CMS's June 16, 2026 proposed rule would permanently write mandatory Maximum Fair Price formulary inclusion into federal regulation and expand the annual negotiation pool to 20 drugs starting with Initial Price Applicability Year 2029, pushing the cumulative negotiated-drug count toward 60. With the 25 drugs already negotiated for 2026 and 2027 covering more than a third of gross Part D drug costs (Milliman, 2026), the rule forecloses the formulary-exclusion lever for the fastest-growing share of plan liability, and Part D bid actuaries have until the August 17, 2026 comment deadline to flag what breaks.
From Guidance to Regulation: What CMS-4215-P Actually Codifies
Proposed rule CMS-4215-P (Doc. No. 2026-12059, Federal Register, June 16, 2026) is CMS's first attempt at implementing the Medicare Drug Price Negotiation Program through formal notice-and-comment rulemaking rather than the guidance documents that have governed the first three negotiation cycles since 2023. That distinction matters for pricing actuaries beyond process: guidance can be revised by the next administration with a memo, while a codified regulation at 42 CFR Part 429 carries the procedural weight of the Administrative Procedure Act. Two provisions bear directly on bid construction. First, Part D plans and their PBMs must include on formulary any selected drug with an effective MFP, eliminating the discretion to exclude a negotiated drug even when a lower-net-cost therapeutic alternative exists. Second, payments to dispensing entities are capped at MFP plus dispensing fees, which fixes the allowed cost that flows into the plan's gross covered drug cost calculation. CMS expects a final rule in fall 2026, with the codified framework governing drug selection beginning with the fourth negotiation cycle.
The GCDC Math: Mandatory Inclusion Removes a Denominator Lever
Every Part D bid starts with a projection of gross covered drug cost, the total ingredient cost plus dispensing fees the plan expects to incur before rebates and cost-sharing are netted out. Under the prior framework, a plan facing a high-cost negotiated drug retained two tools to manage its GCDC exposure: exclude the drug from formulary in favor of a cheaper clinical alternative, or apply utilization management (prior authorization, step therapy) to suppress volume. Mandatory formulary inclusion removes the first tool entirely for any MFP drug and narrows the second, since CMS's existing negotiation guidance already restricts utilization management on selected drugs to standards no more restrictive than those applied to non-selected drugs in the same class. The practical effect on the bid model is that GCDC for MFP drugs becomes a near-pure function of projected utilization times a fixed unit cost (MFP plus dispensing fee), with formulary design no longer available as a cost-control input. For a book where MFP drugs already represent more than a third of gross Part D spend, that is not a marginal adjustment to trend; it is the removal of an entire modeling degree of freedom for the largest cost category in the bid.
Rebuilding Gross-to-Net After the DIR Reversal
The more consequential change is on the rebate side. Negotiated drugs are not subject to the Manufacturer Discount Program, and manufacturers are unlikely to layer additional supplemental rebates on top of an MFP that Milliman characterizes as already reflecting most of the drug's historical net price. That is a structural reversal of how Direct and Indirect Remuneration has worked for high-list, high-rebate specialty and brand drugs: plans previously priced a high gross cost against a large post-point-of-sale rebate to arrive at a low net liability, and the MFP framework instead delivers a lower gross cost with no rebate layered underneath it. Milliman's own illustrative comparison shows why this does not automatically net favorably for plans: a drug priced under the traditional rebate structure can produce a lower net plan liability (Milliman modeled roughly $1,650) than the same drug's MFP-priced equivalent (roughly $3,000), because the lost DIR income on a highly-rebated product outweighs the MFP discount off list. Reported first-cycle MFP discounts ranged from 38% off list price (Imbruvica) to 79% off list price (Januvia), and that spread means the DIR reversal will not hit every drug the same way. Part D bid actuaries need three separate calculations for every MFP drug in the formulary: the DIR income that disappears relative to the prior plan year, whether the MFP unit cost offsets that loss on a net-cost-per-claim basis, and how the resulting net liability shift moves the plan relative to its risk corridor thresholds under the CY2027 bidding instructions.
