Implementation of the Medicare Drug Price Negotiation Program: Centers for Medicare and Medicaid Guidance and Legal Considerations

Implementation of the Medicare Drug Price Negotiation Program: Centers for Medicare and Medicaid Guidance and Legal Considerations

Implementation of the Medicare Drug Price
May 16, 2023
Negotiation Program: Centers for Medicare
Hannah-Alise Rogers
and Medicaid Guidance and Legal
Legislative Attorney

Considerations

This report discusses P.L. 117-169, a budget reconciliation measure often referred to as the
Inflation Reduction Act (IRA), and its creation of the Medicare Drug Price Negotiation Program (the Program). The Program
is to allow the Secretary of Health and Human Services (HHS), through the Centers for Medicare and Medicaid Services
(CMS), to negotiate the prices of certain Medicare drugs directly with drug manufacturers for the first time.
On March 15, 2023, CMS issued guidance regarding the initial implementation of the Program, specifically with respect to
the identification and selection of drugs for negotiation. CMS is to first identify qualifying single source drugs, as defined in
the statute. CMS is to next identify negotiation-eligible drugs from the list of qualifying single source drugs, excluding small
biotech drugs in price applicability years 2026-2028. The agency is to then rank the top 50 highest-spend negotiation-eligible
drugs for price applicability year 2026 using Medicare claims data, and may delay price negotiation for certain biological
products for up to two years, in accordance with the statute. The 10 drugs with the highest Medicare expenditures are to then
be selected for price negotiation in 2026. In addition to providing more information about the selection of drugs, CMS’s
initial guidance also presents details about the process for negotiating the market fair price (MFP) of selected drugs, the
calculation of the MFP, and CMS’s planned enforcement of the MFP.
A significant question about CMS’s implementation of the Program may be the extent to which it is subject to judicial
review. The Program’s authorizing statute precludes administrative and judicial review of certain aspects of CMS’s rollout of
the Program, including (1) the determination of drug units; (2) certain aspects of the identification, determination, and
selection of drugs; (3) the determination of the MFP; and (4) the determination of renegotiation-eligible drugs. The statute’s
preclusion of judicial review of certain aspects of CMS’s implementation of the Program provides limited clarity on the types
of lawsuits that might be prohibited. The report explores the extent to which the statute may bar such legal challenges in light
of previous Supreme Court decisions regarding preclusion, as well as arguments that both CMS and manufacturers might
make about preclusion.
In addition to the specific provisions of the IRA, the Medicare statute as a whole contains several provisions that limit
judicial review of different aspects of CMS’s administration of the Medicare program, and the Supreme Court has discussed
the statute’s limitations on judicial review on several occasions. The Court’s decisions in Bowen v. Michigan Academy of
Family Physicians, American Hospital Association v. Becerra, and Heckler v. Rinker offer insight into how the Court
generally looks at statutory provisions limiting judicial review, and each case describes the strong presumption in favor of
judicial review. If a federal court is asked to review a challenge to CMS’s implementation of the Medicare Drug Price
Negotiation Program, the Court’s decisions in these cases could affect the outcome.

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Contents
Introduction ..................................................................................................................................... 1
CMS Initial Program Guidance for the Medicare Drug Price Negotiation Program....................... 2
Selection of Drugs for the Initial Price Applicability Year 2026 ............................................... 2
Identification of Qualifying Single Source Drugs .............................................................. 2
Identification of Negotiation-Eligible Drugs ...................................................................... 4
Identification of Selected Drugs and the Biosimilar Delay ................................................ 5
Negotiation Process and Development of MFP ........................................................................ 7
The Creation of the Initial Offer ......................................................................................... 7
Responses to the Initial Offer.............................................................................................. 9
CMS Oversight and Civil Monetary Penalties ........................................................................ 10
IRA Limitations on Judicial Review and Potential for Legal Challenges ..................................... 10
Section 1320f-7’s Limitation on Review ................................................................................ 10
The Supreme Court’s Interpretation of the Medicare Statute’s Limits on
Administrative and Judicial Review .................................................................................... 12
Cases Finding the Medicare Statute’s Limitation on Judicial Review Inapplicable ......... 13
Cases Upholding the Medicare Statute’s Limitation on Judicial Review ......................... 14
Potential Challenges to the Program and § 1320f-7 ................................................................ 15
Considerations for Congress.......................................................................................................... 16

Contacts
Author Information ........................................................................................................................ 16

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Implementation of the Medicare Drug Price Negotiation Program

Introduction
P.L. 117-169, a budget reconciliation measure often referred to as the Inflation Reduction Act of
2022 (IRA), became law on August 16, 2022. As described in other CRS publications, the IRA
created the Medicare Drug Price Negotiation Program (the Program), which allows the Secretary
of Health and Human Services (HHS)1 to negotiate drug prices directly with manufacturers for
certain drugs dispensed to Medicare drug prices with manufacturers for the first time.2
The IRA requires HHS to publish a list of selected drugs, enter into agreements with
manufacturers of drugs selected for negotiation, negotiate a maximum fair price (MFP) for those
drugs with manufacturers, and monitor manufacturer compliance with Program requirements.3
The Congressional Budget Office (CBO) estimated that the Program will contribute a $25 billion
reduction to the deficit.4 CBO further estimated that in 2031, Part D drug prices will be 8% lower,
and Part B drug prices will be 9% lower, as a result of the price negotiations.5 The Program’s
generation of significant savings is expected to help fund other parts of the IRA, including a
provision capping Medicare beneficiaries’ out-of-pocket spending for prescription drugs at
$2,000 per year starting in 2025.6
The Centers for Medicare and Medicaid Services (CMS) has since begun implementing the IRA’s
changes to various aspects of the Medicare Program.7 Under the authority in § 11001 and § 11002
of the IRA, CMS has accomplished much of the Program’s initial rollout via agency guidance,
published on March 15, 2023.8 The guidance describes how CMS is to select the first 10 drugs
subject to price negotiation for price applicability year 2026,9 and it identifies several categories
of drugs excepted from price negotiation.10 The guidance also reviews the factors by which CMS
is to determine a “Starting Point” for its initial offer for the MFP to the manufacturer.11 The
guidance further explains CMS’s role in ensuring manufacturer compliance with the terms of the

