AMP is WAC -- 08/07/26

Friday, is it you?

We have some new faces around here, welcome. I’m Jennifer Snow, founder of Apteka Policy and your self-appointed translator of U.S. pharmaceutical policy. I’ve spent 25+ years inside this system - at CMS, at manufacturers, at consulting firms - which means I’ve read the rules, sat in the meetings, and watched the incentives play out in real time. I’m not a lobbyist and I’m not going to give you a neutral take on something that isn’t neutral. What I will do is take the dense, politically charged stuff - IRA negotiations, 340B fights, PBM reform, Medicare Advantage - and tell you what it means for coverage, access, and your commercial strategy. AMP is WAC is where I do that every week, and I’m glad you’re here.

FOIA and Seek. This week, Health Affairs published an analysis of the Trump administration’s deals with drug companies, and the core finding from Vogel, Rangaraj, and Wouters is that these agreements may be less significant than advertised -- and almost certainly less significant than what’s happening in the mandatory regulatory track running alongside them.

Between September 2025 and April 2026, 17 drug companies representing 86% of branded drug sales signed voluntary agreements with the administration. The White House called them “the most significant actions ever taken” to lower drug prices. Senator Ron Wyden called them a sham. The authors can’t fully confirm either characterization, largely because the actual agreement terms remain undisclosed.

What we know: the deals include some version of price concessions, commitments to route drugs through TrumpRx (the administration’s direct-to-consumer platform), and domestic manufacturing investments. What we don’t know: which specific products are covered, how large the price changes are, and whether any of this reaches the patients most affected by high drug costs. TrumpRx operates on a cash-pay basis, which means patients on Medicare, Medicaid, or employer coverage aren’t necessarily reaching these deals.

The mandatory track -- GLOBE for Part B, GUARD for Part D, GENEROUS for Medicaid -- carries actual enforcement mechanisms, rebate requirements, and international benchmarks. Those models are where the structural changes will come from. They’re also still being litigated and implemented, which makes GLOBE and GUARD the longer-duration story. And it sounds like these deals are exempt from these programs.

For manufacturers, the bilateral deals generated real political cover while producing relatively limited public (and competitor) visibility into what was committed. More details will surface. Or they won’t. Which is, frankly, also information.

No Indication of What Comes Next. Last week, Health Affairs published a piece from Dan Crippen and Kirsten Axelsen that makes a point that keeps getting swallowed by the IRA implementation debate: the Congressional Budget Office (CBO) modeled what Medicare drug price negotiation does to new drug development, but nobody has modeled what it does to post-approval development for additional indications.

Under the IRA, the Centers for Medicare & Medicaid Services (CMS) sets prices for selected drugs starting seven years after Food and Drug Administration (FDA) approval for small molecules and eleven years for biologics. By 2030, the agency could be applying Maximum Fair Price (MFP) to 120 drugs representing up to 50% of total Medicare drug spending. The revenue that gets compressed is for every subsequent use of that molecule. A drug negotiated at year seven for its first approved use might be in active clinical development for a pediatric indication or a second cancer at year six. The MFP changes the financial math on that work.

CBO’s estimate of roughly 15 fewer new drugs over a decade from the IRA has been debated extensively. What hasn’t been debated is what happens to indication two, three, and four for the same molecule. The authors call for a formal research agenda to build that evidence, drawing on FDA, CMS, and private-sector data.

The timing matters. The administration is expanding price-setting through GLOBE, GUARD, and GENEROUS, into Part B and Medicaid. If those mechanisms are layered on top of IRA negotiation, the question of what post-approval R&D looks like under compounding price pressure is kind of important.

For manufacturers in oncology and rare disease, where the same molecule often treats multiple conditions sequenced over time, this is the calculation on every Phase 2 trial in the pipeline right now.

What If. Last week, JAMA Health Forum published a piece from Stuart Butler at Brookings laying out five building blocks for a bipartisan post-Trump health system: end employment-centered coverage, harmonize tax benefits and subsidies across programs, build better Affordable Care Act (ACA) exchanges, make full use of federalism, and expand individual and family-level decision-making.

Butler’s framing is that the current political moment, however chaotic, creates enough breathing room for honest public discussion about health system architecture, not just marginal changes. I want to take that argument seriously because the alternative is continuing to fight over Medicaid work requirements and subsidy cliffs while the underlying structure goes untouched. BUT I’m skeptical. Honest political conversations? I’m optimistic and even I’m not sure I can rally.

