Medicare and Medicaid Programs; CY 2026 Payment Policies Under the Physician Fee Schedule and Other Changes to Part B Payment and Coverage Policies; Medicare Shared Savings Program Requirements; and Medicare Prescription Drug Inflation Rebate Program

Section 1847A(h)(3)(B)(ii) of the Act permits the Secretary to increase the applicable percentage for a refundable drug that has unique circumstances through notice and comment rulemaking. In the CY 2024 PFS final rule (88 FR 79057 through 79060), we finalized an application process (CMS-10835, OMB 0938-1435) by which manufacturers could apply for an increased applicable percentage for a drug and may request that we consider an individual drug to have unique circumstances for which an increased applicable percentage is appropriate. We explained that manufacturers could benefit from a formal process through which they can provide information, including that which may not be publicly available, in order to request an increase in their refundable drug's applicable percentage and provide justification for why the drug has unique circumstances for which such an increase is appropriate, including in the case of a drug with an applicable percentage that has already been increased by virtue of its unique circumstances.126 127 We finalized the application deadline of February 1 of each year, adopted a deadline of August 1 for the FDA-approval of the drug and the deadline for notifying and submitting the FDA-approved label to CMS of September 1 of the year before the year in which the increased applicable percentages would apply. We codified this process at Sec. 414.940(e). The application process requires the applicant to provide a written request comprising FDA-approved labeling for the drug; justification for the consideration of an increased applicable percentage based on such unique circumstances; and justification for the requested increase in the applicable percentage. Following a review of timely applications, CMS will summarize its analyses of applications and propose appropriate increases in rulemaking. If adopted, the increased applicable percentage will be the applicable percentage beginning as of the following January 1. The collection of information requests associated with the application process (CMS-10835, OMB 0938-1435) would remain unchanged under this final rule.

\126\ https://www.cms.gov/files/document/drugs-increased-applicable-percentage.pdf.

\127\ https://www.cms.gov/files/document/orphan-drugs-increased-applicable-percentage-calendar-quarters-2023.pdf.

As we discussed in the CY 2026 PFS proposed rule (90 FR 32538 through 32540), we received two applications for increased applicable percentage for consideration. Both applicants submitted the information required at Sec. 414.940(e)(1), including, as applicable, the FDA- approved labeling for the drug, justification for consideration for increased applicable percentage, and

justification for the requested applicable percentage.

The first application for increased applicable percentage for CY 2026 was from the manufacturer of Leukine[supreg] (sargramostim),\128\ who has resubmitted a request for a 72 percent applicable percentage after applying in the previous year. Leukine[supreg] is a leukocyte growth factor with five FDA-approved indications in hematological malignancies and one indication for post-radiation exposure to increase white blood cell counts. The applicant's submitted FDA-approved labeling for the drug did not include the adjuvant uses described in the application (further described later in this paragraph) due to ongoing cancer vaccine adjuvant trials. The applicant reemphasized that multiple sponsors are in late-stage development, with a total of 22 Phase II and Phase III clinical trials, an increase from 16 reported in the previous year, investigating Leukine[supreg] as a vaccine adjuvant for oncology indications, specifically to stimulate the immune response of dendritic cells when used alongside these vaccines. We noted that cancer treatment vaccines differ from the vaccines that protect against viruses, such as the influenza virus. Instead of preventing disease, cancer treatment vaccines aim to stimulate the immune system to attack existing cancer cells in the body.\129\ The applicant stated that it has no ownership stake in the development of these cancer treatment vaccines and does not possess control or influence over the design and execution of the clinical trials. They further explained that the estimated completion dates for Phase III clinical trials vary, with the earliest expected in late 2025 \130\ and the latest in March 2029.\131\ The adjuvant use of Leukine[supreg] in predetermined dosage is distinct from its six FDA-approved indications, all of which have dosages that are based on body weight or body surface area (BSA). The adjuvant use dosages of Leukine[supreg] in clinical trials are generally much smaller than dosages for indications in the FDA-approved labeling. The smallest dose of Leukine[supreg] used for vaccine adjuvant purposes of which the applicant is aware (that is, 70 mcg) would lead to as much as 72 percent of the drug being discarded from a single-dose 250 mcg lyophilized vial, which is the only size available commercially. The applicant suggests that if use of these small doses were to become more common for an approved indication, the percentage of discarded units could increase the discarded drug refund amount that could be owed by the applicant, even though the applicant lacks control or knowledge of the potential variability of the discarded amounts that may occur if Leukine[supreg] were used for such purposes. The applicant notes that if another manufacturer were to seek FDA approval for adjuvant use of sargramostim but was not involved in its production, the available single-dose 250-mcg vial presentation of Leukine[supreg] would likely not be optimized for the small doses being studied in these trials.

\128\ https://www.accessdata.fda.gov/drugsatfda_docs/label/2022/103362s5249lbl.pdf.

\129\ https://www.cancer.org/cancer/managing-cancer/treatment-types/immunotherapy/cancer-vaccines.html.

\130\ https://clinicaltrials.gov/study/NCT04229979.

\131\ https://clinicaltrials.gov/study/NCT05100641.

In the CY 2026 PFS proposed rule (90 FR 32539), we explained that as part of CMS' review of the application, we analyzed existing claims data from the first quarter of 2018 through the last quarter of 2024 and found the percentage of units discarded for the HCPCS code for Leukine[supreg] (J2820) ranged from 1.2 percent to 3.8 percent, which is below the applicable percentage of 10 percent. In addition to the low overall discard rate, the percentage of units discarded showed a standard deviation of less than 1 percent across quarters. This is notably lower than the 6.21 percent average standard deviation observed for rarely utilized orphan drugs, as reported in the CY 2024 PFS final rule (88 FR 52393). The low standard deviation indicates minimal quarter-to-quarter variation, with the percentage of units discarded tightly clustered around a 2.2 percent mean. For context, approximately two-thirds of the quarterly percentage values for units discarded fall within 1 percentage point above or below the mean, highlighting the consistency and stability of the trend over the 7-year period. Therefore, although the applicant suggests otherwise, this data did not follow a statistical distribution similar to that considered for rarely-utilized orphan drugs meeting the criteria at Sec. 414.940(d)(5), which may not have a normal statistical distribution from quarter to quarter, potentially resulting in highly variable refund amounts as compared with the variability of drugs administered to a higher number of beneficiaries. Since we did not yet know the impact of a new adjuvant indication with a type of immunotherapy commonly referred to as cancer vaccines \132\ on the current percentage of units discarded, we did not propose an increased applicable percentage in the CY 2025 PFS proposed rule. Additionally, because it was not yet known whether sargramostim would be approved for additional indications and dosages, as indicated in the information provided by the applicant, and the available data did not provide enough information for CMS to determine whether Leukine[supreg] had unique circumstances that would prompt an increase in the applicable percentage, we did not propose an increase in the applicable percentage for the drug in the CY 2025 PFS proposed rule. The applicant agreed with CMS' rationale for this decision.

\132\ https://www.cancerresearch.org/treatment-types/cancer-vaccines.

As we stated in the CY 2026 PFS proposed rule (90 FR 32539), because we are maintaining our determination from the CY 2025 PFS proposed rule, we did not propose an increase in the applicable percentage for Leukine[supreg] at this time. The applicant may reapply in a future application cycle when more information, such as FDA- approved labeling reflecting new indications or dosages, becomes available.

In the CY 2026 PFS proposed rule (90 FR 32539), we also discuss that the second application was from the manufacturer of Jelmyto[supreg] (mitomycin for pyelocalyceal solution) \133\ who requested an additional 10 percent increase to the 35 percent applicable percentage finalized in the CY 2023 PFS final rule (87 FR 69727 through 69731), bringing the total applicable percentage to 45 percent. We noted that Jelmyto[supreg] is indicated for the treatment of adult patients with low-grade Upper Tract Urothelial Cancer (LG- UTUC), a rare cancer with approximately 7,000 new annual cases \134\ in the United States. According to the applicant, Jelmyto[supreg] dosing ranges from 20 mg to 60 mg per single treatment, with the specific dose determined by kidney volume measurements obtained through pyelography.\9\ In the CY 2023 PFS final rule, we stated that Jelmyto[supreg], a drug reconstituted with a hydrogel and administered via ureteral catheter or nephrostomy tube into the kidneys, may leave a substantial amount adhering to the vial wall due to its viscosity, and making it non-extractable. This viscosity results from proprietary reverse-thermal technology (RTGel[supreg]), which enables the drug to transition from a chilled liquid at instillation into a gel at body temperature. We determined that a 35 percent applicable percentage was appropriate--accounting for 25 percent lost to adhesion (that is, an 80 mg

package with maximum extractable dose of 60 mg results in at least 25 percent being discarded) and an additional 10 percent to align with drugs without unique circumstances for patients requiring less than the maximum dose of 60 mg. We disagreed that an applicable percentage greater than 35 percent should be applied to such hydrogel products, because we believe that 25 percent accounts for the hydrogel that adheres to the vial, and because we have allowed for an additional 10 percent of drug to be discarded before any refund would be owed. We noted that this 35 percent applicable percentage was codified at Sec. 414.940(d)(2), with broad support from commenters, for drugs that are both reconstituted with a hydrogel and subject to variable dosing based on patient-specific characteristics.

\133\ https://www.accessdata.fda.gov/drugsatfda_docs/label/2024/211728s010lbl.pdf.

\134\ https://www.urologyhealth.org/urology-a-z/u/upper-tract-urothelial-carcinoma-(utuc).

The applicant contended that the current 35 percent applicable percentage does not account for drug loss due to kidney volume variations and different administration routes, both of which the applicant claimed meet the patient-specific characteristics outlined in Sec. 414.940(d)(2). The applicant explained that since kidney volume cannot be determined until the pharmacy has prepared the drug and the patient is ready for administration of the initial treatment, and stated that patients with smaller-than-average kidney volumes may lead to a higher amount of drug being discarded. Additionally, they stated that the amount of Jelmyto[supreg] discarded may increase when providers choose antegrade (via nephrostomy tube) administration over the more common retrograde (via ureteral catheter) administration, as the greater drug delivery efficiency of the antegrade route may result in a lower dose required, leading to more of the drug being discarded. The choice of administration route must be determined on an individual basis, considering multiple factors, including but not limited to the risks and benefits of each route, previous history of failed administration attempts, tolerance to anesthesia, anatomical variations in the urinary tract, patient preference, and the patient's clinical presentation at the time of drug administration.\135\ \136\ \137\ We noted that these patient-specific characteristics, combined with the requirement for hydrogel reconstitution, were considered when establishing the current 35 percent applicable percentage.

\135\ https://bjui-journals.onlinelibrary.wiley.com/doi/full/10.1111/bju.15925.

\136\ https://www.sciencedirect.com/science/article/pii/S2405456923001232.

\137\ https://www.jelmyto.com/hcp/pdf/jelmyto-antegrade-instillation-overview.pdf.

In the CY 2024 PFS final rule (88 FR 79057), we stated that we do not consider the following to be unique circumstances warranting an increased applicable percentage at this time: weight-based doses, BSA- based doses, varying surface area of a wound, loading doses, escalation or titration doses, tapering doses, and dose adjustments for toxicity because we believe manufacturers can optimize the availability of products for these circumstances to limit the percentage of discarded units for a drug, unlike the circumstances of manufacturers of drugs that require filtration during the preparation process, as described in section 1847A(h)(8)(B)(ii) of the Act. Consistent with that statement, we generally do not consider dose variations due to patient- or condition-specific characteristics to be unique circumstances for the same reason. That is, manufacturers can optimize the availability of products for these circumstances to minimize discarded amounts. Therefore, we do not consider the drug loss due to patient-specific characteristics, such as variation in kidney volume and factors leading to antegrade administration, to be unique circumstances, and we did not propose an increase in the applicable percentage of 45 percent for the drug. Consistent with the CY 2023 PFS final rule, we proposed that the applicable percentage for Jelmyto[supreg] continue to be 35 percent (90 FR 32540).

The following is a summary of the comments we received and our responses.

Comment: A commenter provided feedback related to the applications received for an increased applicable percentage beginning in CY 2026. The manufacturer of Leukine[supreg] agreed with CMS' rationale, noting that there was insufficient information to determine whether Leukine[supreg] had unique circumstances that would warrant an increase, and indicated that they plan to reapply in a future cycle when more data are available. CMS did not receive any comments regarding the application for Jelmyto[supreg].

Response: We appreciate the commenter's feedback and support for our assessment of the application and decision to not propose an increased applicable percentage at this time for Leukine[supreg]. As discussed previously in this section, the application, including reapplication, for an increased applicable percentage is due by February 1 of the calendar year prior preceding the year in which the increased applicable percentage would apply, as described at Sec. [thinsp]414.940(e).

Comment: A commenter supported the ongoing refinement to discarded drug refund policy, which the commenter stated will help reduce waste and spending within the Medicare program.

Response: We appreciate the commenter for their support.

