Editor’s Note: This month, we offer commentary on two topics around Direct-to-Patient and the Impact of Maximum Fair Prices on the First 10 Medicare-Negotiated Drugs.
As always, if you have questions on any of the content found in this or previous market updates, please reach out to your IntegriChain Consulting Lead or consulting@integrichain.com and we would be happy to talk you through it.

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Manufacturer ‘Direct-to-Patient’ Model Challenging the Traditional Pharmacy Landscape

Over the last year, pharma manufacturers have launched their own direct-to-patient (DTP) programs that allow patients an easier route to access branded medicine. Patients now have the ability to work with a manufacturer directly and virtually to engage in healthcare provider appointments, patient services, and medicine sent directly to their home. Note that this process is different from the traditional approach patients and the industry is accustomed to. Although the variety of medicine being offered from manufacturers in the DTP programs is still limited, the challenges the rest of the pharmaceutical ecosystem may experience due to the changes in dispensing are beginning to be uncovered.

Multiple manufacturers, including Lilly, Novo Nordisk, and Pfizer, have started their own platform this past year. For example, Pfizer’s DTP program ‘PfizerForAll’ includes products that have historically been pharmacy benefit drugs: Nurtec and Paxlovid (note that there are other products/services offered). Pfizer has contracted with UpScriptHealth to manage the patient to HCP relationship and with Alto to carry on the home delivery services. 

Without the use of the traditional patient/product journey, PBMs are not able to have their hands in the process as they typically would. Let’s look at a couple areas where PBMs may need to be considered as DTP programs to become more prevalent.

Navigating the Virtual vs. In-Person Care Trend

Healthcare is not the only industry adjusting to the virtual world. With manufacturers beginning to challenge the route a patient can receive branded medicine, PBMs may need to consider different approaches to reach the patient who prefers the virtual setting when seeking care. The speed of product delivery from online to home compared with the standard brick-and-mortar process is another convenient factor that patients have discovered over the past few years.

Understanding the Vertical Integration within the PBM Umbrella

CVS Health, Express Scripts, Optum, and Prime Therapeutics control around 70% of the market and are integrated with major insurers and specialty pharmacies. These networks rely on the distribution of medicine through each pillar for controlling costs, rebate management, and reimbursement purposes. PBMs may consider different approaches with their partners while DTP programs are contracting with different entities.

Financial Resources

Price transparency and financial support guidance is a resource that manufacturers promote for using their DTP program, either insured or uninsured. PBMs can provide discounted medicine for the patient in the traditional healthcare framework, but the pricing structure can be unclear due to the complex process and payments at the doctor’s office and pharmacy. 

Ease of Access Resources

Compared with the traditional method, DTP programs allow a patient to receive all their needs in one space including billing, healthcare provider services, patient assistance programs, and at-home prescriptions. Although PBMs have created online platforms centering around telehealth, they do not provide the type of services the manufacturing DTP programs provide. It will be important that PBMs understand how to network or contract with the manufacturers in this space.

Stay tuned for more updates as more manufacturers challenge the norm and provide patients with a more simplified way to receive the branded medicine they need. 

Resources

• Pfizer Launches a Digital Platform that Helps Simplify Access to Healthcare
• The New Era of Pharma is Direct-to-Consumer Healthcare
• AMA Study
• Lilly Direct Zepbound

Impact of Maximum Fair Prices on the First 10 Medicare-Negotiated Drugs

The Inflation Reduction Act (IRA) marked a major shift in how Medicare handles drug pricing, with the Centers for Medicare & Medicaid Services (CMS) negotiating prices for the first time. In 2023, CMS selected 10 high-cost, widely used drugs for the initial round of negotiations, setting Maximum Fair Prices (MFPs) that will take effect in 2026. The 10 drugs collectively accounted for about $56.2 billion in gross Medicare Part D spending in 2023. The introduction of MFPs is expected to bring significant cost reductions for Medicare, impact pharmaceutical revenues, and influence broader market pricing.

Price Reductions Under MFPs 

The negotiated MFPs reflect substantial discounts, ranging from 38% to 79% off 2023 list prices. Below are the new prices for a 30-day supply.

• Januvia: $113 (↓79%)
• NovoLog, Fiasp, variants: $119 (↓76%)
• Farxiga: $178.50 (↓68%)
• Enbrel: $2,355 (↓67%)
• Jardiance: $197 (↓66%)
• Stelara: $4,695 (↓66%)
• Xarelto: $197 (↓62%)
• Eliquis: $231 (↓56%)
• Entresto: $295 (↓53%)
• Imbruvica: $9,319 (↓38%)

These price drops are significant, especially for widely prescribed medications. Januvia, for instance, will see an almost 80% reduction, while high-cost specialty drugs like Enbrel and Stelara will be roughly one-third of their former prices. Some drugs, such as Januvia and Stelara, are set to face generic or biosimilar competition around 2025–2026, which likely contributed to their steeper price reductions.