1 References to the “Secretary,” “CMS,” and “the agency” are used interchangeably in this report to generally refer to
actions taken by HHS.
2 For a complete summary of the IRA’s changes to Medicare, Medicaid, and private insurance, see CRS Report
R47396, Health Care Provisions of the Budget Reconciliation Measure P.L. 117-169, coordinated by Katherine M.
Kehres. For a brief overview of the IRA’s changes to the Medicare Program, including an overview of the Medicare
Prescription Drug Price Negotiation Program and other changes to Medicare Parts B and D, see CRS In Focus IF12203,
Selected Health Provisions of the Inflation Reduction Act, by Suzanne M. Kirchhoff.
3 42 U.S.C. § 1320f(a)(1)-(4).
4 HOW CBO ESTIMATED THE BUDGETARY IMPACT OF KEY PRESCRIPTION DRUG PROVISIONS IN THE 2022 RECONCILIATION
ACT at 5, 19, CONGRESSIONAL BUDGET OFFICE (Feb. 2023), https://www.cbo.gov/system/files/2023-02/58850-IRA-
Drug-Provs.pdf [hereinafter CBO REPORT]. See also Michael Erman et al., Bristol Myers, Pfizer, AbbVie Drugs Likely
to Face U.S. Price Negotiation, REUTERS (Mar. 13, 2023), https://www.reuters.com/business/healthcare-
pharmaceuticals/bristol-myers-pfizer-abbvie-drugs-likely-face-us-price-negotiation-2023-03-13/.
5 CBO REPORT, supra note 4, at 12. For more information about Medicare drug coverage under Parts B and D, see CRS
Report R40425, Medicare Primer, coordinated by Patricia A. Davis.
6 Erman et al., supra note 4; see 42 U.S.C. §§ 1395w-102(b), 1395w-115(b).
7 See Social Security Act, 42 U.S.C. § 301 et seq., amended by Inflation Reduction Act of 2022, Pub. L. No. 117-169,
§§ 11001-02, 136 Stat. 1818 (codified at 42 U.S.C. §§ 1320f–1320f-7).
8 CENTERS FOR MEDICARE AND MEDICAID, MEDICARE DRUG PRICE NEGOTIATION PROGRAM: INITIAL MEMORANDUM,
IMPLEMENTATION OF SECTIONS 1191–1198 OF THE SOCIAL SECURITY ACT FOR INITIAL PRICE APPLICABILITY YEAR 2026,
AND SOLICITATION OF COMMENTS (Mar. 15, 2023), https://www.cms.gov/files/document/medicare-drug-price-
negotiation-program-initial-guidance.pdf [hereinafter CMS GUIDANCE].
9 Only Part D drugs are initially eligible for selection for price applicability years 2026 and 2027. Medicare Part B
drugs will become eligible for selection beginning in price year 2028. See 42 U.S.C. § 1320f-1(d)(1)(A).
10 CMS GUIDANCE, supra note 8, at 7–25.
11 Id. at 47–53.
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Program and describes civil monetary penalties (CMPs) for manufacturers that provide false
information to CMS or otherwise fail to comply with the terms of the Program.12
This report discusses several aspects of the CMS guidance, the pharmaceutical industry’s
response to the guidance, and the limitations the statute places on administrative and judicial
review. The report concludes by reviewing how the Supreme Court has previously interpreted
other provisions precluding judicial review in the Medicare statute and offers a few
considerations for the 118th Congress.
CMS Initial Program Guidance for the Medicare
Drug Price Negotiation Program
Selection of Drugs for the Initial Price Applicability Year 2026
To carry out the Program, the statute requires CMS to first identify and publish a list of qualifying
single source, negotiation-eligible, selected drugs for price year 2026.13 Section 1320f-1 of the
Medicare statute and the CMS guidance lay out the process for selection. According to the statute,
the Secretary is required to select and publish a list of 10 drugs for price applicability year 2026,
15 for price applicability years 2027 and 2028, and 20 drugs for price applicability year 2029 and
thereafter.14
Identification of Qualifying Single Source Drugs
The statute’s definition of “qualifying single source drug” distinguishes drug products and
biological products, and each is discussed in turn below.15 For a drug product to be a qualifying
single source drug, the drug must be a covered Part B or Part D drug and (1) be approved by the
U.S. Food and Drug Administration (FDA) and be marketed pursuant to such approval; (2) at
least seven years must have passed since the initial approval; and (3) the drug cannot be the listed
drug for any approved and marketed generic drug.16 CMS guidance provides that CMS will
consider “all dosage forms and strengths of the drug with the same active moiety and the same
holder of a New Drug Application (NDA), inclusive of products that are marketed pursuant to
different NDAs.”17 This definition includes repackaged and relabeled products, authorized

12 Id. at 63–70.
13 42 U.S.C. § 1320f-1(a)(1). CMS guidance explains that to select a drug for negotiation, the agency will first identify
“qualifying single source drugs,” excluding orphan drugs, low spend Medicare drugs, and plasma derived products.
CMS GUIDANCE, supra note 8, at 5; 42 U.S.C. § 1320f-1(e). From there, for price applicability year 2026, CMS will
identify “negotiation-eligible drugs” by selecting the 50 qualifying single source drugs with the highest total
expenditures under Part D using PDE and other data. CMS GUIDANCE, supra note 8, at 6; 42 U.S.C. § 1320f-
1(d)(1)(A). For price applicability years 2026–2028, CMS will exclude small biotech drugs, a term described in more
detail below, from negotiation-eligible drugs. 42 U.S.C. § 1320f-1(d)(2). CMS will select the top 10 highest-spending
negotiation-eligible drugs for price negotiation, excluding any biologic that meets the criteria for a one-year delay as
the result of a high likelihood of a biosimilar market entry; these are known as “selected drug[s].” CMS GUIDANCE,
supra note 8, at 6; 42 U.S.C. § 1320f-1(c).
14 42 U.S.C. § 1320f-1(a)(1)-(4). For price applicability years 2026 and 2027, only Part D drugs will be eligible for
selection. Id. § 1320f-1(a)(1)-(2). Beginning in 2028 and thereafter, both Part B and Part D drugs will be eligible for
selection. Id. § 1320f-1(a)(3).
15 Id. § 1320f-1(e)(1)(A)-(B).
16 Id. § 1320f-1(e)(1)(A)(i)-(iii).
17 CMS GUIDANCE, supra note 8, at 8 (footnote omitted). For more information about FDA regulations concerning
(continued...)
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generic drugs, and multimarket approval products (MMAs).18 Through this guidance, CMS
attempts to target drugs without meaningful market competition, and attempts to prevent
manufacturers from taking relatively simple steps to avoid negotiation by changing product labels
or packaging, releasing a new dosage level, or authorizing a generic.19 For fixed combination
drugs (i.e., those with two or more active ingredients), the guidance provides that the “single
combination” of ingredients will be considered as one for purposes of identifying a single source
drug.20 As defined in the statute and elaborated in the guidance, CMS’s definition of a single
source drug for purposes of the Program is broad, such that the identification of a single “drug” or
“biologic” could lead to the price negotiation of many different products.21
For a biological product to meet the definition of qualifying single source drug, the statute
requires the covered Part B or Part D biological product (1) to be licensed under § 351 of the
Public Health Service Act (PHSA), 42 U.S.C. § 201 et seq., and be marketed under the license;
(2) to have been marketed for at least 11 years from the date of initial licensure; and (3) not to be
the reference product for any other licensed and marketed biosimilar.22 Similar to its guidance
with respect to qualifying single source drugs, CMS states that “all dosage forms and strengths of
the biological product with the same active ingredient and the same holder of a Biologics License
Application” will be considered as negotiation-eligible, including repackaged and relabeled
products, authorized biologics, and MMAs.23
Exceptions to Qualifying Single Source Drugs
The statute and CMS guidance also specify certain drugs and biologics that are to be excluded
from the definition of qualifying single source drug, including orphan drugs, “low-spend”
Medicare drugs, and plasma-derived products.24 To be considered an orphan drug for purposes of
the exclusion, the statute requires that the drug or biologic be designated as a drug used to treat
only one rare disease or condition and approved by the FDA for that purpose.25 All dosage forms
and strengths of the drug must meet the definition, as stated in the guidance.26 Additionally, in
accordance with the statute, CMS is to exclude “low-spend” drugs, which the statute defines as