Comment: Several commenters provided feedback regarding categories and products that the commenters believed should be considered for increased applicable percentages due to unique circumstances. A commenter suggested: (1) cell and gene therapies and other personalized therapies, given their distinct manufacturing and administration requirements; (2) a new category providing a minimum of an additional 18 months of increased applicable percentage for newly approved drugs that are developing new delivery methods and sizes; (3) drugs that treat multiple indications across diverse patient types and characteristics; and (4) exclusion of discarded units from medically unlikely edits (MUEs).

Response: We note that these comments are out of scope and direct commenters to Sec. 414.940(e) for details regarding the application for increased applicable percentage and encourage interested stakeholders to utilize this process to submit requests for CY 2027 and future years.

Comment: Several commenters provided feedback related to information provided in the discarded refund reports. Some of these commenters recommended that CMS expand the data elements included in the report and standardize formats beyond the statutory minimum to improve transparency and support accurate verification. Commenters stated that the current report lacks sufficient granularity and consistency for manufacturers to independently validate refund calculations, creating compliance risks and administrative burdens. They further noted that reports have varied in format, completeness, and data elements, often requiring manufacturers to engage in dispute resolution to obtain missing information. In addition, commenters explained that publicly available Medicare datasets are inadequate due to significant time lags and requested that CMS provide claims-level data through a secure mechanism that protects beneficiary privacy. Suggested elements include the date of service, National Drug Code (NDC), HCPCS code, the ASP for the HCPCS code, allowed charges for both administered and discarded billing

units with the corresponding percentage of allowed payment by CMS, and anonymized provider identifiers. Access to standardized and comprehensive data, they emphasized, would not only facilitate verification and reduce administrative burden but also enable manufacturers to identify opportunities to minimize discarded amounts of drugs through optimized packaging and vial sizes. Another commenter stated that they cannot confirm calculations, determine excess discarded amounts, or verify the accuracy of invoiced amounts in the discarded drug refund report because invoices do not specify the applicable percentage used for each drug.

A commenter recommended that CMS provide an annual, comprehensive report for all products, including those not eligible for refunds under the discarded drug refund policy or with zero refund amount, and to publish the report sooner to reduce the data lag. The commenter stated that such reporting would help manufacturers make informed decisions about post-market optimization of drug vials or packaging in alignment with the policy goals.

Response: We appreciate the commenters' input about information included in the report and the format of the report. Comments requesting expansion of data elements and a comprehensive report for all products--including those not eligible for refunds under the discarded drug refund policy--are out of scope for this final rule. However, we may take this information into consideration for future policy development and potential operational enhancements, including formatting consistency. Regarding the applicable percentage for each drug, we maintain a publicly available website \138\ that lists drugs for which an increased applicable percentage applies and updates that information periodically. Drugs not identified for an increased applicable percentage remain subject to the 10 percent applicable percentage described in section 1847A(h)(3)(B)(i)(I) of the Act. Each manufacturer has an opportunity to dispute information in the discarded drug refund report by submitting an error report as described at Sec. 414.940(f).

\138\ https://www.cms.gov/files/document/drugs-increased-applicable-percentage.pdf.

In summary, after consideration of the public comments, we are finalizing no changes to the applicable percentages for Leukine[supreg] and Jelmyto[supreg]. 2. Average Sales Price: Price Concessions and Bona Fide Service Fees (Sec. 414.804 and 414.802) a. Background

Drugs payable under Medicare Part B fall into three general categories: those furnished incident to a physician's service (hereinafter referred to as “incident to”) (section 1861(s)(2) of the Act), those furnished via a covered item of durable medical equipment (DME) (section 1861(s)(6) of the Act), and other drugs for which coverage is specified by statute (for example, certain vaccines described in sections 1861(s)(10)(A) and (B) of the Act). Payment limits for most drugs separately payable under Medicare Part B are determined using the methodology in section 1847A of the Act, and in many cases, payment is based on the average sales price (ASP) plus a statutorily mandated 6 percent add-on. If CMS determines a payment limit for a drug, it is published in the Medicare Part B Drug Payment Limit File or Not Otherwise Classified (NOC) payment limit file, which are both updated quarterly.

The calculation of payment limits for such drugs payable under Part B is done on a quarterly basis using the manufacturer's ASP (as defined in Sec. 414.902), as applicable, using methodology in section 1847A of the Act. Manufacturers are required to report ASP data to CMS under sections 1847A(f)(2) and 1927(b)(3) of the Act and are instructed to calculate the manufacturer's ASP in accordance with section 1847A(c) of the Act and Sec. 414.804(a).

As part of that calculation of the manufacturer's ASP, required under section 1847A(c)(3) of the Act and Sec. 414.804(a)(2), manufacturers must deduct price concessions such as volume discounts, prompt pay discounts, cash discounts, free goods that are contingent on any purchase requirement, chargebacks, and rebates (other than rebates under the Medicaid Drug Rebate Program and the Medicare Prescription Drug Inflation Rebate Program). Section 1847A(c)(3) of the Act also provides that, “[f]or years after 2004, the Secretary may include in such price other price concessions, which may be based on recommendations of the Inspector General, that would result in a reduction of the cost to the purchaser.” The Secretary implemented an interim rule adopting those statutory categories of price concessions in 2004 (69 FR 47488). In 2006 the Secretary finalized policies for how the manufacturer's ASP is calculated, which required manufacturers to deduct all price concessions from ASP at Sec. 414.804(a)(2).While price concessions are deducted from the manufacturer's ASP (that is, price concessions will lower the resulting manufacturer's ASP), bona fide service fees (BFSFs) are not considered price concessions and, therefore, are not deducted when calculating the manufacturer's ASP (see Sec. 414.804(a)(2)(ii)). In other words, BFSFs do not lower the manufacturer's ASP because they are not part of the calculation.

In the Calendar Year (CY) 2007 Physician Fee Schedule (PFS) final rule (71 FR 69665 through 69678) Medicare finalized a definition of BFSF for the purposes of calculating the manufacturer's ASP at Sec. 414.802. The definition finalized in that final rule states that the term “BFSFs” means fees paid by a manufacturer to an entity, that represent fair market value for a bona fide, itemized service actually performed on behalf of the manufacturer that the manufacturer would otherwise perform (or contract for) in the absence of the service arrangement, and that are not passed on in whole or in part to a client or customer of an entity, whether or not the entity takes title to the drug. In the CY 2007 PFS final rule, we stated that the BFSF definition provides an appropriate safeguard against the potential risk for inappropriately inflated ASPs. We stated that if a manufacturer has determined that a fee paid meets the other elements of the definition of “bona fide service fee,” then the manufacturer may presume, in the absence of any evidence or notice to the contrary, that the fee paid is not passed on to a client or customer of any entity. Further, we stated (71 FR 69669) that in the absence of specific guidance in the Act or Federal regulations, the manufacturer may make reasonable assumptions in its calculations of the manufacturer's ASP, consistent with the general requirements and intent of the Act, Federal regulations, and its customary business practices. We stated that these assumptions may be submitted along with the ASP data.

Accurate assessment and reporting of price concessions and BFSFs are essential to correctly calculating the manufacturer's ASP. Improperly classifying price concessions as BFSFs would artificially increase the manufacturer's ASP resulting in Medicare overpayments and higher coinsurance amounts paid by beneficiaries.

In December of 2022, the Office of Inspector General (OIG) published a report entitled “Manufacturers May Need Additional Guidance to Ensure Consistent Calculations of Average Sales Prices” (hereinafter referred to as the

December 2022 OIG report).\139\ That report recommended CMS actively review current guidance related to areas identified in the report and determine whether additional guidance would ensure more accurate and consistent ASP calculations. One area identified was how bundled sales price concessions should be incorporated into the manufacturer's ASP calculation. One manufacturer specified they would like additional guidance regarding whether unbundling a bundled arrangement should include just the discounts contingent on purchase or performance or all discounts that are part of the arrangement, how to treat bundled sales that include covered and noncovered products, and how manufacturers should identify and reallocate discounts with sales that may be considered bundled across time periods.

\139\ Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Price, Office of Inspector General, U.S. Department of Health and Human Services. December 2022. https://oig.hhs.gov/documents/evaluation/3215/OEI-BL-21-00330-Complete%20Report.pdf.

This report also recommended CMS give particular consideration to guidance regarding BFSFs. Manufacturers surveyed in the report expressed that there could be inconsistencies and differences in how manufacturers interpret the BFSF definition. For example, one manufacturer noted that CMS has not defined the term fair market value (FMV) for the purposes of the BFSF. The report indicated that the manufacturer would like additional guidance from CMS on the methodology that manufacturers should use to assess FMV and clarification about a timeframe after which manufacturers should reassess the FMV of BFSFs.

In addition to the recommendations from the December 2022 OIG report, we have concern that certain costs could be classified by manufacturers as BFSFs when they should instead be classified as price concessions. Further, we are concerned that certain costs that are classified as BFSFs may not represent the FMV for the service. Lastly, the current policy that manufacturers may presume none of the fees are passed on in whole or in part may allow for certain costs to be misclassified when reasonable inquiry would demonstrate that fees are indeed passed on. Such occurrences would likely impact the accuracy of ASP data that is reported to CMS each quarter.

For these reasons, we proposed policies to provide additional guidance on two aspects of the calculation of manufacturer's ASP. First, we proposed regulatory text to specify when certain fees are considered price concessions and on how manufacturers should allocate pricing for drugs sold under a bundled arrangement. Second, we proposed to revise the definition of BFSFs by (1) specifying the methodology that should be used to determine FMV and the time period after which manufacturers should reassess the FMV; and (2) further explaining what CMS considers to be sufficient evidence of whether or not a fee is passed on in whole or in part to an affiliate,\140\ client, or customer of an entity. We also proposed that in the absence of specific guidance, manufacturers be required to submit any reasonable assumptions they utilize for manufacturer's ASP calculations (which is currently voluntary), including documentation of the methodology used to determine FMV and periodic reviews of FMV. We proposed that manufacturers must also submit a warranty or certification from the recipient of the fee that it is not passed on in whole or in part to an affiliate, client, or customer of an entity. Finally, we provided certain non-exhaustive examples of fees that CMS considers to be price concessions and not BFSFs.

\140\ Affiliate meaning the affiliate of an entity that is receiving the fee that is providing the service.

The goal of these proposals was to avoid inaccurate calculation of the manufacturer's ASP that is used to determine Part B drug payment limits. These proposed policies would also clarify how certain costs should be considered under newer pharmaceutical business practices that may not have been considered when Medicare last finalized the definition of BFSFs in 2007. b. Price Concessions

As discussed in the background section, the ASP statute and regulations require that the manufacturer's ASP deduct price concessions, including volume discounts, prompt pay discounts, cash discounts, free goods that are contingent on any purchase requirement, chargebacks, and rebates (other than rebates under the Medicaid Drug Rebate Program and the Medicare Prescription Drug Inflation Rebate Program).

Manufacturers can offer certain price concessions as part of bundled arrangements in which price concessions are treated as discounts that are tied to the purchase of the same drug or item or multiple drugs or items. They can also be discounts contingent on certain performance requirements, such as achievement of market share. In addition, price concessions as part of a bundled arrangement may include only Part B drugs or may include both Part B drugs and other products or services. These price concessions within bundled arrangements are accounted for in the calculation of the manufacturer's ASP.

We discussed bundled price concessions and considered how manufacturers could apportion such discounts to calculate the manufacturer's ASP in the CY 2007 PFS final rule (71 FR 69673 through 69676). We stated that given the potentially wide range of bundling arrangements that might exist, based on the information we had about such arrangements, we could not determine at that time whether there is a universal approach for treating bundled price concessions in the manufacturer's ASP calculation that would address all potential structures of bundling arrangements in a manner that would achieve our goal of ensuring the accuracy of the ASP payment methodology and preventing inappropriate financial incentives. Then, in the Medicare Payment Advisory Commission's (MedPAC) January 2007 Report to Congress, “Impact of Changes in Medicare Payments for Part B Drugs,” \141\ they discussed the issue of allocation of bundled price concessions for purposes of calculating the manufacturer's ASP, noting that “some manufacturers offer provider discounts for one of their products contingent on purchases of one or more other products.” In light of MedPAC's recommendation that CMS address the ASP reporting requirements for bundled products and our discussion of bundled price concessions in the CY 2007 PFS rulemaking, we stated in the CY 2008 PFS proposed rule (72 FR 38150 through 38151) that we believe specific guidance in the ASP context is warranted to ensure consistency in ASP reporting across manufacturers and to enhance the accuracy of the ASP payment system. We stated at that time that we found MedPAC's suggestion not to defer further guidance in this area compelling with respect to the potential that manufacturers may make differing assumptions in the absence of specific guidance on how to allocate bundled price concessions in the context of ASP. However, in the CY 2008 PFS final rule (72 FR 66256 through 66258), based on comments recommending a delay and to

better understand the concerns stated by the commenters, we did not finalize the regulatory language changes we proposed in the CY 2008 PFS proposed rule at that time. However, we explained that in the absence of specific guidance, manufacturers may make reasonable assumptions in their calculation of ASP, consistent with the general requirements and the intent of the Act, Federal regulations, and their customary business practices.