The Fixed-Combination Provision: One MFP Across Every Formulation
Proposed section 429.125(b)(4)(i) targets what CMS's own rule text calls a fixed-combination drug loophole. Where a manufacturer holds the New Drug Application or Biologics License Application for multiple products that share an active ingredient but differ in formulation, strength, or route of administration, the proposed rule requires CMS to identify the negotiation-eligible drug using all dosage forms and strengths of that shared active ingredient under the same NDA or BLA holder. Practically, a molecule sold as an injectable, an oral tablet, and a higher-strength pen under one manufacturer no longer escapes MFP pricing on the formulations that were not individually selected; once any version of the active ingredient is selected, every formulation the same holder markets falls under the same MFP. For a bid actuary, this collapses a utilization model that previously priced tiers by formulation into a single MFP-anchored unit cost across the entire product family. Where a plan had been managing GCDC by steering utilization toward the formulation with the more favorable net cost, that steering no longer changes the unit economics, only the mix, and mix shift stops being a cost lever once every formulation prices identically.
AEBD: The Lever That Survives, With a New Attestation Burden
Actuarially equivalent benefit design remains the primary tool left for managing member-facing cost on mandatory-formulary MFP drugs. Under the defined standard benefit framework, a plan's cost-sharing structure can depart from the standard design as long as the actuary certifies actuarial equivalence under section 1860D-11(c) of the Social Security Act and CMS actuarial guidelines, and catastrophic coverage still begins at the statutory out-of-pocket threshold, set at $2,400 for CY2027, up from $2,100 in CY2026 (CMS, CY2027 Rate Announcement, April 2026), alongside a standard deductible rising from $615 to $700. That gives plan actuaries room to set differentiated cost-sharing tiers on MFP drugs, provided the overall design remains actuarially equivalent to the standard benefit. What changes under CMS-4215-P is the compliance burden layered on top of that certification: because formulary placement itself is now mandatory rather than a plan design choice, the AEBD sign-off must additionally attest that the resulting cost-sharing structure does not create a discriminatory barrier to access for the mandatorily-included drug. That is a new, drug-specific attestation on top of the existing benefit-level equivalence certification, and it applies precisely to the highest-cost, highest-utilization products in the formulary.
From 15 to 20: The Selection Pool Through IPAY 2029
The proposed rule confirms that the fourth negotiation cycle, covering IPAY 2029, will add up to 20 additional negotiation-eligible drugs, up from 15 in the second and third cycles, bringing the cumulative negotiated-drug count to nearly 60. The growth path is not linear in composition: the third cycle (IPAY 2028) already introduced the program's first five Part B drugs, including Orencia, Entyvio, Xolair, Botox, and Cimzia, alongside ten Part D selections, and the fourth cycle's expanded pool draws from both benefits again. For MA-PD plan actuaries, that means the cross-benefit modeling work that began with the third cycle now scales: Part B drugs bill under the medical benefit at Average Sales Price plus a 6% add-on, a completely different reimbursement architecture from the Part D deductible-coinsurance-catastrophic structure, and MFP pricing must be reconciled separately across the Part C bid and the Part D bid even when the fixed-combination provision ties a single molecule's formulations to one MFP across both benefits.
| Cycle | IPAY | New Drugs Selected | Cumulative Under MFP |
|---|---|---|---|
| First | 2026 | 10 (Part D) | 10 |
| Second | 2027 | 15 (Part D) | 25 |
| Third | 2028 | 15 (10 Part D + 5 Part B) | 40 |
| Fourth | 2029 | Up to 20 (Part B + Part D) | ~60 |
Credibility Weighting With Two to Three Years of Post-IRA Data
Plan actuaries building IPAY 2028 and 2029 bids are working with, at most, two to three years of post-negotiation experience data, and that experience is not a clean continuation of pre-IRA trend. Credibility weighting procedures that blend historical drug-cost trend with the limited post-MFP period need to account for structural breaks in drug mix, rebate dynamics, and cost-sharing, not merely a level shift in per-unit price. A trend model that treats the MFP transition as a one-time price adjustment layered onto an otherwise continuous trend line will understate the DIR reversal's effect on net liability and overstate the confidence the actuary should place in a blended historical-plus-recent trend pick for MFP drug categories specifically.