On employment-based coverage: 60% of Americans under 65 get coverage through their employer. The roots of that are in WWII-era tax rulings, not deliberate policy design. It creates brutal transitions -- losing a job means losing coverage and income. But changing the current system requires replacing funding but also an entire administrative and cultural infrastructure. We are broken, but I’m not sure we are broken enough?

On harmonizing tax benefits: the unlimited tax exclusion for employer-sponsored insurance versus capped ACA subsidies creates genuine inequity. The moment you propose touching the employer exclusion, you are in a fight with the benefits industry.

What Butler gets right is that these are the real conversations and that someone should be having them. What the piece doesn’t fully grapple with is that “bipartisan support for the concept” and “bipartisan support for any specific version” are different things. The ACA exchanges have bipartisan conceptual support and have been the subject of partisan warfare for 16 years.

For manufacturers, the structural question of whether the U.S. moves toward a different coverage architecture matters for who the customer is, who makes formulary decisions, and how price negotiation authority is distributed.

Personally, I would love to hold cross stakeholder conversations on where there were lanes of alignment, but I also recognize it feels like a fool’s errand.

404: Reference Price Not Found. Last week, JAMA Health Forum published a research letter that documents a design problem in the GLOBE and GUARD models that the administration has not publicly addressed: the international reference prices those models depend on may not exist for many of the drugs they’re supposed to cover, especially in the years immediately following US launch.

The study looked at 79 novel therapeutics approved by FDA between 2015 and 2019 that would likely qualify for GLOBE or GUARD. Within one year of US launch, only 59.5% had launched in more than one of the 19 most-favored-nation (MFN) reference countries. That climbs to 91% by five years. The more important number: within one year, only 1.3% of those therapeutics had launched in MFN countries with combined drug expenditure equivalent to Medicare. By five years, that’s 24.1%. And remember, that was before there was an MFN policy to worry about.

The problem is worse for exactly the drugs you’d expect. Orphan-designated products and oncology therapeutics have longer timelines. Those are also the most expensive drugs in the Medicare pipeline and the ones most likely to draw GLOBE or GUARD scrutiny.

GLOBE and GUARD are mandatory programs, with rebate obligations tied to those international benchmarks. If a benchmark is missing or sparse when a drug enters the model -- which will happen routinely, given typical US-to-rest-of-world launch timelines -- the regulation needs to say what happens next. It currently doesn’t.

For manufacturers, this isn’t an abstract regulatory gap. It’s an open question about how rebate obligations get calculated when the reference data is incomplete. The assumption has been that these companies just don’t participate but that’s not known, yet.

The Unlaunchables. This week, Cencora released an updated U.S. Biosimilar Landscape Report. As of August 1, 2026, 88 biosimilars have received FDA approval. 67 have launched. The gap -- 21 products approved and sitting -- tells you something about the difference between regulatory success and commercial success in this market.

The biosimilar pathway was built on a premise: biologic competition would work the way generic competition works for small molecules. The Biologics Price Competition and Innovation Act passed in 2010. Sixteen years in, the market is real, but the dynamics are different.

The approved-but-not-launched products aren’t regulatory failures. In most cases the commercial math hasn’t worked. Reference product manufacturers have used rebate arrangements with payers and PBMs to make it difficult for biosimilars to compete on access even when they’re cheaper on paper. Interchangeability designations have helped but haven’t fully resolved the formulary access problem.

Adalimumab is the most vivid example, almost a dozen approved biosimilars, a market that took years to show meaningful switching from Humira.

The pipeline section of this report is more encouraging. Products expected to launch in one to four years span immunomodulators, oncology, ophthalmology, and bone health. Both established biosimilar players and new entrants are investing. That’s a signal the market hasn’t closed off.

For manufacturers of reference biologics in the IRA pipeline, the biosimilar clock matters more than it probably did when the IRA passed. Biologics are insulated from Medicare negotiation until 11 years post-approval specifically to preserve the biosimilar competitive window. If that window closes without robust biosimilar competition materializing -- if the commercial access barriers persist -- the 11-year buffer doesn’t accomplish what it was designed to do, and negotiation pressure lands on reference products that are competing against incumbency, not competition.

67 out of 88. The market is maturing. It’s just not maturing as fast as anyone hoped in 2010.

340B, or Not to Be Reimbursed. The proposed 2027 Outpatient Prospective Payment System (OPPS rule) from CMS, out on July 29, includes a proposal to cut 340B drug reimbursement from Average Sales Price (ASP)+6% to ASP-33.4%. That’s a 37% reduction. This is effectively the same policy CMS tried to implement in 2018 during the first Trump administration, which the Supreme Court struck down in 2022 because the agency hadn’t done a cost acquisition survey before making the change. CMS conducted the survey in early 2026. Here’s the do-over.