active ingredients and active moieties, see CRS Report R46110, Defining Active Ingredient: The U.S. Food and Drug
Administration’s Legal Interpretation of Regulatory Exclusivities, by Erin H. Ward.
18 Id.
19 An authorized generic drug is not the same as a generic drug. According to the FDA, an authorized generic “is most
commonly used to describe an approved brand name drug that is marketed without the brand name on its label.”
Authorized generics are not true generic competition, as they are typically marketed by the same brand name
manufacturer, or with that manufacturer’s permission. For more information about authorized generics, see FOOD AND
DRUG ADMIN., FDA List of Authorized Generic Drugs (Mar. 2021), https://www.fda.gov/drugs/abbreviated-new-drug-
application-anda/fda-list-authorized-generic-drugs.
20 CMS GUIDANCE, supra note 8 at 9. For a definition of fixed combination drugs, see 21 C.F.R. § 300.50.
21 42 U.S.C. § 1320f-1(e); CMS GUIDANCE, supra note 8, at 7–8.
22 42 U.S.C. § 1320f-1(e)(1)(B)(i)-(iii).
23 CMS GUIDANCE, supra note 8, at 8.
24 Id. at 10–11; 42 U.S.C. § 1320f-1(e)(3)(A)-(C).
25 42 U.S.C. § 1320f-1(e)(3)(A). In the Guidance, CMS elaborates that to meet the definition of orphan drug for
purposes of exclusion as a qualifying single source drug, a drug must (1) be designated under Section 526 of the Food,
Drug, and Cosmetics Act as a drug used to treat only one rare disease or condition; and (2) be FDA-approved to treat
only one or more indications associated with that condition. CMS GUIDANCE, supra note 8, at 10–11. An FDA-
designated orphan drug either (1) treats a disease or condition that affects fewer than 200,000 people in the United
States; or (2) affects more than 200,000 people in the United States, but there is no reasonable expectation that the cost
of developing and making the drug would be recovered. U.S. Food & Drug Admin, Rare Diseases at FDA (Dec. 13,
2022), https://www.fda.gov/patients/rare-diseases-fda.
26 CMS GUIDANCE, supra note 8, at 11.
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those that make up less than $200 million in combined Medicare Parts B and D expenditures.27
The statute also excludes biologics that are derived from plasma or human whole blood.28
Identification of Negotiation-Eligible Drugs
Once the qualifying single source drugs are identified, CMS is to next identify 50 negotiation-
eligible drugs from that set. 29 For each qualifying single source drug in price applicability year
2026, CMS is to look at Part D prescription drug cost and payment (PDE) data between June 1,
2022, and May 31, 2023, which it is to use to calculate the Medicare Program’s total expenditures
for each drug.30 CMS is to remove drugs that qualify for the small biotech exception, which is
discussed further below, and is to then rank the qualifying single source drugs according to their
highest total expenditures in the most recent 12-month period prior to the drug publication date.31
The top 50 highest-spend drugs are to be considered negotiation-eligible drugs.32
CMS does not seek comment on the parts of its initial guidance explaining how the agency is to
identify negotiation-eligible drugs, although it requests feedback on other aspects of the
guidance.33 The agency states that the initial guidance with respect to price year 2026 is final,
“[i]n order to facilitate the timely implementation of the . . . Program in accordance with statutory
deadlines.”34 CMS also states that it may make changes to any aspect of the guidance in the
future.35
The Small Biotech Exception
For price years 2026-2028, the statute contains an exception for “small biotech drugs,” the effect
of which is to remove them from consideration as negotiation-eligible drugs.36 CMS guidance
states that to identify small biotech drugs, it will consider whether the Part D total expenditures
for the drug in calendar year (CY) 2021 were (1) equal to or less than 1% of the total
expenditures for all Part D drugs; and (2) were equal to at least 80% of the total Part D
expenditures for all Part D drugs that were covered under the manufacturer’s Medicare Coverage
Gap Discount Program (CGDP) agreement.37 The effect of these two conditions is to identify
drugs that make up a relatively small part of the Part D program’s expenditures and are also a

27 42 U.S.C. § 1320f-1(e)(3)(B).
28 Id. § 1320f-1(e)(3)(C).
29 Id. § 1320f-1(b)(1)(A); CMS GUIDANCE, supra note 8, at 5–6.
30 CMS GUIDANCE, supra note 8, at 12. For more information about PDE data, see CNTRS. FOR MEDICARE & MEDICAID
SERVS., QUESTIONS AND ANSWERS ON OBTAINING PRESCRIPTION DRUG EVENT (PDE) DATA,
https://www.cms.gov/medicare/prescription-drug-coverage/prescriptiondrugcovgenin/downloads/partdclaimsdataqa.pdf
(last visited May 5, 2023).
31 CMS GUIDANCE, supra note 8, at 5-6.
32 Id. at 15.
33 Id. at 5.
34 Id.
35 Id. at 2.
36 42 U.S.C. § 1320f-1(d)(2)(A).
37 CMS GUIDANCE, supra note 8, at 13. The Medicare Coverage Gap Discount Program (MCGDP) makes drug
manufacturer discounts available to eligible Medicare beneficiaries who receive applicable, covered Part D drugs while
in the Part D coverage gap. To participate in the program, the manufacturers must sign an agreement with the Secretary
to provide discounts on all applicable part D drugs, which include drugs that are licensed or approved as a new drug or
biologic. For more information about the MCGDP, see Ctrs. for Medicare & Medicaid Servs., Part D Information for
Pharmaceutical Manufacturers (Mar. 30, 2023), https://www.cms.gov/medicare/prescription-drug-
coverage/prescriptiondrugcovgenin/pharma.
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particular manufacturer’s most significant product. Drug manufacturers that apply for the small
biotech exemption and that meet the stated criteria are not to be included on the list of
negotiation-eligible drugs for the specified price applicability year.38
On January 24, 2023, CMS released an Information Collection Request seeking public comment
on the small biotech exception generally and the specific data that are to be used to implement it;
comments were due on March 27, 2023.39 The information request, as well as the initial guidance,
state that, given the statute’s tight implementation timeline, manufacturers that wish to apply for
the exception must do so prior to the date that CMS publishes the negotiation-eligible drug list for
price year 2026.40 CMS anticipates that this deadline will be in June 2023, but CMS says it will
provide the exact date in additional guidance.41 CMS’s initial guidance also notes that its approval
of an exception will last for one year, so manufacturers must resubmit exception requests for
subsequent years.42
Identification of Selected Drugs and the Biosimilar Delay
After excluding small biotech drugs and ranking the negotiation-eligible drugs, CMS is to publish
the top 10 highest-spend Medicare drugs, which are known as selected drugs.43 These selected
drugs are to be subject to price negotiation for the initial price applicability year 2026.44
The statute also creates a delay for the selection of certain qualifying biological products, which
is explained in further detail below.45 A biologic whose status as a selected drug is delayed is to
still be considered a negotiation-eligible drug for purposes of the previous step of CMS’s
analysis, but cannot be selected for negotiation in the current year.46
The Secretary may delay a qualifying biological product from selection for up to two years if
certain requirements are met.47 In order to qualify for a delay as a selected drug, the biological
product must meet the definition of an extended monopoly drug, as defined in the statute.48 To
qualify as an extended monopoly drug, the biologic must have been FDA-approved or licensed at
least 12 years but fewer than 16 years before the applicable pricing year.49
As noted above, a biologic may be eligible for price negotiation only if it is not listed as the
reference product for any licensed or marketed biosimilar. The biosimilar delay provision

