The bill amends section 1115A of the Social Security Act to require the Center for Medicare and Medicaid Innovation (CMMI) to implement, beginning January 1, 2029, a Most‑Favored‑Nations (MFN) Pricing Model. Under that model, manufacturers without a negotiated ‘‘covered agreement’’ must provide the MFN price for covered drugs to eligible Medicare and Medicaid beneficiaries and to providers and dispensers serving them, and must report sales and pricing information to the Secretary so CMS can calculate the MFN price.
This is a test‑model approach: the MFN mechanism runs for five years and defines the MFN price as the second‑lowest “applicable net price” among eight specified reference countries (adjusted for purchasing power differences). The bill creates a narrow carve‑out: manufacturers may avoid the MFN obligations by entering a covered agreement with CMS that includes reporting, provision of MFN pricing, and a commitment to expand U.S. manufacturing.
The proposal creates immediate operational and compliance tasks for CMS, manufacturers, pharmacies, and providers and risks both program savings and market responses that could affect supply and innovation.
At a Glance
What It Does
Requires CMMI to test a Most‑Favored‑Nations Pricing Model starting Jan 1, 2029, where specified manufacturers must make the MFN price available for covered drugs to defined Medicare and Medicaid beneficiaries and report data to CMS for price calculation. The MFN price is the second‑lowest applicable net price among eight named reference countries, adjusted for purchasing power.
Who It Affects
Specified manufacturers of Medicare‑ and Medicaid‑covered drugs that do not sign a covered agreement; Medicare Part B and Part D beneficiaries (including MA‑PD enrollees) and Medicaid beneficiaries (where state coverage exists); pharmacies, hospitals, physicians, and other dispensers; and CMS/CMMI operational teams. Congress (through named committees) also receives mandated reporting.
Why It Matters
The bill uses international reference pricing through CMMI rather than a statutory rate‑setting mechanism, creating a five‑year federal test that could change procurement leverage for federal payers, impose new reporting and compliance costs on manufacturers and downstream providers, and influence drug availability and pricing globally.
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What This Bill Actually Does
Congress instructs CMMI to run a five‑year demonstration that ties the prices paid by federal programs for many outpatient and physician‑administered drugs to an internationally referenced ‘‘most‑favored‑nation’’ number. Starting January 1, 2029, manufacturers who do not enter a specific agreement with CMS must make available to qualifying Medicare and Medicaid beneficiaries (and to the pharmacies and providers serving them) the MFN price for each covered drug.
CMS will compute that MFN price using manufacturer‑reported data from sales in a fixed set of reference countries and an adjustment for purchasing power differences.
The statute defines core terms. A ‘‘covered drug’’ includes drugs payable under Medicare Part B, outpatient drugs as defined for Medicaid, and Part D drugs.
The MFN price is not the absolute lowest foreign price but the second‑lowest applicable net price across Canada, Denmark, France, Germany, Italy, Japan, Switzerland, and the United Kingdom; ‘‘applicable net price’’ requires averaging across package sizes, purchasers, and accounting for rebates and discounts. Manufacturers must report whatever information the Secretary needs to perform these calculations, with the timing and format left to CMS rulemaking.There is a compliance shortcut: the Secretary may suspend the MFN obligations for a drug until April 1, 2029, if a manufacturer is likely to enter a ‘‘covered agreement’’—a contract with CMS that (1) replicates the MFN access and reporting obligations for specified drugs and (2) includes a commitment by the manufacturer to increase U.S. manufacturing.
Covered agreements must be entered into by December 31, 2028, and reported to the named congressional committees by specified dates. The bill does not enumerate enforcement penalties or specify precise operational mechanics for pass‑through to beneficiary cost‑sharing; CMS will need to define implementation details and reporting requirements under its existing authority.
The Five Things You Need to Know
The model must begin January 1, 2029, and runs for five years (CMMI test under section 1115A).
The MFN price equals the second‑lowest applicable net price among eight reference countries (Canada, Denmark, France, Germany, Italy, Japan, Switzerland, United Kingdom), adjusted for purchasing power differences.
’Specified manufacturers’—those without a ‘covered agreement’—must provide MFN access to eligible Medicare Part B beneficiaries and Part D/MA‑PD enrollees and to Medicaid beneficiaries where the drug is covered, and to their pharmacies/providers.
Manufacturers must report sales and pricing data ‘‘at such time and in such manner’’ as CMS specifies so the Secretary can calculate MFN prices; the bill leaves reporting format and timing to the Secretary.
A covered agreement (entered by Dec 31, 2028) lets a manufacturer avoid MFN model obligations only if it provides the MFN access/reporting and commits to increasing U.S. manufacturing, and the Secretary must report such agreements to four congressional committees by set deadlines.
Section-by-Section Breakdown
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Mandates inclusion of MFN model beginning Jan 1, 2029
The bill amends the CMMI authority paragraph to require inclusion of the Most‑Favored‑Nations Pricing Model in the slate of models CMMI may test, effective January 1, 2029. Practically, that forces CMMI to adopt this specific demonstration as part of its modeling portfolio rather than leaving it wholly discretionary; CMS will need to programmatically prepare to stand up the pilot by that date.
