Centers for Medicare & Medicaid Services (CMS) Department of Health & Human Services (HHS)

• 42 C.F.R. Part 423, Subpart C (i.e., §§ 423.100 – 423.265) — the entire Medicare Part D Plan Benefit rules, drafted without any negotiation authority. • 42 C.F.R. § 447.505(c) — the list of “Prices excluded from best price” under the Medicaid Drug Rebate Program.

—OPTIONAL--

Notice of Proposed Rulemaking

Prohibition on Government Drug Price Negotiation under Medicare Part D and Medicaid (“No-Negotiation” Provisions)

Current federal rules bar CMS from negotiating any drug prices in Medicare Part D (by encoding a blank-slate Subpart C lacking negotiation authority) and carve state-negotiated net-price arrangements out of Medicaid’s “best price” calculation (§ 447.505(c)). Rescinding these provisions would restore true bargaining leverage to public payers, drive deeper manufacturer discounts, and align U.S. purchasing practices with peer OECD models.

U.S. Department of Health & Human Services 200 Independence Avenue, SW Washington, DC 20201 Centers for Medicare & Medicaid Services 7500 Security Boulevard Baltimore, MD 21244

(301) 492-4305 (410) 786-1524 (410) 786-8437

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) added a statutory prohibition on CMS negotiating Part D drug prices (Social Security Act § 1860D–11(c)(1)), which CMS implemented by issuing Part 423 Subpart C with no negotiating authority. Under the Medicaid Drug Rebate Program, § 447.505(c) excludes certain value-based or net-price arrangements from the “best price” calculation, effectively blocking states from securing deeper manufacturer discounts. These measures were originally intended to preserve private-plan competition but now deprive public programs of market power, contributing to America’s highest-in-the-world per-capita drug spending.

Striking Subpart C would empower CMS and Part D plan sponsors to negotiate directly with drug manufacturers. Removing § 447.505(c) would require all state-negotiated net-price deals to count toward Medicaid’s “best price,” unlocking deeper discounts. Together, these changes would leverage billions in combined purchasing volume to secure better value, support value-based contracting, and pass savings on to beneficiaries and taxpayers.

— Sections 423.100 through 423.265 (Subpart C) would be deleted, leaving no regulatory barrier to CMS-led negotiation under Part D. — Paragraph (c) of § 447.505 would be struck, so that no arrangement is excluded from the “best price” calculation. All remaining payment, coverage, rebate, and reporting rules in Parts 423 and 447 would apply without exception.

Robert F. Kennedy Jr.

Secretary of Health and Human Services