38 CMS GUIDANCE, supra note 8, at 14–15.
39 LETTER FROM CHIQUITA BROOKS-LASURE, ADMINISTRATOR, CMS, TO INTERESTED PARTIES (Jan. 11, 2023),
https://www.cms.gov/files/document/medicare-drug-price-negotiation-program-next-steps-implementation-2026.pdf.
40 Id.; CMS GUIDANCE, supra note 8, at 14.
41 CMS GUIDANCE, supra note 8, at 14.
42 Id. at 15.
43 42 U.S.C. § 1320f-1(c)(1); id. § 1320f-1(a)(1); CMS GUIDANCE, supra note 8, at 6.
44 42 U.S.C. § 1320f-1(a)(1).
45 Id. § 1320f-1(b)(1)(C). This section provides a general overview of the delay process. For more detailed information,
see CRS Report R47396, Health Care Provisions of the Budget Reconciliation Measure P.L. 117-169, coordinated by
Katherine M. Kehres.
46 42 U.S.C. § 1320f-1(b)(1)(C).
47 See generally id. § 1320f-1(f)(2).
48 Id. § 1320f-1(f)(1)(A).
49 Id. § 1320f-3(c)(4). The statute excludes from the definition vaccines licensed and marketed under § 351 of the
PHSA, as well as drugs for which the manufacturer has an MFP agreement with the Secretary for a pricing year prior to
2030. Id. CMS notes that for the Initial Delay Requests submitted for price year 2026, in order to qualify as an
extended-monopoly drug, the biologic must have received its initial licensure between January 1, 2010, and January 1,
2014. CMS GUIDANCE, supra note 8, at 17.
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attempts to protect from negotiation biologics that may soon no longer qualify as a qualifying
single source drug by looking ahead at whether that biologic is likely to become the reference
biologic for a biosimilar in the near future.
Therefore, a biosimilar manufacturer may submit a request to the Secretary to delay price
negotiation of the reference biologic for one year (Initial Delay Request).50 The statute states that
only the manufacturer of the biosimilar may make an Initial Delay Request, and the request must
be made prior to the publication of the selected drug list for the price applicability year.51 The
statute gives the Secretary the discretion to specify any relevant information that must be included
in a manufacturer’s request for a delay.52
If, based on that information, the Secretary finds that there is a “high likelihood” that a biosimilar
that would list the negotiation-eligible biologic as its reference product will be licensed by the
FDA and marketed within two years of the date of publication of the selected drug, the Secretary
must grant the request and delay price negotiation of the biologic for one year.53 If the biosimilar
is not licensed and marketed during the initial one-year delay period, a biosimilar manufacturer
may make an “Additional Delay Request” for the Secretary to reevaluate the determination of
high likelihood for delaying the inclusion of the reference biologic on the selected drug list for a
second year.54 In addition to the high likelihood determination, as described for the Initial Delay
Request, when determining whether a reference biologic qualifies for a second year delay, the
statute requires the Secretary to evaluate whether the manufacturer has demonstrated “clear and
convincing evidence” that the competing manufacturer has “made a significant amount of
progress” toward licensing and marketing the biosimilar.55
At the end of year of the Initial Delay Request, if the Secretary determines that there is no longer
a high likelihood that the biosimilar will be licensed and marketed, or that significant progress has
not been made toward licensure and marketing, the reference biologic would not qualify for an
Additional Delay Request and is to be included on the selected drug list for the next price
applicability year.56 The manufacturer must also pay a rebate, in an amount determined by a
formula in the statute, for the year that the manufacturer would have been required to sell the
reference biologic at the MFP but did not because of the initial delay.57 If the Secretary
determines that the biosimilar is not licensed and marketed after the second year, a similar

50 Id. at 16.
51 42 U.S.C. § 1320f-1(f)(1)(B)(i)(I). Section 30.3.1.2 of the CMS Guidance states that “for CMS to determine that
there is a high likelihood of the Biosimilar being licensed and marketed prior to September 1, 2025, the Biosimilar’s
application for licensure must be accepted for review or approved by the FDA no later than August 15, 2023.” See
CMS GUIDANCE, supra note 8, at 23.
52 42 U.S.C. § 1320f-1(f)(1)(B)(ii). The statute specifies that the request must include all agreements related to the
biosimilar product filed with the Federal Trade Commission or the assistant attorney general pursuant to subsections (a)
and (c) of § 1112 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. See Pub. L. No.
108-173, 117 Stat. 2066.
53 See 42 U.S.C. § 1320f-1(f)(1)(A). According to the statute, a high likelihood will be said to exist when the Secretary
finds that another manufacturer has filed an application to license a biosimilar product and the FDA has either accepted
or approved the application. Id. § 1320f-1(f)(3)(A). The statute also requires the determination of high likelihood to
include consideration of (1) any agreements filed with the Federal Trade Commission or Attorney General; (2) the
biosimilar’s manufacturing schedule, as submitted to the FDA; and (3) any required disclosures that pertain to
marketing under relevant sections of the Securities Exchange Act of 1934. Id. § 1320f-1(f)(3)(B); see also CMS
GUIDANCE, supra note 8, at 16, 20.
54 See CMS GUIDANCE, supra note 8, at 16.
55 42 U.S.C. § 1320f-1(f)(2)(B)(i)(I)-(II).
56 Id. § 1320f-1(f)(2)(B)(ii)(I).
57 Id. § 1320f-1(f)(2)(B)(ii)(II). The rebate amount is outlined in § 1320f-1(f)(4).
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process occurs.58 The reference biologic is included on the selected drug list, and the
manufacturer is required to pay a rebate to Medicare.59
To submit an Initial Delay Request for price year 2026, CMS guidance instructs manufacturers to
notify CMS of their intention to submit a request via email no later than May 10, 2023.60 CMS is
to provide manufacturers with a template request form, which the manufacturer should complete
no later than May 22, 2023.61 CMS is to then have until June 20, 2023, to request additional
information, and the manufacturer is to have until July 3, 2023, to submit any additional
information.62 CMS is to notify each manufacturer that submits an Initial Delay Request of its
decision of whether or not to delay price negotiation in September 2023.63 If CMS accepts the
request for delay, the reference biologic is not to appear on the selected drug list.64 In its initial
guidance, CMS discusses only Initial Delay Requests, stating that further details about the
Additional Delay Request will be provided in future guidance.65
Negotiation Process and Development of MFP
After CMS identifies the selected drugs for price negotiation in 2026, the statute directs the
Secretary to “enter into agreements” with the manufacturers of the selected drugs and to negotiate
an MFP.66 According to the statute, the agreement will require the manufacturers to submit certain
pricing data, including the nonfederal average manufacturer price (non-FAMP),67 as well as other
information the Secretary requires to carry out the negotiation process.68 CMS is to use this
information to develop an initial offer price as a starting point for the MFP negotiation.
The Creation of the Initial Offer
The statute authorizes the Secretary to develop a methodology for the negotiation process, and
CMS seeks comments on the following approach, which it describes in the guidance.69 In
summary, CMS states that to determine an initial offer for the MFP, it will (1) identify any
therapeutic alternatives for the drug; (2) use either the Part D net price for the therapeutic
alternative of a Part D drug, or the Part B average sales price for Part B drugs to determine a
starting point for the initial offer; (3) evaluate the selected drug’s clinical benefits (including by

