Model legislation could apply to state regulated commercial market and self-insured plans…………..
The National Academy for State Health Policy (NASHP) has published a new version of model legislation enabling states to reference Medicare’s maximum fair prices (MFPs) for drugs. While the MFPs apply to drugs reimbursed by Medicare, this model extends MFPs to state markets, not by setting MFPs as the price, but by using them as upper payment limits (UPLs) on reimbursement for those drugs within a state.
States could apply MFPs as UPLs for the entire state-regulated commercial market or adopt this approach more narrowly, for example, only for a state employee health plan. The model does not include Medicaid due to the large drug rebates Medicaid already receives through the Medicaid Drug Rebate Program. Self-insured plans regulated under the federal Employee Retirement Income Security Act (ERISA) would be able to opt in to UPLs for savings.
“The 2022 Inflation Reduction Act (IRA) contained several provisions designed to help reduce the costs of prescription drugs. One of the provisions allowed Medicare, for the first time, to negotiate prices for high-cost drugs. The price negotiation process began in 2023, and Medicare published its negotiated prices for the first 10 drugs on August 29, 2024. The negotiated prices for those initial drugs (the maximum fair prices, or MFPs) became effective on January 1, 2026.”
On January 17, 2025, the Centers for Medicare and Medicaid Services (CMS) announced the list of 15 drugs that will be subject to the second round of negotiation (MFPs effective on January 1, 2027). On January 27, 2026, CMS announced the list of 15 drugs that will be subject to the third round of negotiations (MFPs effective on January 1, 2028). The list of drugs subject to negotiated prices include drugs that are costly not only to Medicare, but also to private health insurance plans and state purchasers.”
This model directs a state to review the list of drugs for which Medicare has set an MFP for significant savings and, when appropriate, to use the MFP as an upper payment limit across the state’s health care system. This means that the payment limits set by Medicare will apply to private and public purchasers, including ERISA (Employee Retirement Income Security Act) plans that choose to participate.
Common Drug Pricing Benchmarks Used In The United States:
Medicaid Pharmacy Pricing:
“Why should plan sponsors rely on PBMs who use their MAC pricing 90% of the time (No, they don’t use AWP when they can charge whatever the want under MAC) when they can reprice Rx claims using Medicaid or Medicare as a benchmark?” – Bill Rusteberg