Savings for Medicare and Patients

The lower MFPs are expected to generate major savings for Medicare beneficiaries. For context, nearly 9 million Medicare enrollees used these drugs in 2023, paying around $3.9 billion out-of-pocket. The $1.5 billion out-of-pocket reduction highlights a ~38% decrease in patient expenses. Many beneficiaries will see lower copays or coinsurance once MFPs take effect. For example, under the MFP, Jardiance will cost $197 instead of its $580 list price, offering direct savings for those paying a percentage of the cost. The IRA’s Part D redesign—which introduces a $2,000 annual cap on out-of-pocket spending in 2025—takes a step in a similar direction to reduce prescription drug costs, increasing affordability for patients.

Impact on Manufacturers

Given many drugmakers already offer rebates and discounts in the current system, the MFPs effectively replace some of these behind-the-scenes rebates with an upfront lower price. This means the net revenue loss per prescription may not be as dramatic as the list price reductions suggest, but the industry will still see financial pressure.

Revenue losses from Medicare negotiations could reach 5 to10% for some firms, with total industry losses around $43 billion in one year [9]. The extent of the impact depends on factors like product portfolios and reliance on Medicare sales. Companies with heavily prescribed drugs for seniors—such as Bristol Myers Squibb, AbbVie, and AstraZeneca—are expected to feel the pinch more than diversified firms like Pfizer or Roche. Notably, some of the affected drugs were already nearing patent expiration, meaning manufacturers would have faced declining sales due to generic or biosimilar competition regardless of MFP implementation.

15 Newly Selected Drugs in MFP Negotiations

In January 2025, CMS announced the selection of 15 additional drugs for price negotiations under the (IRA, with negotiated prices set to take effect in 2027. These drugs span a variety of therapeutic areas—including diabetes, obesity, respiratory diseases, cancer, and neurological conditions—and collectively accounted for approximately 14% of Medicare Part D spending in 2023.

Impact of MFP Negotiations

CMS aims to negotiate MFPs that achieve discounts comparable to the first cycle (ranging from 38% to 79% off list prices), with an expected average discount near 63%. Although final MFPs for these 15 drugs will be determined later in 2025, analysts predict substantial price reductions similar to those achieved in the first round, potentially saving Medicare billions annually.

If the negotiated prices had been applied in the previous cycle, Medicare would have saved approximately $6 billion. By extrapolation, applying similar discounts to this second set—representing about $41 billion in spending—could generate annual gross savings of $9 to $10 billion. These savings would also translate into lower out-of-pocket costs for Medicare beneficiaries, who are expected to save significantly, especially under the new $2,000 annual cap.

Manufacturers of these high-expenditure drugs are anticipated to experience reduced revenues from the Medicare market. Given that many of these drugs are among each company’s top sellers, the imposed discounts could lead to revenue losses on the order of 5% to 15%. Companies may respond by adjusting their pricing strategies, such as increasing prices in the commercial sector or accelerating the launch of authorized generics, although such moves are constrained by regulatory and market pressures.

Considerations for Future Negotiations

With future rounds of Medicare negotiations, the criteria for selecting eligible drugs are evolving. For IPAY 2027, a drug must have been on the market for at least seven years (for small-molecule drugs) or 11 years (for biologics) to qualify. CMS aggregates expenditure data across all dosage forms and strengths, meaning selection is based on total Medicare spending rather than just individual formulations. This process has already led to manufacturers reconsidering pricing strategies, with some, like Merck and Novo Nordisk, preemptively lowering prices to offset potential revenue losses.

Additionally, biosimilar manufacturers have raised concerns about MFPs reducing incentives for new market entrants. Lower negotiated prices could shrink the pricing range within which biosimilars compete, potentially limiting their commercial viability. At the same time, commercial insurers may use MFPs as a benchmark to negotiate their own price reductions, creating broader market pressure beyond Medicare.

References

• Medicare Drug Price Negotiation Program
• Medicare Price Negotiation: Year 2 Selection Expands to New Therapeutic Areas
• HHS Announces 15 Additional Drugs Selected for Medicare Drug Price Negotiations in Continues Effort to Lower Prescription Drug Costs for Seniors
• Medicare Drug Price Negotiation Program: Selected Drugs for Initial Price Applicability Year 2027
• FAQs About the Inflation Reduction Act’s Medicare Drug Price Negotiation Program
• CMS Announces Next 15 Drugs Selected for IRA Negotiation
• US Judge Upholds Medicare Drug Price Negotiation Program
• CMS Update on Drugs Selected for Medicare Part D Price Negotiation
• New Analysis Finds the Medicare Drug Price Negotiation Program Threatens Financial Stability of American Pharmacies

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