Manufacturer obligations: access and reporting
This subsection compels each ‘specified manufacturer’ to provide access to the MFN price for covered drugs to defined beneficiaries and to report the sales/pricing information the Secretary needs. The text covers both drugs dispensed through pharmacies/mail order and drugs administered in clinical settings, extending the requirement to pharmacies, hospitals, physicians, and other dispensers that serve eligible patients. The provision gives CMS authority to specify the reporting template and cadence, which means much of the compliance burden will be defined by forthcoming CMS guidance.
Temporary suspension clause and five‑year limit
The Secretary may temporarily suspend MFN obligations for an individual drug until April 1, 2029, if a manufacturer is likely to enter a covered agreement before that date — a grace mechanism tied to negotiation. Separate from that, the statute fixes the model to a five‑year demonstration period. These timing rules create a compressed schedule for manufacturers that want to negotiate a covered agreement and for CMS to design operational rules before the pilot starts.
How the MFN price is calculated and which countries count
The bill defines ‘applicable net price’ as the average price paid to the manufacturer across package sizes and purchasers in a reference country, net of rebates, discounts, and concessions, and requires adjustment for differences in purchasing power. The MFN price is explicitly the second‑lowest applicable net price among the listed reference countries (Canada, Denmark, France, Germany, Italy, Japan, Switzerland, UK). By naming countries and using a second‑lowest rule, the statute both constrains CMS discretion and makes the result sensitive to country selection and reported net prices.
Covered‑agreement carve‑out, beneficiary scope, and covered drug definitions
A ‘covered agreement’ is a time‑bound contract (entered by Dec 31, 2028) in which a manufacturer agrees to replicate MFN access and reporting and commits to boosting U.S. manufacturing; the Secretary must report such agreements to the four named congressional committees by specified deadlines. The bill defines which patients qualify for MFN pricing (Medicaid beneficiaries where the drug is covered, Medicare Part D/MA‑PD enrollees for dispensed drugs, and Part B‑enrolled individuals for physician‑administered drugs) and enumerates covered drug categories (Medicaid covered outpatient drugs, Part B products, and Part D drugs). This section sets the operational perimeter of who and what the pilot will affect.
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Explore Healthcare in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Medicaid enrollees and state Medicaid programs: beneficiaries in states that cover the drug and state programs themselves could see lower acquisition prices and reduced program expenditures if MFN prices are below current costs. Lower federal drug spending for these populations could free state/federal budget capacity.
- Medicare beneficiaries with Part B or Part D coverage (including MA‑PD enrollees): for drugs covered under the model, these patients may see lower acquisition costs or lower program expenditures that could influence beneficiary cost‑sharing depending on CMS’s pass‑through rules.
- Federal payers and taxpayers: Medicare and the federal share of Medicaid could realize savings if MFN prices reduce the amounts paid for covered drugs, altering federal outlays and budget projections.
Who Bears the Cost
- Specified manufacturers without a covered agreement: they must provide MFN prices, supply detailed sales/pricing data to CMS, and face potential revenue reductions tied to internationally referenced pricing.
- Manufacturers that enter covered agreements: to obtain the carve‑out they must commit to increasing U.S. manufacturing capacity, which implies capital spending and operational costs that will affect margins and investment plans.
- CMS/CMMI and agency staff: the agency must design reporting formats, compute adjusted prices across multiple countries, enforce access, and manage congressional reporting — all new operational burdens with staffing and IT costs.
- Pharmacies, hospitals, and physician practices: they will need new billing, reimbursement and compliance processes to apply MFN prices for eligible patients and reconcile manufacturer reporting, creating administrative costs and system changes.
Key Issues
The Core Tension
The central dilemma is between achieving lower, internationally referenced prices quickly for Medicare and Medicaid beneficiaries and preserving manufacturers’ incentives and global supply relationships: aggressive price‑linking can deliver near‑term savings but risks manufacturer responses (withholding, price increases elsewhere, reduced investment) that could diminish access or future innovation.
Implementation complexity is high and many operational details are deferred to the Secretary. The statute leaves the timing, format, and verification of manufacturer reporting to CMS rulemaking while relying on an average‑price, net‑of‑rebates calculation adjusted for purchasing power.
Those calculation choices are technically challenging and vulnerable to data quality problems: manufacturers report multi‑country net prices that reflect confidential rebates and rebates calculated to different purchasers. CMS will need audit authority, standardized templates, and a method to reconcile manufacturer filings with real‑world transaction data — none of which the bill prescribes.
The policy trade‑offs are also acute. Using the second‑lowest foreign net price can reduce payments quickly for federal programs, but it creates incentives for manufacturers to change global pricing strategies, restrict supplies to reference countries, or alter contracting to protect revenue.
The covered‑agreement carve‑out ties relief from MFN obligations to commitments to expand U.S. manufacturing, which could advantage large firms able to finance capacity investments while shifting costs to manufacturers and, ultimately, to innovation budgets. Finally, the bill lacks explicit enforcement penalties or specific beneficiary cost‑sharing rules tied to MFN pricing, leaving open how price reductions translate into patient savings and how CMS will handle noncompliance or supply interruptions.
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