The redistribution math is where it gets interesting. Budget neutrality rules require CMS to keep aggregate OPPS spending flat, so the estimated $4.85 billion reduction in 340B drug payments gets redistributed as an 8.44% across-the-board increase in non-drug outpatient service payments. That creates a significant transfer between hospital types. Safety-net hospitals, which depend heavily on 340B drug revenues, face a net 5.8% reduction in OPPS revenues. For-profit hospitals -- which are not eligible for 340B and benefit only from the non-drug payment increase -- see a 7.4% net increase.

The KFF breakdown from Hulver and colleagues is worth reading for the distribution: large urban hospitals (-5.2%), major teaching hospitals (-4.3%), government hospitals (-3.0%), and nonprofit hospitals (-0.5%) all see net reductions. Rural sole community hospitals (+5.7%), small urban hospitals (+4.8%), and non-teaching hospitals (+3.5%) see net increases. Rural SCHs, children’s hospitals, and PPS-exempt cancer hospitals are exempted from the cut. Critical access hospitals aren’t affected because they’re not reimbursed under OPPS.

Medicare beneficiaries using 340B drugs would save $1.15 billion in 2027 on cost-sharing -- but beneficiaries using non-drug outpatient hospital services face higher cost-sharing from the 8.44% payment increase. The patient-level calculus is not simple.

Safety-net hospitals are also facing Medicaid cuts from the reconciliation law. The financial pressure is concentrating in the same institutions at the same time. For manufacturers, the more immediate question is how a significant drop in 340B margins changes covered entity purchasing behavior and drug utilization in settings that have been among the fastest-growing dispensing channels over the last decade.

Refundamentally Flawed. On July 30, Avalere published an analysis of CMS’s four proposed approaches for calculating the Standardized Default Refund Amount (SDRA)for Part B drugs selected for Medicare price negotiation, and the short version is: each option gets something wrong, the comments are due September 18, and manufacturers need to be in this one.

Quick background. IPAY 2028 will be the first year Maximum Fair Prices apply to Part B drugs. Part B effectuation is more complicated than Part D because Part B drugs are billed using HCPCS codes, not National Drug Codes, and payment flows differ between Traditional Medicare and Medicare Advantage. Since CMS and manufacturers don’t know in real time what a provider paid to acquire a drug, the agency is proposing a Standardized Default Refund Amount as a proxy -- the amount manufacturers refund when a provider can’t access the drug prospectively at MFP.

The four options hinge on two questions: Wholesale Acquisition Cost (WAC) or ASP as the benchmark, and how to factor in volume.

Options 1a and 1b use WAC. The problem: WAC can substantially overestimate what providers paid, especially for products with significant price concessions and contracting discounts. Manufacturers end up paying larger refunds than the actual acquisition cost delta warrants.

Options 2a and 2b use ASP. The problem: ASP declines over time as competition and contracting evolve, so the SDRA may underestimate the acquisition-cost-to-MFP gap as market dynamics shift. The SDRA moves the wrong direction.

There’s a volume-weighting issue layered on top. Options using ASP sales data across all payer markets -- not just Medicare -- may produce a benchmark that doesn’t reflect what Medicare providers paid. And requiring NDC-level reporting in Medicare to enable more precise calculation would need its own rulemaking, with an abbreviated implementation window if changes are made in 2028 rulemaking.

Starting in 2028, ASP for negotiated Part B products won’t be published at all. The benchmark is being built on a measure that disappears once negotiation kicks in.

For manufacturers, the SDRA isn’t an administrative detail. It determines what you pay under retrospective effectuation. Comments are due September 18.

Reimbursement Fundamentals: 340B Catch-up --A Two-Part Primer on the Program Everyone Is Fighting About

Part 1: What It Is and How It Got Here

Let’s pause and give some background for anyone who feels like they should know, might know, doesn’t know what 340B is. Let me try to give you that answer. Not the advocacy version. Not the “340B is a lifeline for safety-net providers” version or the “340B is a broken program manufacturers are being forced to subsidize” version. The actual mechanics, the history, and the incentive structure that explains why this program generates more heat than almost anything else in drug pricing.

The basics

340B is a federal drug pricing program created in 1992. It’s codified at Section 340B of the Public Health Service Act, hence the name. The program requires drug manufacturers that want their drugs covered by Medicaid to also sell those same drugs to qualifying safety-net health care providers at a significant discount.