\141\ Impact of Changes in Medicare Payments for Part B Drugs, Medicare Payment Advisory Commission. January 2007. https://www.govinfo.gov/content/pkg/GOVPUB-Y3_M46_3-PURL-LPS78409/pdf/GOVPUB-Y3_M46_3-PURL-LPS78409.pdf.

In the 2007 Prescription Drugs final rule (72 FR 39144 through 39145), Medicaid finalized a definition of the term “bundled sale” for the purpose of calculating the average manufacturer price (AMP) and best price, which is codified at Sec. 447.502. The definition was revised in the 2016 Covered Outpatient Drugs final rule (81 FR 5181 through 5183) and the 2020 Establishing Minimum Standards in Medicaid State Drug Utilization Review and Supporting Value-Based Purchasing for Drugs Covered in Medicaid, Revising Medicaid Drug Rebate and Third Party Liability Requirements final rule (85 FR 87022 through 87024). The current definition states that a bundled sale means any arrangement regardless of physical packaging under which the rebate, discount, or other price concession is conditioned upon the purchase of the same drug, drugs of different types (that is, at the nine-digit National Drug Code (NDC) level) or another product or some other performance requirement (for example, the achievement of market share, inclusion or tier placement on a formulary), or where the resulting discounts or other price concessions are greater than those which would have been available had the bundled drugs been purchased separately or outside the bundled arrangement. The definition further states: (1) The discounts in a bundled sale, including those discounts resulting from a contingent arrangement, are allocated proportionally to the total dollar value of the units of all drugs or products sold under the bundled arrangement; (2) For bundled sales where multiple drugs are discounted, the aggregate value of all the discounts in the bundled arrangement must be proportionally allocated across all the drugs or products in the bundle; and (3) Value-based purchasing (VBP) arrangements may qualify as a bundled sale.

We are aware that many manufacturers currently utilize portions of the Medicaid definition of bundled sales to identify any bundled arrangements for the purposes of their ASP calculations. In addition, we noted in the CY 2008 PFS final rule (72 FR 66257 through 66258), that most commenters supported an appropriately consistent approach for the treatment of bundled price concessions with both AMP and ASP calculations. We also stated our intention at that time to remain consistent, as appropriate, with the final policy adopted in the 2007 Prescription Drugs final rule (72 FR 39144 through 39145).

As discussed in the background section, the December 2022 OIG report recommended that CMS consider providing additional guidance with regard to how bundled sales price concessions should be incorporated into the manufacturer's ASP calculation. The report stated specifically that one manufacturer requested additional guidance pertaining to bundled sales discounts for the following:

Whether unbundling a bundled arrangement should include just the discounts contingent on purchase or performance requirements or all discounts that may be part of the underlying arrangement.

How to treat bundled sales that include both covered products and noncovered products (that is, products for which there is no government price reporting obligation).

How manufacturers should identify and reallocate discounts associated with sales that may be considered bundled across time periods. The manufacturer stated that CMS guidance on these types of temporal bundling will be critical because they will play an important role in the implementation and evaluation of value- and outcomes-based arrangements, which may require assessing the efficacy of a drug over multiple reporting periods.

Therefore, we proposed to add a definition of the term bundled arrangement to Sec. 414.802, similar to that which was proposed in the CY 2008 PFS proposed rule. Specifically, we proposed the definition to state “Bundled Arrangement means an arrangement regardless of physical packaging under which the rebate, discount, or other price concession is conditioned upon the purchase of the same drug or biological or other drugs or biologicals or another product or some other performance requirement (for example, the achievement of market share, inclusion or tier placement on a formulary, purchasing patterns, prior purchases), or where the resulting discounts or other price concessions are greater than those which would have been available had the bundled drugs or biologicals been purchased separately or outside the bundled arrangement.” We also proposed adding paragraphs (iii) and (iv) at Sec. 414.804(a)(2) to provide manufacturers with additional guidance on how to allocate discounts under bundled arrangements, which aligns with Medicaid's definition of bundled sale further described later in this section. This proposal aligned with our previously stated intent to remain consistent, as appropriate, with Medicaid's policy for calculating AMP and aligns with supportive comments discussed in the CY 2007 and 2008 PFS final rule discussions on this topic.

We received public comments on this proposal. The following is a summary of the comments we received and our responses.

Comment: A few commenters supported the proposed definition of bundled arrangement, citing that aligning with Medicaid's approach is reasonable and will promote consistency in how ASP is calculated across manufacturers.

Response: We thank the commenters for their support.

Comment: Many commenters generally supported the proposed definition of bundled arrangement but were concerned with the inclusion of “purchasing patterns” and “prior purchases” in the proposed definition as examples of performance requirements, not only because of misalignment with MDRP, but commenters stated that these words create ambiguity because they are not defined in the proposed rule nor explained why they were included. A commenter requested CMS clarify that purchasing patterns, prior purchases, or any other purchase or performance requirement applicable to the same product cannot create a bundled arrangement requiring reallocation of discounts across reporting periods.

Response: It is our objective to adopt a consistent definition of bundled arrangements that is consistent with MDRP. We are persuaded by the commenters and believe removing “purchasing patterns” and “prior purchases” from the definition of bundled arrangement is reasonable and as such, reallocation is not applicable.

Comment: A commenter requested that CMS clarify that certain phrases create objective standards based on contract text and that bundles across ASP, AMP, and BP should be verifiable and text-based.

Response: This comment is outside the scope of the final rule at this time.

Comment: A few commenters did not agree with finalizing a definition of bundled arrangement. A commenter stated that finalizing a definition of bundled arrangement would expand the universe of price concessions that would be included in ASP and therefore

lower ASPs relative to where they are today. Another commenter encouraged CMS to engage in discussions before finalizing the definition to evaluate whether a universal definition of this term results in a more accurate ASP calculation. A few commenters also opposed the January 1, 2026 implementation for price concessions involved in bundled arrangements.

Response: We do not agree with the commenters' concerns regarding finalizing a definition of bundled arrangement. We believe that the adoption of a standardized definition will enhance transparency, promote consistency across interested parties, and support more accurate ASP calculations. Moreover, because many manufacturers have stated in their submitted reasonable assumptions that they currently utilize the Medicaid definition of bundled arrangements in calculating ASP, we believe the finalized policy would not be overly burdensome to implement and would better reflect current industry practice. Regarding delaying implementation, because manufacturers have used the Medicaid bundled sale definition as a reasonable assumption when calculating ASP, we are not persuaded that these new requirements would be difficult to implement. Therefore, we are not convinced that delayed implementation of this definition is necessary.

After consideration of public comments, we are finalizing the proposed bundled arrangement definition, excluding the terms “purchasing patterns” and “prior purchases.” The finalized definition is effective for sales occurring on or after January 1, 2026, which is reflected in the Medicare Part B Drug Payment Limit File beginning July 2026. We believe this aligns with our stated intent to support program alignment with MDRP and reduces administrative complexity.

Second, to address the suggestion that the agency determine whether additional guidance would be appropriate for the areas described in the December 2022 OIG report for how to account for unbundling a bundled arrangement, we note that Medicaid's definition of “bundled sale” at Sec. 447.502 directs that discounts in a bundled sale, including those discounts resulting from a contingent arrangement, are allocated proportionally to the total dollar value of the units of all drugs or products sold under the bundled arrangement.

In other words, as noted in 81 FR 5181 through 5183, the “unbundling” of both contingent and non-contingent discounts is appropriate because “all the discounts” in the bundled arrangement should be proportionally allocated. We proposed to adopt this approach for the calculation of the manufacturer's ASP because of our stated intent for consistency with policies for AMP. Consistent application of this policy by all manufacturers reduces the opportunity for improper manipulation of the ASP calculation, providing greater certainty to CMS of the integrity of the submitted ASP. Therefore, we proposed the same regulatory language be added to Sec. 414.804(a)(2)(iii) and (iv).

We received public comments on this proposal. The following is a summary of the comments we received and our responses.

Comment: A few commenters supported CMS' proposal to allocate discounts under a bundled sale proportionally across all products.

Response: We thank the commenters for their support.

Comment: Many commenters opposed the reallocation of all non- contingent discounts in bundled arrangements, stating that the 2016 MDRP final rule does not require this. They believed that different standards between ASP and MDRP would create administrative burdens for manufacturers, contradicting CMS' intent to align these policies. A commenter noted that reallocating non-contingent discounts would not consistently affect ASPs, while others claimed it could distort ASP values. Commenters urged CMS to allow manufacturers to make reasonable assumptions about discounts in bundled arrangements. They also requested clarification that products without financial relationships should not require reallocation of non-contingent discounts. If CMS deems reallocation necessary, commenters recommended clear regulatory language and explanations.

Response: Consistent with the 2007 Medicaid Program final rule (72 FR 39142), which was reiterated in the 2016 Medicaid Program final rule (81 FR 5181 through 5183), we consider all drugs to be within the bundled sales if: (1) Any drug must be purchased to get a discount on any drug in the bundle regardless of whether any drug is purchased at full price; (2) there is a performance requirement (such as inclusion or tier placement on a formulary or achieving a certain level or percentage of sales for one drug to receive a discount on another drug); or (3) price concessions are greater than those which would have been available had the bundled drugs been purchased separately or outside the bundled arrangement. When a manufacturer offers discounts on multiple products under a single contract (for example, to minimize the administrative burden of developing several single contracts which offer separate discounts on the multiple products) no bundled sales arrangement exists as long as all of the following conditions are met: (1) A discount or price concession is established independently for each product within the contract; (2) the purchase price under the contract is not contingent upon any other product in the contract or upon some other performance requirement (such as the achievement of market share or inclusion or tier placement on a formulary); and (3) the discount provided for any product under the contract is no greater than if the product was purchased outside of the contract.

After consideration of public comments, we are finalizing as proposed to direct that discounts in a bundled sale, including those discounts resulting from a contingent arrangement, are allocated proportionally to the total dollar value of the units of all drugs or products sold under the bundled arrangement.

Third, to address the suggestion that the agency determine whether additional guidance would be appropriate for the areas described in the December 2022 OIG report for how to allocate discounts for bundled sales, we proposed that for bundled sales containing both Medicare Part B-covered and non-covered products, manufacturers allocate discounts proportionally as described in the previous paragraph. However, we have heard from interested parties that this method may not be sufficient to cover all cases and could potentially result in inaccurate ASPs. Bundled arrangements may vary depending upon the number and type of products included in a bundling arrangement, whether the price concessions are contingent on the purchase of only one product, the purchase of multiple products, or the inclusion of one or more products on a formulary, and the timing of the price concessions. For example, a different allocation method may be needed to account for variable costs per product in the bundled arrangement. We solicited comments on whether there are other methods of allocating discounts in these circumstances that would more accurately represent ASP.

The following is a summary of the comments we received and our responses.

Comment: MedPAC encouraged CMS to consider use of a “lower-of approach” to prevent the allocation of discounts from Part B drugs to other products. They explained that under this

approach ASP could be the lower of (1) ASP with price concessions allocated across all products in the bundle; or (2) ASP with price concessions allocated only among Part B drugs in the bundle that are required to report ASP data.

Response: We may re-examine this policy consideration in future rulemaking.

Comment: A commenter affirmed that bundles across Part B-covered and non-covered products should be subject to standard bundling requirements. However, the commenter encouraged CMS to clarify that drug delivery devices that are approved under the drug approval (NDA or BLA) should be considered part of the drug, and not another product that could create a bundled arrangement, even if the delivery device is not packaged within the same National Drug Code.

Response: The suggestion that drug delivery devices approved under a drug application should be treated as part of drug to be outside the scope of this rulemaking.

After consideration of public comments, we are finalizing as proposed that for bundled sales containing both Medicare Part B-covered and non-covered products, manufacturers allocate discounts proportionally.

Finally, to address the suggestion that the agency determine whether additional guidance would be appropriate for the areas described in the December 2022 OIG report as it relates to how to reallocate discounts associated with sales that may be considered bundled across time periods (for example, outcomes-based arrangements or value-based purchasing arrangements), we did not propose to adopt the portion of the Medicaid definition of bundled sale stating that value-based purchasing arrangements may qualify as a bundled sale because we are continuing to evaluate how value-based purchasing arrangements should be considered for drugs payable under Medicare Part B. We solicited comments on how discounts associated with sales that may be considered bundled across time periods could be accounted for in the manufacturer's ASP calculation.

Comment: A commenter encouraged CMS to monitor value-based purchasing arrangements going forward to help ensure this policy does not have unintended consequences. Specifically, the commenter recommended CMS consider monitoring for the prevalence of value-based purchasing arrangements via the reasonable assumptions manufacturers submit to CMS.

Response: We intend to review reasonable assumptions to monitor this policy going forward. If we have concerns with manufacturer's reasonable assumptions, we may follow up with the manufacturer. The requirement that manufacturers submit their reasonable assumptions does not change that manufacturers are responsible for submitting accurate ASP reports, and that we rely on and uses manufacturers' submission as submitted to calculate payment limits. Reasonable assumptions will be used to review industry-wise issues for potential future policy development and, in certain instances, to make referrals to law enforcement partners. Manufacturers should not expect individual feedback from us on their reasonable assumptions submissions, nor should they interpret a lack of response from us as an approval of those submissions. If we determine that a manufacturer has misrepresented information in the reporting of its ASP, CMS may refer the issue to HHS's Office of Inspector General (OIG) to determine whether a civil monetary penalty should be imposed, in accordance with section 1847A(d)(4) of the Act.