58 Id. § 1320f-1(f)(2)(C).
59 Id. § 1320f-1(f)(2)(C)(i)-(ii).
60 CMS GUIDANCE, supra note 8, at 21, 24.
61 Id. at 24.
62 Id.
63 Id. at 23.
64 Id.
65 Id. at 16.
66 42 U.S.C. § 1320f-2(a).
67 Non-FAMP is defined as “the weighted average price of a single form and dosage unit of the drug that is paid by
wholesalers in the United States to the manufacturer, taking into account any cash discounts or similar price reductions
during that period, but not taking into account . . . any prices paid by the Federal Government; or . . . any prices found
by the Secretary to be merely nominal in amount.” 38 U.S.C. § 8126(h)(5)(A)-(B). The CMS guidance advises that
CMS will consider non-FAMP information as proprietary for purposes of negotiation year 2026, and the agency seeks
stakeholder comments on its proposed confidentiality policy, as outlined in the guidance. See CMS GUIDANCE, supra
note 8, at 28–29.
68 42 U.S.C. § 1320f-2(a)(4)(A)-(B).
69 Id. § 1320f-3(b)(1); CMS GUIDANCE, supra note 8, at 38, 47.
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comparing it to its therapeutic alternatives); and (4) use the negotiation factors listed in § 1320f-
3(e) to further adjust the price as needed.70
The Secretary is to use the data submitted by manufacturers, other stakeholders, and the public to
develop an initial written offer for the price of the negotiated drug.71 CMS intends to identify a
single proposed MFP, based on a 30-day equivalent supply of the drug, for purposes of the
negotiation.72 CMS explains that such methods will “allow for a more direct comparison with
therapeutic alternatives, which might have different dosage forms, strengths, and frequency of
use.”73 Once finalized, CMS is to then “translate” the single price back to a per unit price for the
drug in its various strengths and dosage forms.74
The statute lists two main categories of negotiation factors that the Secretary is to consider when
negotiating the MFP: manufacturer data and alternative treatments.75 First, the statute directs the
Secretary to consider manufacturer-specific data (submitted by both manufacturers and the
public) regarding (1) research and development costs and the extent to which the manufacturer
has recouped those costs; (2) the unit cost of production and distribution; (3) prior federal
financial support received for novel therapeutic discovery and development of the drug; (4) data
regarding pending or approved patent applications and existing or pending exclusivity of the
drug; and (5) market data, including revenue and sales volume data.76 With respect to alternative
treatments, the Secretary must consider evidence including (1) whether the drug constitutes a
therapeutic advance as compared to existing therapeutic alternatives, and the cost of those
alternatives; (2) FDA-approved prescribing information for the drug and existing therapeutic
alternatives; (3) the comparative effectiveness of the drug and its therapeutic alternatives
(including effects of the drug and its alternatives on specific populations, including elderly
individuals and the terminally ill); and (4) whether the drug addresses current unmet medical need
for a condition for which a treatment or diagnosis is not addressed adequately by available
therapy.77 The statute also creates a ceiling for the MFP and states that the Secretary may not
negotiate an MFP above that ceiling price.78
CMS guidance indicates that to inform the price negotiation process, the agency intends to do its
own research on “existing literature and real-world evidence,” and it permits both manufacturers

70 Id. at 47.
71 CMS GUIDANCE, supra note 8, at 35-37, 47.
72 Id. at 38. CMS’s initial guidance explains that, in accordance with the definition of MFP found in § 1320f(c)(3), the
MFP is the price negotiated in accordance with § 1320f-3 and updated in subsequent years, as applicable, in accordance
with § 1320f-4(b). CMS states that it “interprets this language to refer to a single price negotiation for a selected drug
with respect to its price applicability period. Accordingly, CMS intends to identify a single price for use at each step in
the negotiation process described in this [guidance].” Id.
73 Id. at 38.
74 Id. at 38–39.
75 42 U.S.C. § 1320f-3(e)(1), (2). The Guidance also states that if a selected drug has no therapeutic alternative, “CMS
intends to adjust the starting point for the initial offer based on the extent to which the drug fills an unmet medical
need.” CMS GUIDANCE, supra note 8, at 52.
76 42 U.S.C. § 1320f-3(e)(1)(A)-(E); see CMS GUIDANCE, supra note 8, at 35.
77 42 U.S.C. § 1320f-3(e)(2)(A)-(D).
78 Id. § 1320f-3(b)(2)(F)(i)-(ii), (c)(1)(A). The statute also describes a temporary floor for small biotech drugs in §
1320f-3(d), which is not discussed here or in the CMS Guidance, as it does not take effect until 2029. See 42 U.S.C. §
1320f-3(d). For more information regarding the determination of the ceiling for the MFP, see CMS GUIDANCE, supra
note 8, at 39-40. For more information regarding both the ceiling and the temporary floor for small biotech drugs in
2029-2030, see CRS Report R47396, Health Care Provisions of the Budget Reconciliation Measure P.L. 117-169,
coordinated by Katherine M. Kehres, at 19-21.
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and the public to submit information on therapeutic alternatives.79 The statute does not limit CMS
to using only data submitted by the manufacturer for information regarding the negotiation
factors described above. Presumably, the Secretary has the discretion to weigh the negotiation
factors as appropriate, as the statute does not specify whether the Secretary should equally weigh
each factor. The statute also does not expressly address whether the Secretary could consider
additional factors outside of those listed in the statute.
Responses to the Initial Offer
In accordance with the statute, CMS must present the manufacturers of the selected drugs for
price applicability year 2026 with an initial offer no later than February 1, 2024.80 The initial offer
will also include a written explanation of CMS’s justification of the offered price, including a list
of the factors used in developing the offer.81 The statute provides the manufacturer with 30 days
to respond to CMS’s initial offer, once it is received, either by accepting the offer or proposing a
counteroffer.82 The Secretary is required to respond to the manufacturer’s counteroffer in writing,
but the statute does not provide a timeline for that response.83 The negotiation process for price
applicability year 2026 must end by August 1, 2024.84 As noted above, in accordance with the
statute, the Secretary is limited by the ceiling price and may not accept an offer for MFP above
that price.85
The CMS guidance provides that if CMS rejects the manufacturer’s counteroffer for the MFP, the
agency is to then invite the manufacturer to either an in person or virtual negotiation meeting,
which is to occur within 30 days of the agency’s receipt of the counteroffer.86 Each party may
then request an additional meeting, for a total of no more than three meetings.87 For the initial
price year 2026, CMS states that it intends for all negotiation meetings to end no later than June
30, 2024, so as to allow the agency time to prepare a final offer, which CMS intends to submit to
the manufacturer no later than July 15, 2024.88 The manufacturer is to have until July 31, 2024, to
consider the final offer and respond to CMS in writing.89 The agency is to then publish the MFP
and its explanation in accordance with § 1320f-4.
The agency’s guidance seeks stakeholder comments on this proposed negotiation process and its
advantages and disadvantages.90

79 CMS GUIDANCE, supra note 8, at 37.
80 42 U.S.C. § 1320f-3(b)(2)(B); CMS GUIDANCE, supra note 8, at 54.
81 CMS GUIDANCE, supra note 8, at 54.
82 42 U.S.C. § 1320f-3(b)(2)(C). The statute further requires the counteroffer to be submitted in writing; manufacturers
must also use the negotiation factors described above, as listed in § 1320f-3(e), to justify their counteroffer price. Id.
§ 1320f-3(b)(2)(C)(i)-(ii).
83 Id. § 1320f-3(b)(2)(D).
84 CMS GUIDANCE, supra note 8, at 55.
85 Section 1320f-3(b)(2)(F) prohibits the Secretary from accepting an offer for the MFP at a price above the statutory
ceiling. For more information on how CMS intends to calculate the ceiling price, see CMS GUIDANCE, supra note 8, at
39–42.
86 CMS GUIDANCE, supra note 8, at 55.
87 Id. at 55–56.
88 Id. at 56. CMS titles this final offer as a “Notification of Final Maximum Fair Price Offer.” Id. at 57.
89 Id. at 56. The statute prescribes that, with respect to initial price year 2026, negotiations must end by August 1, 2024.
See 42 U.S.C. § 1320f(d)(2)(B); id. § 1320f-3(b)(2)(E).
90 CMS GUIDANCE, supra note 8, at 56.
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CMS Oversight and Civil Monetary Penalties
The statute requires the Secretary to monitor drug manufacturers to ensure their compliance with
the MFP under the terms of the negotiation agreements and directs the Secretary to establish a
process for the reporting of violations.91 The statute does not establish how CMS should carry out
the necessary compliance monitoring and program oversight. CMS guidance advises that it plans
to establish a process by which Medicare beneficiaries, pharmacies and other providers, suppliers,
and dispensaries may report being unable to access the MFP or other violations.92 It also creates
several CMPs for noncompliant manufacturers and manufacturers that knowingly furnish false
information to CMS.93 In addition, CMS is to expect manufacturers to report dispensers that do
not extend the MFP to eligible individuals, noting that the statute makes it the ultimate
responsibility of manufacturers to ensure access to the MFP. 94
IRA Limitations on Judicial Review and Potential
for Legal Challenges
Section 1320f-7’s Limitation on Review
The IRA limits administrative and judicial review of some of CMS’s determinations for purposes
of carrying out the Program in several areas: (1) the determination of drug units; (2) certain
aspects of the determination of whether the drug is a qualifying single source drug, whether it is a
negotiation-eligible drug, and the selection of drugs published as selected drugs; (3) the
determination of the MFP; and (4) the determination of renegotiation-eligible drugs.95 The statute
outlines each of these areas, which are explored in detail below, but there remain some
ambiguities in the types of lawsuits that might be prohibited.
First, the IRA bars administrative and legal challenges related to CMS’s identification of a drug
“unit.”96 A drug unit is defined as the “lowest identifiable amount (such as a capsule or tablet,
milligram of molecules, or grams) of the drug or biological product that is dispensed.”97 Drug
units are discussed in two main sections of the statute. Section 1320f-3(e) references the “unit
costs of production and distribution” as one of the negotiation factors in the computation of the
MFP, and § 1320f-6 mentions drug units in the context of the computation of penalties a
manufacturer will owe for failure to sell or ensure that drugs are dispensed at or below the MFP.98