The discounted price has a name: the 340B ceiling price. And a formula:

Ceiling price = Average Manufacturer Price (AMP) minus the Unit Rebate Amount (URA)

AMP is roughly what manufacturers receive from wholesalers and direct purchasers. The URA is the rebate manufacturers already owe Medicaid. Subtract one from the other and you get the ceiling price, which typically lands somewhere between 25% and 50% below commercial market rates.

The logic was straightforward. Safety-net providers serve disproportionately poor, uninsured, and underinsured patients. Their margins are thin. Their payer mix is difficult. If you want them to stay open and keep dispensing drugs to people who can’t afford them, giving them access to drugs at a meaningful discount is one concrete way to help.

Who qualifies

The providers that can purchase drugs under 340B are called covered entities. There’s a specific statutory list and knowing what’s on it matters for understanding the current debates.

The largest category is Disproportionate Share Hospitals (DSH), hospitals that serve a high volume of Medicaid and uninsured patients. Beyond DSH, you have children’s hospitals, cancer centers, rural sole community hospitals, critical access hospitals, federally qualified health centers (FQHCs), Ryan White HIV/AIDS clinics, and a handful of other categories tied to specific federal programs.

The common thread is supposed to be providers serving populations with limited ability to pay, who depend heavily on federal funding. The 340B discount is meant to help them stretch those resources further.

What’s in it for manufacturers

Here’s where it gets interesting. Manufacturers don’t participate in 340B because they want to. They participate because they have to.

If a manufacturer wants its drugs covered by Medicaid, and they almost all do, they sign a Pharmaceutical Pricing Agreement (PPA) with HHS. That agreement has two major obligations: pay Medicaid rebates and participate in 340B. You can’t have one without the other. It’s a condition of market access.

That structure is important for understanding why manufacturers have been so frustrated with the program’s expansion. They signed up to discount drugs for a defined set of safety-net providers serving a defined patient population. What they got, over time, was something considerably larger.

How it grew

The program started small and stayed relatively quiet for its first couple of decades. Then two things happened that changed its trajectory significantly.

The first was HRSA’s 2010 guidance on contract pharmacies. Originally, covered entities dispensed 340B drugs through their own in-house pharmacies. A hospital pharmacy, a clinic pharmacy, a health center pharmacy. The patients were physically there. The drugs were dispensed on-site.

In 2010, HRSA issued guidance permitting covered entities to use an unlimited number of commercial contract pharmacy arrangements. A covered entity could now contract with any retail pharmacy, anywhere, to dispense 340B drugs. This expanded access for patients who couldn’t travel to a covered entity’s location, which is a legitimate goal. It also expanded the program’s footprint, dramatically, in ways Congress never explicitly authorized.

The numbers tell that story better than anything else.

In 2016, total 340B drug purchases were $16.2 billion. By 2021, they had nearly tripled to $43.9 billion. By 2023, $66 billion, a 23% increase from the year before. By 2024, $81.4 billion, another 23% increase. And in July 2026, HRSA released data showing that 340B drug purchases crossed $100 billion in 2025 for the first time, coming in at $100,010,973,317.

The compound annual growth rate since 2010: 22.1%.

For context on what that scale means: 340B purchases now represent more than 16% of total U.S. drug spending. The program is more than 70% larger than what Medicaid spends on drugs net of rebates. DSH hospitals alone account for about 78% of all 340B purchases. I mean, sit with that for a second. A program most people outside of pharma and health policy have never heard of is now larger than Medicaid’s net drug spend.

The structural tensions

The statute has two integrity prohibitions meant to keep the program honest.

First, no duplicate discounts. You can’t get both a 340B price and a Medicaid rebate on the same unit of drug. The manufacturer gets hit once, not twice. In theory.

Second, no diversion. 340B drugs can only go to patients of the covered entity. They can’t be resold, transferred, or dispensed to individuals who aren’t bona fide patients of that entity.

Both prohibitions have been genuinely difficult to enforce in a program that has expanded to tens of thousands of contract pharmacy locations with limited claim-level data visibility. That enforcement gap is where most of the current fights live, and we’ll get into that in Part 2.

There’s also a structural ambiguity that doesn’t get enough attention: the statute doesn’t specify what covered entities have to do with their 340B savings. There’s no requirement to pass discounts on to patients at the point of sale. No requirement to use savings for specific services. No floor on how the margin gets used. Hospitals have used 340B savings to fund uncompensated care and community health programs. They’ve also used it to build specialty service lines, expand facilities, and in some cases generate operating surpluses. The program has no mechanism for distinguishing between those uses.

Whether that’s a feature or a bug depends heavily on who you ask. But it’s the original sin of the program’s design, and everything else in the current debate flows from it.

Part 2 next week – The Battlegrounds (AKA why 340B is in your inbox these days.)