Comment: A few commenters supported CMS' decision to exclude value- based purchasing arrangements from the ASP bundled arrangement definition, citing this decision reflects structural differences between ASP and MDRP frameworks. Specifically, while manufacturers can revise pricing data to address time-based bundled discounts in MDRP, the ASP framework lacks a routine process for retrospective payment adjustments.

Response: We thank the commenters for their support.

Comment: A few commenters opposed CMS' proposal to not adopt the portion of the Medicaid definition of bundled sale stating that value- based purchasing arrangements may qualify as a bundled sale. These commenters recommend CMS adopt a consistent approach in the context of ASP.

Response: We believe not adopting this definition at this time provides the agency the opportunity to monitor and assess how such a definition may affect ASP, especially as we intend to finalize mandatory submission of reasonable assumptions.

Comment: A commenter noted that the most likely type of bundle is a temporal or cross period bundle, thus the commenter urged temporal bundles should not be considered bundled arrangements for purposes of calculating ASP. Rather, price concessions in one period that are based on a purchase or performance requirement in a different period should be handled as a lagged eligible price concession.

Response: We will consider this suggestion as we continue to refine this policy area.

After consideration of public comments, we are finalizing as proposed to not adopt the portion of the Medicaid definition of bundled sale stating that value-based purchasing arrangements may qualify as a bundled sale.

Comment: We received one out-of-scope comment. In this comment, MedPAC encouraged CMS to monitor the issue of bundled price concessions in the context of products without an alternative, citing concerns in which manufacturers could use the bundle discount to pressure buyers into also purchasing a second product that does have competition.

Response: We consider this issue to be outside the scope of the proposed rule; however, we will take it under consideration for potential future rulemaking. c. Bona Fide Service Fees

As described previously in the background section, currently, the term “BFSFs” means fees paid by a manufacturer to an entity, that (1) represent FMV (2) for a bona fide, itemized service actually performed on behalf of the manufacturer (3) that the manufacturer would otherwise perform (or contract for) in the absence of the service arrangement, and (4) that are not passed on in whole or in part to a client or customer of an entity, whether or not the entity takes title to the drug.\142\ A fee must meet all four conditions of the definition to be considered a BFSF rather than a price concession to be deducted from ASP. For these reasons, in this proposed rule, we are proposing policies to provide additional guidance on two aspects of the calculation of manufacturer's ASP. First, we are proposing regulatory text to specify when certain fees are considered price concessions and on how manufacturers should allocate pricing for drugs sold under a bundled arrangement. Second, we are proposing to revise the definition of BFSFs by (1) specifying the methodology that should be used to determine FMV and the time period after which manufacturers should reassess the FMV; and (2) further explaining what we consider to be sufficient evidence of whether or not a fee is passed on in whole or in part to an affiliate, client, or customer of an entity. We are also proposing that in the absence of specific guidance,

manufacturers be required to submit any reasonable assumptions they utilize for manufacturer's ASP calculations (which is currently voluntary), including documentation of the methodology used to determine fair market value and.

\142\ 42 CFR 414.802.

(1) Fair Market Value

One element of the definition of BFSFs specifies that the fees must represent FMV for the service. To date, we have not issued guidance on a specific method that manufacturers must use to determine whether a fee represents FMV. In the CY 2007 PFS final rule (71 FR 69666 through 69670), we stated that the appropriate method or methods for determining whether a fee represents FMV may depend upon the specifics of the contracting terms, such as the activities the entity will perform and the agreed-upon mechanism for establishing the payment (for example, percentage of goods purchased). We stated in that final rule that we believe manufacturers are well-equipped to determine the most appropriate, industry-accepted method for determining FMV of drug distribution services for which they contract. Therefore, we did not mandate the specific method manufacturers must use to determine whether a fee represents FMV for purposes of excluding BFSFs from the calculation of ASP.

As discussed previously in the background section, the December 2022 OIG report identified BFSFs as an area where CMS could provide additional guidance to manufacturers and further stated that manufacturers expressed that competitors may be taking disparate approaches when applying CMS' four-part test to make these determinations. In some cases, service fees that are very high could mask price concessions that are passed on by the entity performing some bona fide services so that the product's ASP can remain high. Conversely, certain fees that should be classified as BFSFs could be incorrectly classified as a price concession to reduce the manufacturer's ASP and mask price increases that could be faster than the rate of inflation for purposes of the Medicare Prescription Drug Inflation Rebate Program. Consequently, we recommended additional guardrails to ensure that BFSFs are correctly classified, and that the manufacturer's ASP is not manipulated to be artificially increased or decreased.

Accordingly, we (1) proposed revisions to the definition of BFSFs at Sec. 414.802 that retains the existing four prong test (as described in the background section) and adds proposed requirements for the standards and the methodology that should be used to determine the FMV for such fees; (2) the time period after which manufacturers should reassess the FMV; and (3) any FMV analysis of fees that vary directly with the amount of drug sold or price of a manufacturer's drug must be conducted by an independent third party that does not have a conflict of interest.

Based on the structure or arrangement of certain fees that meet the definition of BFSF, we proposed additional requirements for the standards and methodology that should be used to determine FMV. Specifically, we proposed that for fees paid by a manufacturer to an entity that do not vary directly with the amount of drug sold or price of a manufacturer's drug, that the FMV must be determined either based on comparable market transactions that generally reflect current market conditions or the cost of the service plus a reasonable markup to the total cost.

We proposed that, for fees paid by a manufacturer to an entity that vary directly with the amount of drug sold or price of a manufacturer's drug, the FMV must be determined by using the cost of the service and adding a reasonable markup to the total cost. If any material portion of cost data is not available, manufacturers should follow a market- based approach based on verifiable market data until such time as sufficient cost data becomes available. In addition, we proposed that under such circumstances that the FMV assessment must be conducted by an independent third-party valuator. This means that the valuator must not have any financial relationship (other than the arrangement to conduct FMV analyses) with either party to the arrangement and no stake in the outcome of the valuation. The FMV analysis must be documented with a clear explanation, including a description of the methodology used.

Regarding FMV assessments, we proposed manufacturers conduct periodic updates of any FMV analyses for service arrangements that are ongoing, at a frequency no less than the renewal frequency of the agreement (that is, annually for annual renewals). We stated that documentation of this update should be included in the reasonable assumption documentation that corresponds with the quarter when the update is conducted. We agreed that implementing standards and defining the methodology manufacturers must use to determine FMV would better establish uniform industry practices and provide the desired clarity requested by manufacturers in the December 2022 OIG report.

The following is a summary of the comments we received and our responses.

Comment: A few commenters stated support for enhanced guidance, accountability, and transparency for BFSFs, and affirmed support for ensuring the accurate calculation of FMV.

Response: We thank the commenters for their support.

Comment: Many commenters did not agree with CMS' proposed FMV standards and methodology, arguing the rule overemphasizes cost-based methods and limits flexibility. They stated that CMS should allow multiple valuation approaches (cost-, market-, income-based, or hybrid) to reflect market realities and maintain that well-documented service fees should not be presumed price concessions.

Some commenters stated that the current FMV framework is adequate and that the proposal departs from longstanding CMS policy and industry practice. They cited past rulemaking (for example, 2016 MDRP, 2007 PFS) supporting manufacturer discretion and noted limited industry demand for additional FMV guidance in the December 2022 OIG report.

Several commenters stated that CMS' proposed definition of BFSFs exceeds its statutory authority and diverges from ASP/AMP alignment. They contended that percentage-based fees are not inherently improper and that rigid formulas conflict with existing standards under Stark and Anti-Kickback Statute (AKS). A commenter suggested aligning percentage-based fees with existing precedents, such as the GPO safe harbor to the AKS at 42 CFR 1001.952(j).

Others noted the new BFSF test adds regulatory burden and that extending the no pass-through requirement to “affiliates” is overly broad, ambiguous, and unauthorized. They noted that unclear definitions could disrupt legitimate business arrangements and conflict with MDRP treatment of affiliates.

Response: We agree that it would be time-intensive to implement a new FMV methodology under the proposed timeline. We acknowledge commenters' concern about extending the no pass-through requirement to “affiliates” and would like to further engage with manufacturers regarding determination of FMV that could address these concerns while also achieving the goal of accuracy and transparency when classifying costs for the calculation of ASP. As such, we are not finalizing the proposed requirements for the standards and methodology that should be used to

determine FMV in this final rule. However, we encourage manufacturers to document in their reasonable assumptions which service fees are tied to costs that do not depend on the drug's price or volume and which service fees do. As we plan to engage with manufacturers, this information will aid with informing future policy development.

For comments noting the proposed FMV methodology requirements depart from established CMS policy, we recognize that this marks a shift from prior policy interpretation. However, as new services enter the market, policy updates are occasionally required to ensure appropriate regulation and oversight. We also take recommendations outlined in OIG reports seriously and are committed to addressing them effectively.

We also acknowledge commenters' other concerns, including whether we have the statutory authority to impose BFSF standards that conflict with MDRP and the FMV requirements conflict with FMV frameworks under other law in our purview. In light of these comments, we intend to continue to evaluate and consider this issue in next year's rulemaking cycle. We also recognize that although this proposal would impose an additional regulatory burden on manufacturers, we anticipate that it would support the Administration's priorities of increased transparency and potentially lower drug prices.

Further, we appreciate commenters' feedback regarding the exclusion of the term “affiliates” and will further consider whether to incorporate this term in future rulemaking.

Finally, we agree with commenters about limiting the scope of the BFSF analysis to fees directly tied to drug sales. We will use information from manufacturers' reasonable assumption to inform future policy development concerning whether a flexible FMV approach is appropriate and to evaluate whether certain fees exceed FMV.

Comment: A commenter stated concerns about pharmacy benefit managers (PBMs), group purchasing organizations (GPOs), and related fee reform, citing the proposed rule allows these intermediaries to demand or require payments directly linked to drug costs.

Response: These issues fall outside the scope of the proposed CMS BFSF rule as the proposed rule does not directly regulate PBMs or GPOs.

Comment: A commenter stated support for the proposed frequency of FMV determinations and submission of FMV assessments, affirming that these requirements would give CMS increased visibility into how ASP is calculated and greater ability to monitor differences in approaches across manufacturers and the potential need for future guidance.

Response: We thank the commenters for their support.

Comment: Several commenters did not agree with the proposed requirement for manufacturers to conduct periodic updates of FMV. They cited ambiguities regarding both the scope and frequency of the reassessments. Commenters noted that FMV reassessment is unduly burdensome due to the complexity of the process, which requires reviewing detailed contract terms, compiling and analyzing historical and projected data, and engaging in multiple rounds of consultation to clarify service scope and pricing structures. Given that many contracts are short-term in nature, commenters stated that requiring a new FMV analysis upon every renewal could introduce unnecessary inefficiencies without meaningfully improving compliance or accuracy.

Several commenters requested at a minimum the FMV reassessment for ongoing service arrangements needs more flexibility. For example, manufacturers could rely on FMV ranges established by third party evaluators for common service types to ensure fees remain within an inflation-adjusted FMV range. They also could apply existing FMV assessments to new contracts involving similar services and vendors for a reasonable period of time (for example,--3 to 5 years), unless there is a material change in the scope or costs of the services provided or a significant shift in market conditions. Another commenter suggested that FMV reassessments need not be conducted for minor contract modifications and not more than once every 3 years. Furthermore, a commenter suggested allowing manufacturers to submit summary information in the form of reasonable assumptions regarding their approach to determine FMV.

Response: We agree that manufacturers should provide summary information on FMV assessments as part of their reasonable assumptions, as we are finalizing that portion of the proposal. We will use reasonable assumptions to better understand the scope and frequency of FMV reassessments, and this information will aid with informing future policy development. As such, we are not finalizing the proposal that manufacturers reassess FMV upon contract renewal in this final rule.

Comment: A few commenters supported the requirement that the FMV assessment must be conducted by an independent third party for percentage-based fees.

Response: We thank the commenters for their support.

Comment: Many commenters did not agree with the requirement that manufacturers obtain independent third-party FMV assessments for BFSFs. They stated that the terms “independent” and “financial relationship” are not defined, which could result in an overly broad and unintended interpretation. Commenters further expressed concern that the proposal might disqualify accounting, actuarial, and transfer pricing firms with which manufacturers already maintain business relationships. Collectively, commenters stated that, as drafted, the proposal could significantly reduce the number of firms with experience in pharmaceutical FMV assessments, thereby causing delays. Additionally, commenters noted that requiring third-party assessments for every agreement could substantially increase compliance costs, while also incentivizing valuators to demand shorter contract terms and higher fees.