91 42 U.S.C. § 1320f-5(b).
92 CMS GUIDANCE, supra note 8, at 64–67.
93 42 U.S.C. § 1320f-6(a).
94 Id. § 1320f-2(a)(3). Section 11003 of the IRA amends the internal revenue code to establish an excise tax on drug
sales by manufacturers and others during certain noncompliance periods. The excise tax increases the longer the
duration of noncompliance. For more information about the excise tax, see CRS Report R47396, Health Care
Provisions of the Budget Reconciliation Measure P.L. 117-169, coordinated by Katherine M. Kehres.
95 See generally 42 U.S.C. § 1320f-7. This report covers the first three limitations in depth, but it does not provide a
similarly detailed discussion of the fourth limitation, as CMS has not yet issued guidance on the renegotiation of drugs
under § 1320f-3(f). The agency has stated that such a process will be detailed in future guidance. See CMS GUIDANCE,
supra note 8, at 31.
96 42 U.S.C. § 1320f-7(1).
97 Drug “unit[s]” are defined in § 1320f(c)(6).
98 Id. §§ 1320f-3(e)(1)(B), 1320f-6(a). This section describes that manufacturers that do not provide drugs at or below
(continued...)
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CMS has not yet explained how it will calculate the “lowest identifiable amount” of a drug for
purposes of identifying a drug unit, which could have major financial consequences for
manufacturers whose drugs are subject to negotiation. A court could read the limitation on
judicial review as not only preventing a manufacturer from challenging CMS’s identification of a
drug unit, but also as preventing any challenges based on the consequences stemming from it. For
example, with respect to the MFP negotiation factors, if a manufacturer disagrees with CMS
about the per-unit cost of the drug and challenges CMS’s calculation of that overall cost, CMS
could argue that its finding with respect to the per-unit cost is not subject to judicial review. On its
face, the statute limits review of the “identification” of a drug unit, but it is unclear whether this
would prevent challenges related to the financial impact as a result of that determination.
Second, the law limits review of CMS’s determination of qualifying single source drugs,
negotiation-eligible drugs, and the identification of selected drugs under § 1320f-1(b), (d), and
(e), respectively.99 Section 1320f-1(b) authorizes the Secretary to rank negotiation-eligible drugs
and, for price year 2026, to select the 10 drugs with the highest total Medicare expenditures.100
Section 1320f-1(d) defines “negotiation-eligible drug,” as well as “Part D High Spend Drugs,”
and “Part B High Spend Drugs” for purposes of the Program.101 Section 1320f-1(d)(2) also
contains the small biotech exception, outlining which Parts B and D drugs qualify for the
exception.102 The definition of qualifying single source drugs and biologics is contained in
§ 1320f-1(e)(1), authorized generics are defined in § 1320f-1(e)(2), and the exceptions for orphan
drugs, low-spend drugs, and plasma-derived products is contained in § 1320f-1(e)(3).
Although some kinds of challenges to CMS’s determinations are plainly precluded under § 1320f-
7(2), the availability of other claims will likely depend on how narrowly the courts interpret the
limitations set forth in § 1320f-7. For example, it is unclear whether lawsuits regarding CMS’s
determination of eligibility for the small biotech exception will be subject to judicial review.
Section 1320f-7(2) bars “the determination of negotiation-eligible drugs under section
1192(d).”103 That prohibition could be interpreted to apply only to a determination that CMS
makes under § 1320f-1(d)(1), which generally defines negotiation-eligible drugs, or it may also
preclude challenges brought under the small biotech exception of § 1320f-1(d)(2). Thus, if a
manufacturer were to claim that its drug or biologic meets the qualifications for the small biotech
exception, but CMS disagrees and, as a result, the drug is included as a negotiation-eligible drug,
the reviewing court would have to decide whether the statute allows it to consider the
applicability of the small biotech exception.
Third, § 1320f-7(3) bars administrative and judicial review of CMS’s “determination” of the MFP
under § 1320f-3(b) and (f).104 These sections seem more clearly tied to the negotiation process
involved in reaching an MFP, however, rather than the MFP calculation itself. Section 1320f-
3(b)(1) authorizes the Secretary to develop and use a methodology to “achieve” the MFP.105
Several provisions within subsection § 1320f-3(b)(2) provide specific timelines for CMS to

the MFP to eligible individuals and providers “shall be subject to a civil monetary penalty equal to ten times the
amount equal to the product of the number of units of such drug so furnished . . . and the difference between the price
for such drug made available . . . and the maximum fair price.”
99 42 U.S.C. § 1320f-7(2).
100 Id. § 1320f-1(b)(1).
101 Id. § 1320f-1(d)(1)(A)-(B).
102 See generally Id. § 1320f-1(d)(2)(A)-(B).
103 Id. § 1320f-7(2).
104 Id. § 1320f-7(3).
105 Id. § 1320f-3(b)(1).
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implement the Program, including dates for drug manufacturers to submit information to CMS,
for CMS to make an initial offer, for manufacturers to make a counteroffer, and for CMS to
respond.106 This subsection also prohibits the Secretary from both making an offer that exceeds
the ceiling price, as described in § 1320f-3(c), and from offering a price below the floor described
in § 1320f-3(d), if applicable.107 Section 1320f-3(f) describes the renegotiation process, to begin
in 2028, of negotiation-eligible drugs.108
Because the provisions listed in § 1320f-7(3) relate primarily to the negotiation process, it is
unclear whether that section bars judicial review of CMS’s calculation of the final MFP itself on
any grounds, or only on grounds related to the negotiation process. A plain reading of § 1320f-
7(3) and its references to § 1320f-3(b) would seem to preclude manufacturers or other interested
parties from challenging the implementation timeline as set forth in the statute and CMS
guidance. But other potential situations and claims may not be covered by the statute’s plain
language. For example, CMS guidance invokes the Secretary’s authority in § 1320f-3(b) when
describing various aspects of the negotiation process, including the potential for three meetings to
happen between the manufacturer and CMS, while the parties are engaged in active negotiation of
the MFP of a drug.109 If a manufacturer cannot reach an agreement with CMS after three such
meetings and requests another meeting, a manufacturer might attempt to challenge CMS’s
decision on the basis that insufficient time was given for the negotiation process. A reading of §
1320f-7(3) on its face would also not seem to preclude a suit challenging some aspect of how
CMS calculated the MFP, which is arguably done via the authorities in § 1320f-3(c) (the
determination of the ceiling price), § 1320f-3(d) (the determination of a temporary floor for small
biotech drugs), and § 1320f-3(e) (prescribing factors that the Secretary must consider when
negotiating the MFP).
Finally, § 1320f-7(4) precludes challenges of CMS’s decisions to reselect a drug for negotiation
in subsequent years and renegotiate its MFP. In accordance with the statute, the renegotiation
process does not begin until 2028, and CMS has not yet provided guidance on this process.110 As
such, it is not discussed further here.
The Supreme Court’s Interpretation of the Medicare Statute’s
Limits on Administrative and Judicial Review
At the time of this writing, no litigants have challenged the provisions of the IRA that created the
Program, or CMS’s guidance seeking to implement it. As discussed above, if a challenge were to
be brought against the guidance implementing the statute or a particular decision that HHS
makes, HHS could try to argue that § 1320f-7 precludes judicial review.
Courts considering the scope of § 1320f-7 might draw upon cases that have applied other
provisions of the Medicate statute that preclude judicial review of certain aspects of the