Why This Matters
The distinction between the guidance-based negotiation program of 2023 through 2025 and the codified regulation CMS-4215-P proposes is not procedural trivia for a bid actuary. Guidance can shift with each annual cycle's published methodology; a regulation at 42 CFR Part 429 sets the mandatory-inclusion and dispensing-fee-cap rules on a footing that plan sponsors, PBMs, and CMS itself must build multi-year bid infrastructure against. With comment closing August 17, 2026 and a final rule expected before the fourth cycle's IPAY 2029 selections take effect, actuaries who wait for the final rule to start rebuilding the GCDC, DIR, and AEBD components of their bid models will be doing that work under a compressed timeline against an already-locked selection pool.
Further Reading
- IRA Third Cycle Adds Part B Drugs to Medicare Price Negotiation for the First Time - The IPAY 2028 cycle that introduced the first five Part B selections and the Medigap, MA bid, and provider reimbursement mechanics this article builds on.
- CMS's 75% AMP Floor and the IPAY 2029 MFP Pricing Mechanics - A companion look at how CMS's proposed MFP price floor interacts with the same fourth-cycle drug pool this article covers.
- Medicare GLP-1 Bridge Launches July 1: What Part D Plan Actuaries Need to Know - How a separate CMS drug-cost initiative is reshaping 2028 Part D bid assumptions for a different high-cost drug class.
- Medicare Part D 2026 Redesign: Year One Data - The $2,000 out-of-pocket cap's first year of claims experience, the baseline the CY2027 threshold increase builds on.
- IRA Part D Redesign Cuts Employer Creditable Coverage to 72% - How the same Part D redesign parameters driving the AEBD threshold shift are compressing employer-plan creditable coverage.
Sources
- Federal Register: Medicare Drug Price Negotiation Program and Medicare Prescription Drug Benefit Program (CMS-4215-P, June 16, 2026, Doc. No. 2026-12059) - The proposed rule text, comment deadline, and codification of mandatory formulary inclusion.
- CMS: Medicare Drug Price Negotiation Program Proposed Rule Fact Sheet (CMS-4215-P) - CMS's summary of the mandatory formulary inclusion and dispensing-fee-cap provisions.
- National Law Review: CMS Proposes Rule to Codify the Medicare Drug Price Negotiation Program, With Modifications for 2029 - The 20-drug fourth-cycle expansion, cumulative "nearly 60 drugs" figure, and fixed-combination drug loophole mechanics under proposed section 429.125(b)(4)(i).
- Duane Morris: CMS Proposes Permanent Framework for Medicare Drug Price Negotiation Program - Mandatory formulary inclusion mechanics and PBM discretion elimination.
- Holland & Knight: CMS Issues First Proposed Rule for IRA Medicare Drug Price Negotiation - Transition from guidance-based to regulation-based program administration and the August 17, 2026 comment deadline.
- Milliman: Medicare Price Negotiation: Anchored Drug Prices in Uncharted Waters - DIR/rebate elimination mechanics, the $1,650-versus-$3,000 net liability example, and the 38% to 79% MFP discount range.
- Milliman: Medicare Price Negotiation: Year 2 Selection Expands to New Therapeutic Areas - The 25-drug, more-than-one-third-of-gross-Part-D-spend figure.
- CMS: Announcement of Calendar Year (CY) 2027 Medicare Advantage and Part D Payment Policies - CY2027 standard benefit deductible ($700) and out-of-pocket threshold ($2,400).