Several commenters requested that CMS clarify the criteria by which an FMV evaluator would be considered “independent”. Other comments requested alternatives to the FMV evaluator. For example, CMS could require personnel conducting valuations to exercise independent judgment, supported by mechanisms such as ethical screens between teams or that CMS allow manufacturers to identify independent third-party verification services. Another commenter requested CMS authorize established vendors with subject matter expertise to conduct FMV assessments. Lastly, a commenter requested CMS allow FMV reassessment to be conducted internally by applying an inflation adjustment to the valuation.

Response: We are persuaded by these comments that more information is needed to determine which parties may determine FMV and if there are circumstances in which an internal determination may be appropriate. We will engage with interested parties to better understand these issues and consider them in future rulemaking.

After consideration of public comments, we are not finalizing the proposed language regarding FMV methodology standards, FMV reassessments, and independent third-party valuator requirement. We will engage with interested parties to better understand current practices and challenges related to FMV methodologies, reassessments, and the use of third-party valuators.

(2) Fees Presumed To Be Price Concessions

We proposed revisions to Sec. 414.804(a)(2) to specify when certain fees should be presumed to be price concessions. Specifically, we proposed that if fees paid by a manufacturer to an entity vary directly with the amount or price of a manufacturer's drugs (that is, the fees paid are (1) percentage-based fees or (2) flat fees or fixed fees that are designed in such a way as to approximate percentage-based fees), such fees are presumed to be price concessions to be deducted from the calculation of the manufacturer's ASP unless such manufacturer determines such fees to be FMV using a cost-based approach which may be further validated with market-based data.

The following is a summary of the comments we received and our responses.

Comment: A few commenters did not agree with the proposal to presume that certain fee arrangements do not qualify as BFSFs. They noted that percentage-based fees are widely used across the pharmaceutical supply chain and highlighted the Congress's explicit recognition of percentage-based BFSFs in the context of AMP reporting. They further cited that in amending the AMP definition, the Congress provided examples of fees it considered to be BFSFs that should be excluded from AMP calculations, and those examples clearly encompass percentage-based fees. Furthermore, commenters stated that this presumption would result in the under-exclusion of BFSFs ASP calculations.

Other commenters requested clarification that only those service fees which reduce the acquisition cost for a purchaser should be treated as price concessions. They claimed that what is relevant is whether the arrangement ultimately lowers the price paid by the provider who will be reimbursed based on the product's ASP.

Response: We will take these comments and the related issues under consideration in future rulemaking.

After consideration of public comments, we are not finalizing the proposed regulatory text to specify when fees are presumed to be price concessions. (3) Evidence

Another element of the BFSF definition specifies that the BFSF must not be passed on, in whole or in part, to a client or customer of an entity. When finalizing the CY 2007 PFS final rule (71 FR 69669 through 69670), we stated that there may be significant barriers that limit a manufacturer's ability to determine whether a fee that otherwise meets the definition of BFSF is passed on, in whole or in part, to a client or customer of any entity. We noted in the preamble section of that rule that we believe that it is essential to retain the “not passed on” element in the definition of BFSFs given that the “not passed on” element is a key factor in distinguishing a price concession from a BFSF because, if a fee that is passed on is excluded from the ASP calculation, then there is a greater risk of the ASP being inappropriately inflated. We stated that if a manufacturer has determined that a fee paid meets the other elements of the definition of “bona fide service fees,” then the manufacturer may presume, in the absence of any evidence or notice to the contrary, that the fee paid is not passed on to a client or customer of any entity.

There may be certain fees that a manufacturer classifies as BFSFs for the purposes of calculating the manufacturer's ASP that should actually be considered price concessions and, therefore, deducted from the manufacturer's ASP. In the December 2022 OIG report, manufacturers reported inconsistent practices in the treatment of BFSFs. As such, we proposed that it is no longer appropriate that a manufacturer may presume, in absence of any evidence or notice to the contrary, that a fee paid is not passed on to an affiliate, client, or customer of any entity. This proposed revision to the definition specified that, in addition to a client or customer of any entity, that the fee also shall not be passed on to an affiliate, which means an affiliate of an entity that is receiving the fee is providing the service. We proposed the addition of the word affiliate to more comprehensively address the type of arrangements that may exist between certain entities.

In addition, we proposed that the manufacturer be responsible for obtaining a certification or warranty from the entity receiving the fee stating that such fee will not be passed on to an affiliate, client, or customer of any entity. We proposed to add new Sec. 414.804(a)(5)(iii) requiring manufacturers to provide certification letters from any recipient of a BFSF that the fee is not passed on in whole or in part to an affiliate, client or customer of an entity, whether or not the entity takes title to the drug.

We also proposed to revise Sec. 414.804(a)(5) to add additional data submission requirements. This paragraph currently states that the manufacturer's average sales price must be calculated by the manufacturer every calendar quarter and submitted to CMS within 30 days of the close of the quarter. The first quarter submission must be submitted by April 30, 2004. Subsequent reports are due not later than 30 days after the last day of each calendar quarter. We proposed to add a header to this section titled “Submission Requirements” and remove “The first quarter submission must be submitted by April 30, 2004. Subsequent reports are due not later than 30 days after the last day of each calendar quarter.” We proposed to add three paragraphs (i, ii, and iii). The proposed text would be revised to state that manufacturers must submit the following to CMS within 30 days of the close of the quarter:

The manufacturer's average sales price, which must be calculated by the manufacturer every calendar quarter. The first quarter submission must be submitted by April 30, 2004.

Effective January 1, 2026, reasonable assumptions for calculation of the manufacturer's ASP including the fair market value analysis for bona fide service fees, consistent with the general requirements and intent of the Act, Federal regulations, and its customary business practices, including documentation of the methodology used to determine fair market value and periodic reviews of fair market value.

Effective January 1, 2026, certification letter from the recipient of a bona fide service fee (as defined under Sec. 414.802) as evidence that the fee is not passed on in whole or in part to an affiliate, client, or customer of an entity, whether the entity takes title to the drug.

We stated that, these data submission requirements, if finalized, would be effective for sales occurring on or after January 1, 2026, and that data would be due to CMS by April 30, 2026, and used in the July 2026 Medicare Part B Drug Payment Limit File. The newly proposed certification letter would be submitted in the current reporting portal and uploaded under reasonable assumptions. Lastly, we explained that manufacturers must maintain and submit to CMS a copy of the FMV analysis, confirming it was conducted in a timely manner, documentation (such as a certification letter from the recipient of the fee) that the fee is not passed on in whole or in part to an affiliate, client or customer of an entity, whether or not the entity takes title to the drug, and documentation (such as a mutual representation in the relevant services agreement) that both parties have agreed to represent the payment as a BFSF in a consistent manner to all

third parties, including any affiliates, clients, and governmental agencies.

The following is a summary of the comments we received and our responses.

Comment: A few commenters supported mandatory submission of reasonable assumption letters. A commenter encourages CMS to read these closely and provide feedback on them for purposes of driving greater consistency. The commenter requests CMS confirm that reasonable assumptions letters are covered by the “Confidentiality” provision in the ASP statute. The commenter further requested CMS should also confirm that it will treat these reasonable assumptions as confidential and proprietary financial information within the meaning of the Freedom of Information Act (FOIA), the relevant Federal criminal statute, the FOIA regulations, and other applicable laws, regulations, or policies. Specifically, this information is subject to exemption from mandatory disclosure under Exemption of FOIA across manufacturers in the calculation and interpretation of ASP.

Response: We agree that these submissions are an important tool for promoting transparency, consistency, and accuracy in ASP reporting. As noted above, we intend to review reasonable assumptions, and if any concerns are identified, we will reach out to the manufacturer. Regarding confidentiality, data collected through the ASP module will be protected from disclosure to the extent required by the law. We cannot release information about specific manufacturers or wholesalers or prices charged by such manufacturer or wholesaler for specific products due to statutory confidentiality provisions that limit the release of ASP data as specified in section 1847A(f)(2)(D) of the Act, and in section 1927(b)(3)(D) of the Act.\143\

\143\ Average Sales Price (ASP) Quarterly Publication Process, Centers for Medicare and Medicaid Services. January 17, 2025. https://www.cms.gov/files/document/frequently-asked-questions-faqs-asp-data-collection.pdf.

Comment: A commenter did not agree with the mandatory submission of ASP reasonable assumption letters and recommended CMS maintain the practice of voluntary submission of reasonable assumptions and stated that if CMS is concerned with variances in reasonable assumptions then CMS should standardize a template.

Response: We do not agree with the commenter and believe that mandatory submission of ASP reasonable assumption letters is necessary to enhance transparency, promote consistent application of ASP methodologies, and strengthen program oversight. Although there is not currently a standardized format for reasonable assumption letters, as the commenter noted, there is a template form under review with PRA.

Comment: Several commenters did not agree with the proposal that manufacturers provide documentation of the methodology used to determine FMV. Commenters cited concerns with the administrative and financial burden that quarterly FMV submissions would impose on manufacturers and added that this requirement contradicts the Administration's stated aim of reducing unnecessary paperwork. A few commenters noted that FMV analyses involve proprietary valuation methods, market data, and sensitive business strategies not meant for disclosure. A few commenters highlighted the absence of corresponding regulatory text to codify the preamble's proposals, which could lead to confusion and inconsistencies. Finally, another commenter stated the FMV documentation requirement provides no clear benefit to the healthcare system.

Response: We do not believe that the requirement to document FMV determinations will impose an undue burden on manufacturers. Manufacturers should already maintain sufficient internal documentation to support their FMV assessments. To clarify, FMV documentation is not due quarterly; effective January 1, 2026, manufacturers must document the methodology used to determine FMV for all current, new, and renewed contracts. For example, all FMV determinations for current contracts are due by April 30, 2026 with their submission of ASP for first quarter of sales in 2026. If a service arrangement is newly signed or renewed between January 1, 2026 through March 31, 2026, the FMV determination data is also due by April 30, 2026. To minimize administrative burden, we will accept well-detailed summaries of FMV methodologies that clearly describe the data sources, assumptions, and rationale supporting the determination. While this would be an additional reporting requirement, this supports the Administration's priorities of lowering drug prices. Further, in reference to the statement that FMV data is proprietary, as we noted previously, data collected through the ASP module will be protected from disclosure to the extent required by law. Lastly, we do not agree that requiring FMV documentation does not provide a clear benefit to the healthcare system. This information can enhance transparency, accountability, and program integrity. Following publication of the final rule, we will provide a template of the reasonable assumptions letter for manufacturers to document FMV analyses.

Comment: A few commenters recommended modifications to the FMV documentation requirement to reduce administrative burden. A commenter suggested that CMS require manufacturers to maintain FMV documentation supporting BFSFs, consistent with existing MDRP guidance that requires manufacturers to retain records for 10 years from the date of reporting the BFSF to CMS. Commenters stated that this approach would minimize paperwork while preserving CMS' ability to request and review FMV analyses as necessary. Another commenter requested that CMS adopt a flexible approach in its review of FMV documentation and operate under the presumption that manufacturers are complying in good faith.

Response: We do not agree with the commenters' suggestion to require manufacturers only to maintain, rather than submit, FMV documentation. We believe that requiring submission promotes greater transparency and consistency across manufacturers and enables us to conduct more effective oversight of FMV determinations. Regarding the suggestion we adopt a flexible approach in its review of FMV documentation, because we did not propose a policy for CMS's review of reasonable assumptions, this comment is out of scope. We will review reasonable assumptions to inform future policy development. However, if we determine that a manufacturer has misrepresented information in the reporting of its ASP, we may refer the issue to HHS's Office of Inspector General (OIG) to determine whether a civil monetary penalty should be imposed, in accordance with section 1847A(d)(4) of the Act.

Comment: Many commenters did not agree with CMS' proposed certification requirement for BFSFs. Commenters stated that the change would impose substantial administrative, contractual, and operational burdens on manufacturers, who often manage hundreds of service agreements. They emphasized that manufacturers cannot compel third- party vendors to provide certifications, which risks misclassifying legitimate BFSFs as price concessions. Commenters further questioned CMS' legal authority to impose this obligation, stating it is inconsistent with existing statutory frameworks, Medicaid rules, and longstanding CMS policy that presumes

BFSFs are not passed on. Many highlighted that the proposal undermines the Administration's stated goal of reducing regulatory burden and paperwork.

Response: We do not agree that the required certification would add substantive burden. This measure targets transparency and is not a fundamental change in how manufacturers calculate FMV. The certification ensures accountability and documentation that payments reported as BFSFs are consistent with regulatory definitions. Until we observe evidence that service providers are unwilling to provide such certifications, we do not find these concerns to be substantiated. Finally, while this proposal adds some additional regulatory and paperwork requirements, it supports the Administration's priorities to lower drug prices and increase transparency.

