MFP effectuation for selected products.

Finding 2. Some contracts already include fallback methodology when ASP is not published, often referring back to the Medicare Allowable Amount. Payers have not fully determined whether this would equate to an automatic switch to an alternative benchmark. Forty-two percent of survey respondents indicated that their contracts include a defined fallback methodology when ASP is unavailable, though the specific approaches vary.

Potential market implication: These provisions may influence how payers and providers prioritize contract renegotiations ahead of 2028. Where the existing fallback methodology is acceptable to both payers and providers, limited contract renegotiation action may be required. However, contracts with no fallback methodology or one that materially disadvantages either stakeholder are likely to face greater pressure for renegotiation and revised reimbursement terms. This may create additional operational burden for payers and providers as they identify affected contracts, evaluate alternative reimbursement benchmarks, and implement revised terms ahead of MFP effectuation.

Finding 3. There was no consensus among payers on which benchmark would be preferable to replace ASP if no longer published for negotiated Part B drugs. Survey responses suggest a preference for preserving familiar reimbursement benchmarks when ASP is no longer available. Specifically, 62% of payer respondents reported that their organizations have considered using the last published ASP, while 58% have considered using the Medicare Allowable Amount, which would effectively reflect the MFP (Note: Respondents could select more than one payment benchmark in their response). By contrast, only 30% indicated that their organizations have considered referencing the MFP directly.

Potential market implication: There may be variation in how respondents understand the relationship between the Medicare Allowable Amount and MFP.

Finding 4. Provider administration payments could offset reimbursement pressure, although payer approaches remain uncertain. An alternative lever to offset decreasing reimbursement may be to change the reimbursement rate for the provider administration service. However, potential payer approaches remain uncertain. Less than half (42%) of surveyed payers said that that their organization has discussed administration payment changes though without a clear direction, while 32% anticipate implementing increases in provider administration payments for negotiated Part B drugs.

Potential market implication: Payers may use administration payments to manage provider economics as effectuation takes effect, particularly in the absence of a defined drug reimbursement benchmark.

Considerations for market dynamics

MFPs for the first set of selected Part B products will go into effect in less than 18 months, but there is still uncertainty and inconsistency regarding how MA and commercial payers will adapt reimbursement rates in the absence of ASP publication for negotiated products. Contract structure will influence whether agreements need to be reopened as payment benchmarks shift. Contracts with clear fallback methodology or language that references Medicare payment rates (such as ASP or the Medicare Allowable Amount) may require less modification, while contracts without clear alternative benchmark language may require renegotiation.

Where contracts are reopened, payers and providers may consider several options to address differences in payment. These include modifying not only the underlying reimbursement benchmark, but also the contracted add-on amount and reimbursement for drug administration services. As a result, overall economics for negotiated Part B drugs may be partially offset, even if the benchmark itself changes, creating multiple potential pathways for contract negotiation and almost certain variability in how different payers will structure contracts.

Providers may seek to preserve pre-negotiation reimbursement rates, while plans may seek to balance cost management by maintaining adequate provider networks and access. These dynamics may vary by regional vs. national payers and provider type, based on the relative influence of each stakeholder in each market.  Varying contracting strategies could increase operational complexity for providers, payers, and other stakeholders. The ultimate impact, however, will be felt by patients, who are in the middle of this complex, rapidly evolving Part B payment landscape.

Methodology

Avalere Health conducted a survey of 50 commercial payer respondents to assess perspectives on the Inflation Reduction Act (IRA). The sample included 32 national and 18 regional payers and represented a range of plan sizes: 24 respondents (48%) represented payers with more than five million covered lives, 11 (22%) represented payers with one million to five million covered lives, and 15 (30%) represented payers with fewer than one million covered lives.

All respondents were currently in their role or had left within the previous six months, had directly supported negotiations with hospital outpatient departments or physician offices, and reported being very or somewhat familiar with the IRA.

Funding for this research was provided by Johnson & Johnson. Avalere Health retained full editorial control.