The upper limit for the negotiated price of a drug (the “maximum fair price”) is equal to the lower of:

  • The drug’s enrollment-weighted negotiated price (net of all price concessions) for a Part D drug;
  • The average sales price for a Part B drug; or
  • A percentage of the non-federal average manufacturer price (i.e., the average price wholesalers pay manufactures for drugs distributed to non-federal purchasers), depending on FDA approval date:
    • 75% for small-molecule drugs more than 9 years but less than 12 years beyond FDA approval;
    • 65% for drugs between 12 and 16 years beyond FDA approval; and
    • 40% for drugs more than 16 years beyond FDA approval

Financial penalties would be imposed on drug manufacturers for non-compliance

  • An excise tax would be imposed on prior year sales of a given drug for manufacturers that do not negotiate with the Secretary, starting at 65%, increasing by 10% every quarter up to 95%
    • The excise tax would be suspended if manufacturers choose to have their drugs no longer covered by Medicare or Medicaid
  • A civil monetary penalty would be imposed on drug manufacturers for not offering the agreed-upon maximum fair price of up to 10x difference between price charged and negotiated price

Have any questions regarding this notice? Don’t hesitate to contact your Total Benefit Solutions health insurance specialists today at (215)355-2121.