After consideration of public comments, we are finalizing as proposed to require manufacturers submit reasonable assumptions including documentation of the methodology used to determine FMV for current, new, and renewed contracts. We are also finalizing as proposed to require certification letters from the recipient of a BFSF for prospective contracts that the fee is not passed on in whole or in part to a client or customer of the recipient of the fee, whether or not the entity takes title to the drug. (3) Further Guidance on the BFSF Definition

In the CY 2007 PFS final rule (71 FR 69667 through 69668), we discussed the option of providing a list of bona fide services. However, many commenters at that time were opposed to establishing a list of bona fide services because it would require ongoing refinement for manufacturers to accurately calculate ASP. In that final rule, we did not establish a list of bona fide services because we wanted to avoid inadvertently limiting the scope of what could constitute a bona fide service. We believed that constructing an exhaustive list could be prohibitive over time. However, in the CY 2026 proposed rule we proposed some specific, non-exhaustive examples of fees and how they should be considered in the calculation of manufacturer's ASP for the following reasons.

First, we noted that certain payments by drug manufacturers to drug distributors, which lower the price that distributors and purchasing physicians pay, appear to be price concessions. In 2024, the Department of Justice filed a complaint against a manufacturer alleging the company engaged in fraudulent drug price reporting practices by classifying payments to distributors to cover credit card processing fees as BFSFs instead of price concessions.\144\ The manufacturers' payment allegedly enabled the purchasers of the product to use credit cards to purchase drugs from the distributor without incurring an additional fee that would otherwise be charged, while also taking advantage of the benefits of using credit cards, such as “cash back” and other credit card rewards. This type of arrangement would lower the price of the drug to both the distributor and the distributors' customers, and the manufacturers' payments should be classified as price concessions, which are deducted from ASP, not BFSFs.

\144\ United States Files Complaint Against Regeneron Pharmaceuticals Alleging Fraudulent Drug Price Reporting, District of Massachusetts, United States Attorney's Office. April 2024. https://www.justice.gov/usao-ma/pr/united-states-files-complaint-against-regeneron-pharmaceuticals-alleging-fraudulent-drug.

Second, as discussed in our Autologous Cell-based Immunotherapy and Gene Therapy Payment proposal, we also proposed that any payment by the manufacturer to an entity for tissue procurement is not considered a BFSF for the purposes of calculating the manufacturer's ASP since this is an integral part of the manufacturing process for autologous cell- based immunotherapy or gene therapy and should be included in the price of the product.

Third, certain fees for data sharing services about the product appeared to exceed the FMV for the service or were not for bona fide services because the data is required for legal compliance and audit purposes under the services agreement (such as complete and timely data to validate that a rebate or discount has been earned or is not duplicative prior to its payment by the manufacturer). If a manufacturer pays an entity for providing data back to the manufacturer about the product being sold, that fee should be assessed for FMV as discussed previously in this section and we proposed a certification or warranty from the entity providing the service that the fee is not passed on in whole or in part to an affiliate, client, or customer of an entity. As discussed previously in this section, we proposed that such certification or warranty should be submitted by the manufacturer to CMS as part of the quarterly ASP data submission.

Lastly, certain fees paid for distribution services appeared to exceed the FMV for the service. Similar to data sharing services, if a manufacturer pays an entity for distributing their product, the fee should be assessed for FMV, and we proposed a certification or warranty should be provided by the entity providing the service that the fee is not passed on in whole or in part to an affiliate, client, or customer of an entity. As discussed previously in this section, we proposed that such certification or warranty should be submitted by the manufacturer to CMS as part of the quarterly ASP data submission.

The following is a summary of the comments we received and our responses.

Comment: Many commenters did not agree with CMS' proposed non- exhaustive list of excluded fees, saying the list is confusing and ambiguous, creates uncertainty and compliance risks, and could reduce provider reimbursement. Commenters did not agree with CMS' characterization that certain data sharing and distributor service fees are not BFSFs. They cited that the Congress explicitly excluded distribution and inventory management fees from AMP, suggesting they are not price concessions, and therefore, CMS is overreaching by reclassifying them. Commenters requested that CMS identify specific problematic fees, solicit input through targeted questions, and issue clear guidance to avoid confusion. Commenters also object to the inclusion of credit card processing fees as an example, noting that CMS has not provided sufficient justification for excluding them. A commenter does not believe that an isolated example of credit card processing fees is sufficient justification for providing the list.

Response: We do not agree that we have not provided sufficient justification for excluding credit card fees to distributors as BFSFs, as described in the proposed rule. However, we are persuaded by some of the commenters' concerns that providing examples of fees could have unintended implications and are not finalizing a list of example of fees at this time.

After consideration of public comments, we are not finalizing the list of fee examples and how they should be considered in the calculation of manufacturer's ASP.

Comment: Many commenters expressed concern regarding CMS' proposed implementation of January 1, 2026 for the BFSF proposals, asserting that the proposed timeline is too aggressive and does not allow sufficient time for interested parties to adjust. Commenters highlighted the extensive contract renegotiations, valuations, system updates, and compliance

procedures required. Commenters stated concerns with the rushed timeline, including reporting inconsistencies, compliance risks, and administrative inefficiencies, potentially exposing manufacturers to audits and penalties. Commenters requested more time for CMS to fully evaluate operational and policy implications, conduct additional engagement and analysis, and ensure that the rulemaking does not result in unintended consequences. Some commenters recommended that, if finalized, the policy should apply only to new contracts moving forward.

Response: We agree with commenters that the proposed implementation timeline for the BFSF definition proposals does not provide sufficient time for manufacturers to make the necessary system and operational changes. Accordingly, we intend to address this policy area in rulemaking next year. To clarify, the proposed certification requirement applies to new contracts. However, documentation of the FMV methodology applies to current as well as new contracts. As stated previously, manufacturers are expected to document and submit the FMV methodology used for any current BFSF arrangements by April 30, 2026 (that is, the due date for ASP data submission to us for sales occurring in the first quarter of CY 2026) and reflected in the July 2026 Medicare Part B Drug Payment Limit File.

Comment: Many commenters recommended CMS conduct additional research and create more opportunities for dialogue between interested parties before implementation. Commenters noted CMS could host listening sessions, establish a technical advisory panel to work with providers and interested parties and develop technical guidance, or conduct a survey of manufacturer practices.

Response: Thank you for this feedback and methods of future engagement.

Comment: A few commenters did not agree with the proposal because there is no regulatory impact analysis assessing the costs associated with the proposed changes. A commenter requested that CMS withdraw BFSF proposal and produce an analysis showing costs and benefits of changing the FMV methodology. A commenter requested a two-pronged approach: (1) conduct a comprehensive study of BFSF impacts on ASP before rulemaking, considering scenarios where fees increase or decrease ASP, treatment discrepancies, contract timelines, potential drug shortages, and interactions with other legislative/regulatory actions; (2) determine whether changes should apply universally or in a more targeted manner.

Response: We do not agree that a separate regulatory impact analysis or additional study is necessary. We believe that engaging directly with manufacturers and reviewing reasonable assumptions letters provides sufficient information to assess current practices and inform policy decisions.

Comment: We received a few comments outside the scope of the proposed rule. A commenter requested that CMS convene a public-private interested parties' group to develop recommendations for comprehensively reforming Part B drug payments to align payment to services provided and outcomes achieved versus the cost of the drug. Another commenter requested CMS gather physician costs on drugs where payment is reported to be below or less than allowed 6 percent and recommended CMS review the costs associated with administering drugs in the office where ASP is less than five percent above acquisition price or where ASP does not meet acquisition price.

Response: We note that the recommendations are outside the scope of this rulemaking. d. Summary

In summary, we are finalizing a definition of bundled arrangement at Sec. 414.802 with the removal of the phrases of purchasing patterns and prior purchases and amending Sec. 414.804(a)(2) with new paragraphs (iii) and (iv) as proposed to provide guidance to manufacturers regarding pricing of bundled price concessions. We are not finalizing the proposed new regulatory text at Sec. 414.804(a)(2)(i) to specify when certain fees are considered price concessions. We are not finalizing the proposed revised definition of BFSFs at Sec. 414.802. We are finalizing the revisions at Sec. 414.804(a)(5) to update requirements for ASP data submissions as they relate to reasonable assumptions letters, FMV documentation for current, new, and renewed contracts in reasonable assumption letters, and evidence that BFSFs are not passed on with some modifications in (ii) and (iii). Finally, we are not finalizing a non-exhaustive list of certain fees that we either do not consider BFSFs or may not be in line with FMV. 3. Average Sales Price: Units Sold at Maximum Fair Price

The Act establishes the Medicare Drug Price Negotiation Program (the “Negotiation Program”) to negotiate a maximum fair price (MFP) \145\ for certain high expenditure, single source drugs payable under Medicare Part B and covered under Part D (each, a “selected drug”). For the initial price applicability year 2026, CMS reached agreement on a negotiated price for all 10 selected drugs covered under Part D. Then, for initial price applicability year 2027, CMS selected an additional 15 drugs covered under Part D. For the third year of the Negotiation Program, initial price applicability year 2028, CMS will select for negotiation up to 15 high expenditure, single source drugs payable under Part B and/or covered under Part D.

\145\ Defined at section 1191(c)(3) of the Act.

Beginning in initial price applicability year 2028, for selected drugs payable under Part B, section 1847A(b)(1)(B) of the Act sets the Medicare Part B payment limit during the price applicability period as 106 percent of MFP. Payment limits are published on the Medicare Part B Drug Payment Limit File, which is updated quarterly. For selected drugs with a negotiated price for initial price applicability year 2026 and 2027 that have utilization under Medicare Part B, we clarify that the Part B payment limit will not be based on the MFP unless it is selected for renegotiation, pursuant to section 1194(f)(3) of the Act and as discussed in section 130.2 of the Medicare Drug Price Negotiation Program: Draft Guidance, Implementation of sections 1191 through 1198 of the Act for Initial Price Applicability Year 2028 and Manufacturer Effectuation of the Maximum Fair Price in 2026, 2027, and 2028; \146\ and there is an agreed-upon renegotiated MFP. We note that the guidance was updated on September 30, 2025; however, there were no changes to this policy in section 130.2.\147\

\146\ See: https://www.cms.gov/files/document/ipay-2028-draft-guidance.pdf.

\147\ See: www.cms.gov/files/document/ipay-2028-final-guidance.pdf.

Manufacturers of drugs payable under Part B are required to report the manufacturer's ASP to CMS each quarter as described in sections 1927(b)(3) and 1847A(f) of the Act, even when a drug is a selected drug with an MFP, including a renegotiated MFP. The statute directs that the manufacturer's ASP include sales to all purchasers in the United States (section 1847A(c)(1) of the Act) with two exempted categories of sales: (1) sales exempt from best price under section 1927(c)(1)(C)(i) of the Act; and (2) sales that are merely nominal in amount as applied for purposes of section 1927(c)(1)(C)(ii)(III) of the Act, as limited by section 1927(c)(1)(D) of the

Act. Units of drugs sold at MFP do not fall in either of those categories. In addition, units sold at MFP are expressly included in the determination of best price, as stated in section 1927(c)(1)(C)(ii)(V) of the Act. Therefore, since the statutory language does not expressly or implicitly exempt units of Medicare Part B or Part D MFP sales from the calculation of the manufacturer's ASP, we clarified in the CY 2026 PFS proposed rule (90 FR 32545 through 32546) that units of selected drugs sold at MFP are included in the calculation of the manufacturer's ASP described in section 1847A(c) of the Act effective January 1, 2026.

The file used for publishing payment limits for drugs covered under Part B has commonly been referred to as the “ASP drug pricing file” likely because most drugs listed on the file have a payment limit based on the ASP (usually 106 percent of ASP). However, the file also contains the payment limits based on other pricing metrics. For example, several provisions in section 1847A of the Act require that the payment limit be based on a pricing metric other than ASP under specific circumstances, including the following:

When the Wholesale acquisition cost (WAC) is less than ASP for a single source drug or biological (section 1847A(b)(4) of the Act);

When ASP exceeds the widely available market price (WAMP) or average manufacturer price (AMP) (section 1847A(d)(3)(C) of the Act); and

For a selected drug, 106 percent of MFP (section 1847A(b)(1)(B) of the Act).

In such circumstances, only the actual payment limit is published on the file (and no ASP information is displayed). Therefore, we now refer to it as the Medicare Part B Drug Payment Limit File.

While we did not make a proposal or solicit comments on the policy statement clarifying that (1) units of selected Part B or Part D drugs sold at the MFP are included in the manufacturer's ASP and (2) when the Medicare payment limit is based on MFP, the Medicare Part B Drug Payment Limit File will display the MFP-based payment limit, we received comments. Commenters mentioned statutory framework and its relationship to ASP, AMP, and best price; operational and reporting considerations; the role and publication of ASP values in CMS files; and potential implications across Medicare fee-for-service, Medicare Advantage, Medicaid, and commercial arrangements. Submissions also discussed biosimilar market dynamics, inflation-rebate calculations, and transparency and labeling in public files. We appreciate the thoughtful and robust feedback on this policy statement. 4. Autologous Cell-Based Immunotherapy and Gene Therapy Payment a. Background

Medicare Part B covers many cellular immunotherapies and gene therapies that are FDA-approved under a biologics license application (BLA) as incident to drugs and biologicals under section 1861(s)(2) of the Act, which are paid under section 1847A of the Act (typically, at ASP plus 6 percent). Cell-based autologous therapies are a particular subset, which require cells to be collected from the patient, altered to create the intended therapy, and then administered to the same patient for treatment of a condition. These steps generally include cell collection from the patient via apheresis (including leukapheresis), surgical removal, biopsies or other means, the cells are immediately transported at very low temperatures to a manufacturing site for genetic engineering and/or other steps (for example, activation, cell expansion, and/or quality testing). After the manufacturing steps are complete, the final product is transported back to the healthcare provider or treatment facility to be administered to the patient.

