Centers for Medicare and Medicaid Services Archives

The Centers for Medicare & Medicaid Services (“CMS”) released the Calendar Year 2026 Medicare Physician Fee Schedule (“PFS”) proposed rule on July 16, 2025. (See cms.gov/newsroom/fact-sheets/calendar-year-cy-2026-medicare-physician-fee-schedule-pfs-proposed-rule-cms-1832-p). The proposed rule includes potentially significant changes to what is considered a bona fide service fee (“BFSF”) when calculating average sales price (“ASP”) under Medicare Part B.^[*]

Under Medicare Part B, most drugs are reimbursed based on ASP plus six percent. Manufacturers report ASPs to CMS quarterly. With certain exceptions, ASP is defined as a weighted average price to commercial customers in the United States. Drug manufacturer price concessions are deducted when calculating ASP but BFSFs are not. To support a higher ASP, which increases a drug’s reimbursement, manufacturers seek to avoid price concessions and instead classify programs as BFSFs. Improperly classifying a price concession as a BFSF increases a manufacturer’s ASP, which results in Medicare overpayments and higher coinsurance amounts for Medicare beneficiaries.

Merle M. DeLancey Jr.

On March 23, 2022, the Centers for Medicare and Medicaid Services (“CMS”) issued long-awaited guidance regarding how drug manufacturers are to report multiple best prices (“BPs”) to the Medicaid Drug Rebate Program (“MDRP”) under value-based purchasing (“VBP”) arrangements. See Manufacturer Release 116 (medicaid.gov/prescription-drugs/downloads/mfr-rel-116.pdf). CMS delayed issuing the guidance to allow states, payers, and manufacturers to administratively prepare for multiple BP reporting in connection with VBP arrangements. The regulatory amendments are effective July 1, 2022.

VBP Arrangements and Medicaid’s Best Price Rule

VBP arrangements consist of additional rebates or price concessions that states may be able to earn based on a drug’s clinical outcomes in Medicaid beneficiaries. CMS’ challenge was reconciling Medicaid’s long-standing BP reporting rule used to calculate manufacturer rebate payments to states with anticipated low prices available under VBP arrangements. Since 1991, the MDRP agreed to cover every drug a manufacturer sells regardless of price. In exchange for this unprecedented access, manufacturers agreed to pay rebates ensuring that Medicaid programs paid no more than the “best prices” paid by manufacturers’ commercial customers. Many argued that Medicaid’s BP rule prevented states from accessing innovative manufacturer programs involving cutting-edge therapies.

Tag: Centers for Medicare and Medicaid Services

CMS Proposes New Rules for Calculating Average Sales Price for Medicare Part B Drug Reimbursement

The Medicaid Drug Rebate Program and Value-Based Purchasing

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