106 Id. § 1320f-3(b)(2)(A)-(E).
107 Id. § 1320f-3(b)(2)(F)(i)-(ii).
108 Id. § 1320f-3(f). The CMS Guidance does not cover the renegotiation of drugs under § 1320f-3(f). CMS states that
further information about the renegotiation process of drugs, which will begin in 2028, will be provided in future
guidance. CMS GUIDANCE, supra note 8, at 5, 31.
109 See, e.g., id. at 37, 55.
110 CMS states, “Topics that are not relevant to the Negotiation Program for initial price applicability year 2026, such
as the selection of Medicare Part B drugs and renegotiation, will not be addressed in the guidance issued by CMS for
initial price applicability year 2026. CMS will provide additional information in the future related to implementation
for initial price applicability years 2027 and beyond.” Id. at 5.
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Secretary’s administration of the Medicare program.111 Similar to § 1320f-7(1)-(4), these
provisions limiting review often make specific references to the Secretary’s actions in other parts
of the statute and can be complicated to understand or interpret.
Questions about the scope of judicial review of agency action appear often in litigation, and
CMS’s administration of the Medicare statute is no exception.112 The U.S. Supreme Court has
made clear that there is a “strong presumption” in favor of judicial review of a federal agency’s
final action.113 The Court has observed, however, that this presumption “is just that—a
presumption,” and as such, it “may be overcome by specific language or specific legislative
history” indicating congressional intent to forgo review.114 When determining whether a statute
precludes judicial review, the Court has assessed several factors, including the express language
of the statute; the statutory scheme, structure, and objectives; the legislative history; and the
“nature of the administrative action involved.”115 The government bears the burden of rebutting
the presumption in favor of judicial review.116
Cases Finding the Medicare Statute’s Limitation on Judicial Review
Inapplicable
Historically, and consistent with the presumption in favor of review, the Supreme Court has
trended toward a narrow reading of the Medicare statute’s preclusions of administrative and
judicial review. For example, in Bowen v. Michigan Academy of Family Physicians, a unanimous
Court held that Congress did not bar judicial review of CMS regulations related to the calculation
of physician reimbursement payments under Medicare Part B.117 Several participant providers
challenged those regulations, which authorized different payment amounts for Part B physician
services.118 When the lower courts held that the regulations were invalid,119 CMS argued that the
Medicare statute precluded administrative or judicial review of the Part B payment calculation
altogether.120

111 See, e.g., 42 U.S.C. § 1395l(t)(12) (precluding judicial review of certain aspects of Part B benefit determinations);
Bowen v. Mich. Acad. of Family Physicians, 476 U.S. 667 (1986) (finding that Congress did not intend to bar judicial
review of CMS regulations regarding the calculation methodology of physician reimbursement under Part B).
112 See, e.g., Am. Hosp. Ass’n v. Becerra, 142 S. Ct. 1896 (2022); Azar v. Allina Health Servs., 139 S. Ct. 1804 (2019);
Bowen, 476 U.S. at 672; Heckler v. Ringer, 466 U.S. 602 (1984).
113 Am. Hosp. Ass’n, 142 S. Ct. at 1902 (quoting Mach Mining, LLC v. EEOC, 575 U.S. 480, 489 (2015)).
114 Block v. Cmty. Nutrition Inst., 467 U.S. 340, 349 (1984).
115 Id. at 345 (citing S. Ry. Co. v. Seaboard Allied Milling Corp., 422 U.S. 444, 454 (1979); Morris v. Gressette, 432
U.S. 491, 499 (1977)).
116 Bowen, 476 U.S. at 672.
117 Id. at 667 (Rehnquist, J. did not participate in the decision). At the time the Court decided Bowen, judicial review
was available for claims related to benefit amounts under Part A, but not Part B. A person wishing to dispute a Part B
payment amount was entitled only to a hearing and did not have access to judicial review, per the Supreme Court’s
holding in an earlier case, United States v. Erika, Inc., 456 U.S. 201, 207–08 (1982). In Illinois Insurance Guaranty
Fund v. Becerra, 33. F. 4th 916, 924 (7th Cir. 2022), the Seventh Circuit explained that the “amount/methodology
dichotomy” that the Court set up in Bowen was made irrelevant by Congress in 1986, when Congress amended the
Medicare statute to provide for administrative and judicial review for claims under both Part A and Part B. (See Pub. L.
No. 99-509, § 9341(a), 100 Stat. 1874, 2037–38).
118 Bowen, 476 U.S. at 668.
119 Mich. Acad. of Family Physicians v. Blue Cross & Blue Shield, 502 F. Supp. 751, 755 (E.D. Mich. 1980); Mich.
Acad. of Family Physicians v. Blue Cross & Blue Shield, 728 F.2d 326 (6th Cir. 1984), vacated sub nom. Heckler v.
Mich. Acad. of Family Physicians, 469 U.S. 807 (1984).
120 476 U.S. at 669.
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The Supreme Court disagreed, observing that judicial review is not precluded “unless there is a
persuasive reason to believe that such was the purpose of Congress.”121 The Court read the
judicial review provisions of the Medicare statute in the context of the greater statutory scheme. It
also distinguished the facts of Bowen from its earlier decision in United States v. Erika, Inc.,
where it held that Congress “deliberately intended to foreclose further review” of amount
determinations for Part B awards.122 The Bowen Court found that the statutory scheme of Part B
“simply does not speak to challenges mounted against the method by which such amounts are to
be determined.”123 In other words, the Court reasoned that although the statute prohibited judicial
review of the payment amount itself, a regulation describing the method CMS used to calculate
that payment amount could be challenged.124
HHS’s most recent argument that a particular provision of the Medicare statute was not subject to
judicial review also failed.125 In American Hospital Association v. Becerra, the Secretary argued
that a provider group could not challenge a CMS regulation calculating payments for specified
covered outpatient drugs (SCODs) under Medicare Part B because § 1395l(t)(12)(A) and (C) of
the statute precluded judicial review of such actions.126 The Court concluded that those provisions
related to HHS’s “general payment methodology” for calculating Medicare reimbursement rates
for services rendered, rather than the specific SCODs reimbursement rates at issue in American
Hospital Association.127 The statute did not expressly preclude judicial review of the calculation
of the reimbursement rates, and in the Court’s view, the existence of a “detailed statutory
formula” for that calculation suggested that HHS’s implementation of that formula was subject to
review.128 According to the Court, “HHS’s arguments against judicial review cannot override the
text of the statute and the traditional presumption in favor of judicial review of administrative
action.”129 Here again, therefore, the Court drew a distinction between the process by which HHS
made its determination and the substance of that final determination, and read the statute’s limit
on judicial review to apply narrowly only to one of those elements.
Cases Upholding the Medicare Statute’s Limitation on Judicial Review
Although the Supreme Court has narrowly interpreted the Medicare statute’s restrictions on
administrative and judicial review, it has upheld the statute’s limitations on federal court
jurisdiction over Medicare claims under certain circumstances. For example, in Heckler v. Ringer,
the Supreme Court upheld the statute’s mechanism for adjudicating Medicare claim benefit
denials, including its requirement that administrative exhaustion precede judicial review.130 In
Heckler, several Medicare beneficiaries brought a variety of constitutional and other statutory
challenges to Medicare Part A’s denial of coverage for a surgery, but the district court dismissed
the case in its entirety, holding that the Medicare statute limited judicial review to only instances