For example, for Chimeric Antigen Receptor (CAR) T-cell therapy, T- cells are collected from the patient via leukapheresis and genetically engineered to express a chimeric antigen receptor that will bind to a certain protein on a patient's cancerous cells. The CAR T-cells are then administered to the same patient to attack certain cancerous cells. For other autologous cell-based therapy, the preparatory and manufacturing steps follow a similar general process.

Many studies show that the manufacturing steps for these therapies have a very high cost of goods sold (COGS), including very high proportion of labor costs in manufacturing, which ultimately leads to a high final cost of the therapy.148 149 Some also note that the acquisition of raw materials, including tissue procurement, and quality-related activities are other top contributors to the COGS for autologous cell-based therapies. As technologies advance, there has been continued research to scale cell-based therapies, including a possible shift to allogeneic cell therapy, in which cell collection would be from healthy donors or stem cells. Manufacturing allogenic cell-based therapy would allow the therapy to be ready ahead of time instead of the multiple-week wait time between cell collection and administration of the treatment for allogeneic therapies.150 151 152 Throughout research and discussions of cell-based therapies, tissue procurement is a key consideration in the discussion of the COGS. This further distinguishes all types of tissue procurement, whether it be for allogenic or autologous therapies, are part of the COGS and part of the manufacturing process for the products.

\148\ Yonatan Y. Lipsitz, William D. Milligan, Ian Fitzpatrick, et al, A roadmap for cost-of-goods planning to guide economic production of cell therapy products, Cytotherapy,Volume 19, Issue 12, 2017, Pages 1383-1391.

\149\ Brian Canter, Sabine Sussman, Stephen Colvill, Nitzan Arad, Elizabeth Staton, Arti Rai, Introducing biosimilar competition for cell and gene therapy products, Journal of Law and the Biosciences, Volume 11, Issue 2, July-December 2024, lsae015, https://doi.org/10.1093/jlb/lsae015.

\150\ Caldwell KJ, Gottschalk S, Talleur AC. Allogeneic CAR Cell Therapy-More Than a Pipe Dream. Front Immunol. 2021 Jan 8;11:618427. doi: 10.3389/fimmu.2020.618427. PMID: 33488631; PMCID: PMC7821739.

\151\ Abbasalizadeh, S., Pakzad, M., Cabral, J. M. S., & Baharvand, H. (2017). Allogeneic cell therapy manufacturing: process development technologies and facility design options. Expert Opinion on Biological Therapy, 17(10), 1201-1219. https://doi.org/10.1080/14712598.2017.1354982.

\152\ Pigeau GM, Csaszar E, Dulgar-Tulloch A. Commercial Scale Manufacturing of Allogeneic Cell Therapy. Front Med (Lausanne). 2018 Aug 22;5:233. doi: 10.3389/fmed.2018.00233. PMID: 30186836; PMCID: PMC6113399.

As technologies for autologous cell-based immunotherapies and gene therapies continue to advance, we aim for payment policies amongst these therapies to be consistent. Therefore, in the CY 2026 PFS proposed rule (90 FR 32546 through 32547), we proposed policies for how Medicare pays for the manufacturing steps across all types of autologous cell-based immunotherapies and gene therapies and proposed how these steps should be considered by manufacturers when submitting ASP data to CMS. b. Payment

Medicare payment for the manufacturing steps to CAR T-cell therapies have previously been discussed in rulemaking, specifically in the CY 2019, 2020, and 2021 Medicare hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) payment system final rules and the CY 2025 Physician Fee Schedule (PFS) final rule. In the 2019 OPPS/ASC final rule (83 FR 58904 through 58908), we finalized policies for payment of four Level III CPT codes (0537T through 0540T). We finalized that CPT codes describing (1) harvesting of blood-derived T lymphocytes, (2) preparation

of T lymphocytes for transportation, cryopreservation, and storage, and (3) preparation of the CAR T-cell therapy for administration are not payable under OPPS. We stated that these codes describe various steps required to collect and prepare the genetically modified T-cells, and Medicare does not generally pay separately for each step used to manufacture a drug or biological. We noted that the billing and payment codes for the CAR T-cell therapies include leukapheresis and dose preparation procedures because these services are included in the manufacturing of these biologicals. In that final rule, we also finalized to pay separately for the Level III CPT code describing the administration service for CAR T-cell therapy. This policy was reiterated in the CY 2020 and 2021 OPPS/ASC final rules (84 FR 61231 through 61234 and 85 FR 85949 through 85951, respectively).

In September 2023, the CPT Editorial Panel deleted four Level III codes (0537T through 0540T) and created four new Level I codes (38225 through 38228) that describe only the steps of the complex CAR-T Therapy process performed and supervised by physicians: CPT code 38225 (Chimeric antigen receptor T-cell (CAR-T) therapy; harvesting of blood- derived T lymphocytes for development of genetically modified autologous CAR-T cells, per day); 38226 (Chimeric antigen receptor T- cell (CAR-T) therapy; preparation of blood-derived T lymphocytes for transportation (eg, cryopreservation, storage)); 38227 (Chimeric antigen receptor T-cell (CAR-T) therapy; receipt and preparation of CAR-T cells for administration); 38228 (Chimeric antigen receptor T- cell (CAR-T) therapy; CAR-T cell administration, autologous). In the CY 2025 PFS final rule (89 FR 97779 through 97780), we finalized the policy to continue to bundle payment under the PFS for CAR-T services described under CPT codes 38225, 38226, and 38227. We stated that bundling payment is appropriate for these codes to align with OPPS policies to not pay separately for each step used to manufacture a drug or biological. In that final rule we also finalized to pay separately for CPT code 38228 (the service of CAR T-cell therapy administration), which aligns with OPPS policy.

To date, payment for procedures that are required for manufacturing other autologous cell-based immunotherapies and gene therapies (that are not CAR T-cell therapies) have not been explicitly addressed. As discussed in the background section above, the tissue procurement step for all autologous cell-based therapies is a pivotal part of the manufacturing process and a key component of the overall cost of the product, that is, COGS. In addition, if certain therapies could be scaled in a way that they could be allogenic in nature, we see that the tissue procurement step would even more clearly be considered a manufacturing step.

We proposed that preparatory procedures for tissue procurement required for manufacturing an autologous cell-based immunotherapy or gene therapy be included in the payment of the product itself. The proposal would continue the current payment policies for CAR T-cell therapies and would extend the same payment policy to other autologous cell-based therapies. In our evaluation of each therapy, we noted there are similar sequences of steps as we described in the background section. Consistent with previous rulemaking, we proposed that Medicare not pay separately for each step used to manufacture an autologous cell-based immunotherapy or gene therapy. In other words, Medicare would not pay separately for the collection of raw materials or labor associated with the collection of raw materials for a drug or biological that are essentially part of the COGS. Payment for the raw materials and any labor associated with collection of the raw materials would be included in the payment of the drug or biological itself, using the billing and payment code for the product.

We solicited comments on the proposal to continue this policy for CAR T-cell therapies and extension of the policy to other autologous cell-based immunotherapy or gene therapy.

The following is a summary of public comments we received and our responses.

Comment: Some commenters supported including manufacturing-related costs in the payment for the product (that is, bundled payment) and recognizing manufacturer-paid procurement activities in pricing and reporting. They stated this approach reflects true acquisition costs, reduces uncompensated expenses, and aligns with current policy for CAR T-cell therapies.

Response: We thank the commenters for their support.

Comment: Many commenters did not agree with CMS' current payment policy for CAR T-cell therapies, under which services described by CPT codes 38225, 38226, and 38227 are bundled into the payment for the product, and the proposal to extend that approach to other autologous cell-based immunotherapy and gene therapy. They stated that preparatory procedures such as cell collection, apheresis, laboratory processing, and dose preparation are clinician-ordered, resource-intensive, and medically necessary, and therefore should be reimbursed separately rather than treated as manufacturer COGS. Commenters further stated that the current bundling policy for CAR T-cell therapies oversimplifies the nature of cell and gene therapies, undervalues physicians' work (for example, clinical oversight and coordination), and is inconsistent with CMS' approach for stem cell transplants and other therapies in which analogous services are paid separately. Several commenters were concerned that continued bundling could worsen “underwater reimbursement,” leading to practice closures, consolidation, and shifts to higher-cost inpatient settings or to integrated centers that can absorb unreimbursed costs, thereby increasing overall system costs.

Response: We appreciate commenters' feedback regarding the characterization of preparation services, such as cell collection by apheresis and local processing, for CAR T-cell therapies. Consistent with prior rulemaking under both the OPPS and the PFS--ranging from the CY 2019 OPPS/ASC final rule (83 FR 58904 through 58908) to the most recent CY 2025 OPPS/ASC final rule (89 FR 94080 through 94082) and the CY 2025 PFS final rule (89 FR 97778 through 97780)--we continue to view these services as integral preparatory steps in the manufacturing of the therapy and, therefore, included in the payment for the product. Medicare does not pay separately for each step used to manufacture a drug or biological product; these manufacturing-related services are accounted for in the drug payment code, while administration services are separately recognized.

We do not agree with commenters' comparisons to payment for stem cell transplant services and other therapies where collection and processing may be separately payable, as we do not consider those frameworks directly analogous to CAR T-cell therapies and other autologous cell-based immunotherapy and gene therapy products. In the stem cell transplant context, payment policies established under section 1886(d)(5)(M) of the Act and related implementing regulation at Sec. 412.113(e) address clinical services furnished to the beneficiary and, in some cases, provide a distinct reasonable-cost cell-acquisition payment to subsection (d) hospitals. By contrast, for CAR T-cell therapies and other autologous cell-based

immunotherapy and gene therapy paid under section 1847A of the Act, patient-specific collection and local processing are steps used to manufacture the labeled biological product and are reflected in the product payment, while the administration service is separately payable. Maintaining this approach across payment systems promotes consistency in the treatment of these complex therapies.

Accordingly, we are finalizing that preparatory procedures for tissue procurement required for manufacturing an autologous cell-based immunotherapy or gene therapy be included in the payment of the product itself, consistent with the existing payment policy for CAR T-cell therapies. For concerns about potential payment adequacy, practice viability, and site-of-service shifts, we will continue to evaluate and monitor claims data, clinical practice patterns, and site-of-service trends to determine whether additional refinements may be warranted in future rulemaking.

Comment: Several commenters requested a clearer definition of “tissue procurement” and suggested that “cell collection” more accurately describes the procedures involved in autologous cell-based immunotherapy and gene therapy. They noted that “tissue procurement” is a broad term that could cause confusion, as it may encompass clinical activities (for example, diagnostic tissue biopsies) beyond those intended for payment and ASP reporting. Commenters also noted that, in some cases, a finalized CAR T-cell product is never administered to the beneficiary due to factors such as manufacturing failure or disease progression that may render the patient ineligible or result in death during the production period. They recommended complementary payment tools for preparatory procedure payment and requested clarification on how payment policy applies in these circumstances.

Response: We agree with commenters that “cell collection” is a more precise term than “tissue procurement” to describe the preparatory procedures such as apheresis or other collection of patient cells used as starting material for autologous cell-based immunotherapy and gene therapy, and we will adopt this terminology where appropriate for clarity. We further clarify that when the required procurement procedure does not involve apheresis (for example, when starting material is obtained via procedures including, but not limited to, surgical biopsy, tumor harvest, or tumor resection), the term “tissue procurement” remains appropriate in the context of manufacturing autologous cell-based immunotherapy and gene therapy. This clarification promotes consistent terminology and reporting and does not expand nor narrow existing payment scope. This finalized policy applies to patient-specific procurement and associated processing required by the product's manufacturing and release specifications. We thank commenters for providing their unique perspectives and experiences in situations where the manufacturing process does not result in a final product being administered to a beneficiary and recommendation on complementary payment tools; these issues are out of scope for this final rule.

Comment: Several commenters requested CMS consider additional protections to ensure appropriate reimbursement for autologous cell immunotherapy and gene therapy services. They recommended mechanisms such as add-on codes for preparatory procedures and strengthened outlier protections under the OPPS to address cases with exceptionally high costs, including but not limited to severe toxicity-related hospital admissions. Commenters also noted that some hospitals may face unfunded costs such as anesthesia, intensive care unit readiness, registry reporting, and long-term monitoring, while community practices expressed concern about losing the ability to provide these therapies locally. A few commenters requested that CMS monitor ASP volatility in low-volume markets, where quarterly sales data may fluctuate significantly and create reimbursement uncertainty.

Response: As part of establishing the Part B payment limit based on the quarterly submission of all sales under section 1847A(c)(5) of the Act, we will continue to monitor pricing changes and patient volumes for autologous cell-based immunotherapies and gene therapies. For recommendations for additional protections such as add-on codes or enhanced outlier adjustments, this final rule addresses only (1) continuation of bundled payment for manufacturing steps under the PFS and OPPS and (2) the manufacturer-paid preparatory procedures for ASP reporting. These recommendations are therefore out of scope for this rule.

Comment: Many commenters did not agree with the assignment of PC/TC indicator “5” to CPT code 38228, which describes the administration of autologous CAR T-cell therapy. They stated that CAR T-cell administration should not be categorized as an “incident to” service and recommended revising the indicator from “5” to “0 (physician service),\153\” consistent with similar services such as autologous stem cell transplant infusion (CPT code 38241). Several commenters also requested that this correction be applied retroactively to January 1, 2025, and that CMS direct MACs to reprocess affected claims.

\153\ https://www.cms.gov/status-indicators.

In addition, commenters objected to CMS' bundling of preparatory services described by CPT codes 38225 (cell collection), 38226 (cell processing/cryopreservation), and 38227 (receipt and dose preparation), which CMS has assigned status indicator “B” under both the OPPS and PFS, making them non-payable. They noted that this approach is inconsistent with CMS' payment policies for stem cell transplants, where collection and processing are separately reimbursed. Commenters recommended assigning status indicator “S” and place these codes in appropriate APCs to reflect the clinical complexity and resource intensity of these services.

Response: We made no specific proposal related to the CAR-T cell administration codes. Therefore, these comments are out of scope. Similarly, we did not propose changes to status indicators for CPT codes 38225 (cell collection), 38226 (cell processing/ cryopreservation), and 38227 (receipt and dose preparation). As discussed above in this section, we are finalizing that preparatory procedures for tissue procurement required for manufacturing an autologous cell-based immunotherapy or gene therapy be included in the payment of the product itself, consistent with the existing payment policy for CAR T-cell therapies.

Comment: Several commenters requested clarification on how the policy would apply to allogeneic cell and gene therapies that require donor search, evaluation, and cell procurement. They explained that these steps--such as identifying and matching donors through national registries, performing compatibility testing, coordinating donor cell collection and transport, and monitoring donor health--are critical for patient and donor safety, can vary widely by case, and may occur even when the therapy is not ultimately administered. Commenters requested CMS to separately reimburse for these steps to reflect their complexity and variability. Alternatively, commenters requested for clarification whether these steps paid by manufacturers qualify as BFSFs.

Response: This rule addresses autologous cell-based immunotherapy

and gene therapy manufacturing steps only. Policies specific to allogeneic donor procurement or transplant services are outside the scope of this rule. That said, as discussed earlier in this preamble, procurement of starting material--whether patient-derived (autologous) or donor-derived (allogeneic)--is integral to the manufacturing process and a component of a manufacturer's COGS. If, in the future, allogeneic therapies are scaled and a manufacturer makes payments to non- purchasing third parties for donor search, evaluation and cell procurement services, such payments may qualify as BFSFs and be excluded from ASP when they satisfy the four-part test at Sec. 414.802. This final rule does not establish new payment policy specific to allogeneic donor search, evaluation, or cell procurement, nor does it alter existing transplant-related procurement policies. We may consider whether additional clarification is warranted in future rulemaking as allogeneic cell-based therapy evolves.

Therefore, after consideration of public comments, we are finalizing as proposed to continue the existing payment policy for CAR T-cell therapies and to extend it to autologous cell-based immunotherapy and gene therapy. Under this policy, the costs of patient-specific cell or tissue procurement and processing remain bundled into the payment for the product. c. Average Sales Price

Payment limit calculations for drugs payable under Part B are done on a quarterly basis using the manufacturer's ASP (as defined in Sec. 414.902) using methodology in section 1847A of the Act. Manufacturers are required to report ASP data to CMS under sections 1847A(f)(2) and 1927(b)(3) of the Act. Manufacturers are instructed to calculate the manufacturer's ASP in accordance with section 1847A(c) of the Act and Sec. 414.804(a). To date, we have not addressed how manufacturers of autologous cell-based immunotherapy or gene therapy should account for the procedures for the collection of cells used to manufacture the product into the calculation of the manufacturer's ASP.

As discussed in section III.A.3.a. of this final rule, the COGS and manufacturing process for an autologous cell-based immunotherapy or gene therapy include tissue procurement (that is, the collection of cells from the patient). Consistent with the proposal in the previous section that preparatory procedures required for manufacturing an autologous cell-based immunotherapy or gene therapy be included in the payment of the product itself, we also proposed that, beginning January 1, 2026 (that is, data reflecting sales beginning on that date), any preparatory procedures for tissue procurement required for manufacturing an autologous cell-based immunotherapy or gene therapy that are paid by the manufacturer be included in the calculation of the manufacturer's ASP. We also proposed that any payment by the manufacturer to an entity for tissue procurement is not considered a bona fide service fee for the purposes of calculating the manufacturer's ASP since this is an integral part of the manufacturing process for autologous cell-based immunotherapy or gene therapy and should be included in the price of the product.

The following is a summary of the comments we received and our responses.

Comment: Several commenters requested additional details on documentation expectation for classifying payments for preparatory procedures as BFSFs for autologous cell-based immunotherapy or gene therapy.

Response: General BSFS documentation standards are addressed in section III.A.2.c. of this final rule. The policy in this section pertains only to the ASP reporting classification of manufacturer-paid preparatory procedures for autologous cell-based immunotherapy and gene therapy manufacturing and does not establish new submission requirements.

Comment: Many commenters did not agree with CMS' proposal to treat preparatory procedures--such as cell collection and local processing-- as not BFSFs and to require their inclusion in the calculation of ASP. Commenters stated that payments for these procedures meet the regulatory BFSF criteria and that treating them as price concessions would artificially lower ASP and reimbursement, create operational burdens, and limit patient access. Some commenters requested CMS to address potential interactions between ASP and other pricing metrics. Commenters also stated that, for many beneficiaries, cell collection occurs at a different facility and by a different provider than the entity that ultimately administers and bills for the product.

Commenters further stated that CMS lacks explicit statutory authority to redefine ASP inputs in this manner because section 1847A of the Act ties ASP to sales to purchasers, not payments to non- purchasing service providers, and the Congress has not directed manufacturers to add specific manufacturing costs into ASP. Some commenters recommended that CMS delay implementation by 12 to 24 months, requested clarification that payments to non-purchasing third parties (for example, the American Red Cross) should not affect ASP calculations, and suggested for clearer guardrails for manufacturer- provider arrangements if manufacturers pay for cell collection or processing.

Response: We are persuaded by the commenters that when a manufacturer pays for a preparatory procedure, it could be classified as a bona fide service. Therefore, after consideration of public comments, we are not finalizing our proposal that such payments cannot be classified as BFSFs. Likewise, we are not finalizing the proposal to require inclusion in ASP, beginning January 1, 2026, of manufacturer- paid preparatory procedures for tissue procurement (including “cell collection”) required for manufacturing an autologous cell-based immunotherapy or gene therapy product. Instead, we agree that manufacturer payments for preparatory procedures--such as cell collection and local processing--may meet the four-part regulatory criteria for BFSFs under Sec. 414.802 when they are itemized, represent FMV, are performed on behalf of the manufacturer, and are not passed through to a purchaser. These payments compensate for services integral to the manufacturing process and are not discounts or rebates that reduce the cost to the purchaser. When these criteria are satisfied, such payments are excluded from price concessions under Sec. 414.804(a)(2)(ii); because ASP is calculated net of price concessions under section 1847A(c)(3) of the Act, these amounts are not deducted from ASP. These clarifications apply regardless of whether collection and infusion occur at the same or different facilities.

We believe this interpretation is most consistent with the statutory framework for ASP and the regulatory definition at Sec. 414.802, and it avoids unintended downward pressure on ASP-based reimbursement that could impede beneficiary access. Because manufacturers already maintain documentation relevant to BFSF analyses, this clarification aligns ASP reporting with existing requirements and does not impose new burden. We reiterate that payments properly classified as BFSFs are not price concessions in ASP calculations, and manufacturers must continue to maintain documentation supporting their BFSF determinations and reasonable assumptions.

For payments made to non-purchasing third parties, payments that

meet the BFSF criteria are excluded from ASP. More broadly, ASP represents the manufacturer's sales to all purchasers; therefore, payments to entities that do not purchase the product are not price concessions to a purchaser and, when properly classified as BFSFs, do not affect ASP.

This policy addresses only how manufacturer-paid amounts are reflected in ASP; it does not require hospitals or physicians to enter financial arrangements with manufacturers or dictate commercial terms. By not mandating such arrangements, we provide interested parties flexibility to structure relationships consistent with operational needs and applicable law, supporting site-specific decisions and reducing administrative burden. Except for the ASP reporting clarification described in this section, this final rule does not change any statutory or regulatory price-reporting definitions or methodologies, including AMP and best price. d. Summary

In summary, we proposed that preparatory procedures for tissue procurement required for manufacturing an autologous cell-based immunotherapy or gene therapy be included in the payment of the product itself and that, beginning January 1, 2026, any preparatory procedures for tissue procurement required for manufacturing an autologous cell- based immunotherapy or gene therapy that were paid for by the manufacturer be included in the calculation of the manufacturer's ASP.

After consideration of public comments, we are finalizing, as proposed, continuation of the existing bundled payment policy for CAR T-cell therapies and extending that policy to autologous cell-based immunotherapy and gene therapy, such that preparatory procedures for patient-specific cell or tissue procurement required for manufacturing are included in the payment for the product itself. However, we are not finalizing the proposal to prevent these payments from qualifying as BFSFs or to require their inclusion in ASP beginning January 1, 2026. Instead, we conclude that such payments may be treated as BFSFs when the four-part test at Sec. 414.802 is satisfied and therefore excluded from ASP, consistent with section 1847A(c)(3) of the Act and Sec. 414.804(a)(2)(ii). This final rule maintains cross-setting alignment under the OPPS and PFS--where Medicare does not pay separately for each step used to manufacture a drug or biological but does pay separately for the administration service--and ensures that ASP reporting remains consistent with statutory and regulatory requirements.

As provided in 42 CFR part 405 subpart X of our regulations, RHC and FQHC visits generally are defined as face-to-face encounters between a patient and one or more RHC or FQHC practitioners during which one or more RHC or FQHC qualifying services are furnished. RHC and FQHC practitioners are physicians, NPs, PAs, CNMs, clinical psychologists (CPs), licensed marriage and family therapists, mental health counselors, and clinical social workers, and under certain conditions, a registered nurse or licensed practical nurse that is furnishing care to a homebound RHC or FQHC patient in an area verified as having shortage of home health agencies. Transitional Care Management (TCM) services can also be paid by Medicare as an RHC or FQHC visit. In addition, Diabetes Self-Management Training (DSMT) or Medical Nutrition Therapy (MNT) sessions furnished by a certified DSMT or MNT program may also be considered FQHC visits for Medicare payment purposes. Only medically necessary medical, mental health, or qualified preventive health services that require the skill level of an RHC or FQHC practitioner are RHC or FQHC billable visits. Services furnished by auxiliary personnel (for example, nurses, medical assistants, or other clinical personnel acting under the supervision of the RHC or FQHC practitioner) are considered incident to the visit and are included in the per-visit payment.

RHCs generally are paid an all-inclusive rate (AIR) for all medically necessary medical and mental health services and qualified preventive health services furnished on the same day (with some exceptions). The AIR is subject to a payment limit, meaning that an RHC will not receive any payment beyond the specified limit amount per visit. As of April 1, 2021, all RHCs are subject to statutory upper payment limits determined in accordance with section 1833(f) of the Act, as amended by section 130 of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260).

FQHCs were paid under the same AIR methodology until October 1, 2014. Beginning on that date, in accordance with section 1834(o) of the Act (as added by section 10501(i)(3) of the Patient Protection and Affordable Care Act (Pub. L. 111-148)), FQHCs began to transition to the FQHC PPS system, in which they are paid based on the lesser of the FQHC PPS rate or their actual charges. The FQHC PPS rate is adjusted for geographic differences in the cost of services by the FQHC PPS geographic adjustment factor (GAF). The rate is increased by 34 percent when an FQHC furnishes care to a patient that is new to the FQHC, or to a beneficiary receiving an initial preventive physical examination (IPPE) or has an annual wellness visit (AWV).

Both the RHC AIR and FQHC PPS payment rates were initially designed to reflect the cost of all services and supplies that an RHC or FQHC furnishes to a patient in a single day. These nearly all-inclusive rates are not adjusted at the individual level for the complexity of individual patient health care needs, the length of an individual visit, or the number or type of practitioners involved in the patient's care. Instead for RHCs, all costs for the facility over the course of the year are aggregated and an AIR is derived from these aggregate expenditures. The FQHC PPS base rate is updated annually by the percentage increase in the FQHC market basket reduced by a productivity adjustment. For CY 2025, we rebased and revised the 2017-based FQHC market basket to reflect a 2022 base year (89 FR 98023 through 98032). 2. Payment for Care Coordination Services