121 Id. at 670, 672.
122 456 U.S. 201, 208 (1982).
123 Bowen, 476 U.S. at 675.
124 Id.
125 Am. Hosp. Ass’n, 142 S. Ct. at 1902. The case interpreted the Medicare statute’s preclusion on judicial review found
in 42 U.S.C. § 1395l(t)(12)(A) and (C). For more information on the Supreme Court’s decision in the case, see CRS
Legal Sidebar LSB10821, Supreme Court Overturns HHS Regulation Reducing the Medicare Outpatient Drug
Reimbursement Rate for 340B Hospitals, by Edward C. Liu and Hannah-Alise Rogers.
126 Am. Hosp. Ass’n, 142 S. Ct. at 1902.
127 Id. at 1897.
128 Id. at 1902.
129 Id.
130 466 U.S. 602 (1984).
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in which the Secretary had issued a final decision.131 The Supreme Court agreed, holding that
“[i]n the best of all worlds, immediate judicial access . . . might be desirable. But Congress . . .
struck a different balance . . . requiring that administrative remedies be exhausted before judicial
review of the Secretary’s decisions takes place. . . . If the balance is to be struck anew, the
decision must come from Congress and not from this Court.”132
Potential Challenges to the Program and § 1320f-7
In light of this background, it is possible that the scope of judicial review available under § 1320f-
7 could become the subject of similar litigation. That statutory section may help insulate the
agency from challenges to its implementation of the Program, but litigants are likely to test how
much protection § 1320f-7 provides. For example, if a manufacturer were to challenge some
aspect of the MFP negotiation process, the agency could argue that such challenges are prohibited
by § 1320f-7(3), which states that “the determination of a[n] [MFP]” under § 1320f-3(b) is
exempt from administrative or judicial review.133 Similar to the holding of Bowen, a manufacturer
might respond that a court should not interpret § 1320f-7(3) to prohibit a challenge to the method
of computing the MFP, but only a challenge to the final amount.134 Alternatively, relying on the
Court’s decision in American Hospital Association, manufacturers might argue that a court
reviewing its challenge to the MFP should distinguish between the “general methodology” of the
MFP and the specific calculation of it.135
To avoid litigation over whether the courts have jurisdiction over such challenges, Congress may
further clarify which sections of the statute are judicially reviewable. For example, after the
Court’s decision in Bowen, Congress amended the Medicare statute to alter the Court’s holding on
the judicial reviewability of payment amounts under Part B.136

131 Heckler, 466 U.S. at 611.
132 Id. at 627. The Court further explained, “[h]ere respondents clearly have an adequate remedy in § 405(g) [of the
Medicare statute] for challenging all aspects of the Secretary’s denial of their claims. . . . Thus § 405(g) is the only
avenue for judicial review of respondents’ . . . claims for benefits, and, when their claim was filed in District Court,
each had failed to satisfy the exhaustion requirement that is a prerequisite to jurisdiction under that provision.” Id. at
617 (emphasis added).
133 See 42 U.S.C. § 1320f-7.
134 See Bowen, 476 U.S. at 675.
135 See Am. Hosp. Ass’n, 142 S. Ct. at 1897. The legislative history of the IRA, which some courts might use to
evaluate its judicial review provisions, provides little guidance. During floor debates about the IRA, Congress did not
discuss § 1320f-7 at length, but Sen. Michael Crapo mentioned its limitation on judicial review in a floor statement
opposing the bill. In his characterization, the provision established “permanent prohibitions on even judicial and
administrative review and with initial implementation shielded from basic notice-and-comment rulemaking
requirements.” 168 CONG. REC. S4155–56 (daily ed. Aug. 6, 2022) (statement of Sen. Michael Crapo).
136 As discussed supra note 117, in 1986, the year that Bowen was decided, Congress amended the Medicare statute to
provide for administrative and judicial review for claims under both Part A and Part B, thus eliminating the
“amount/methodology dichotomy” that the Bowen Court created. (See § 9341(a), 100 Stat. at 2037–38).
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Implementation of the Medicare Drug Price Negotiation Program

Considerations for Congress
Since the IRA became law in August 2022, the Medicare Drug Price Negotiation Program has
received mixed responses from stakeholders. Some have expressed skepticism, arguing that the
legislation will discourage innovation and increase drug list prices, while others praise the
Program as a response to the need for more affordable Medicare prescription drugs.137 Many
stakeholders are also skeptical of the short implementation timeline and the limited, 30-day
window for stakeholders to provide feedback to CMS on its initial guidance, anticipating that this
will make litigation more likely.138 Although no cases challenging the Program have been filed,
many stakeholders see litigation as inevitable, given the high stakes.139 Legal commentators have
speculated on the types of challenges that manufacturers might bring against the law, including
the Due Process Clause, the Fifth Amendment takings clause, or even under the nondelegation
doctrine.140
Assuming a legal challenge arises, a court may need to consider whether and to what extent the
statute’s provisions on preclusion of judicial review limit manufacturers’ ability to bring cases.
The courts’ primary resource in interpreting those provisions is likely to be the statutory text. The
most effective way that Congress could influence the scope of judicial review of the Program
would therefore be to amend the statute to clarify further the types of legal challenges it intends to
prohibit.

Author Information

Hannah-Alise Rogers

Legislative Attorney

137 Compare AARP, Senate Vote is Historic Step Toward Real Relief on Prescription Drug Pricing (Aug. 7, 2022),
https://press.aarp.org/2022-8-AARP-Senate-Vote-Historic-Step-Toward-Real-Relief-Prescription-Drug-Pricing; with
Caleb Watney & Heidi Williams, Drug Pricing Reforms Can Hurt Innovation. Here Are Three Ways To Prevent That,
WASH. POST (Aug. 22, 2022), https://www.washingtonpost.com/opinions/2022/08/22/medicare-drug-prices-
negotiation-innovation/.
138 Celine Castronuovo, Drug Price Negotiation Deadlines Expose Medicare to Litigation, BLOOMBERG LAW (Feb. 22,
2023), https://news.bloomberglaw.com/health-law-and-business/drug-price-negotiation-deadlines-expose-medicare-to-
litigation.
139 Kaustuv Basu, Drug Price Law to Spur Creative Claims as Industry Readies Fight, BLOOMBERG LAW (Sept. 29,
2022), https://news.bloomberglaw.com/health-law-and-business/drug-price-law-to-spur-creative-claims-as-industry-
readies-fight.
140 Id.
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Implementation of the Medicare Drug Price Negotiation Program

Disclaimer
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under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
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Congressional Research Service
R47555 · VERSION 1 · NEW
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