AMP is WAC -- 1/23/26
Looking for joy
I swear that inside I’m an 8-year-old at times (one that likes to make cocktails, but still), I am so excited about a snowstorm. Real snowfall! Cozy inside time interspersed with time shoveling out alongside neighbors. Watching the kids sled in front of the elementary school. Pulling out the snowshoes and remembering that they aren’t as fun as I hoped they would be. By Monday night I’ll be ready for it all to melt and my family to go back to their routines but, for now, leaning into the joy.
Zero’d Out. Late last week, JAMA Network Open published a study examining out-of-pocket (OOP) spending for Medicare Advantage beneficiaries using biologic drugs before and after biosimilar competition entered the market. Four years after biosimilars entered, annual OOP spending fell by $94, from $233 in the year before competition to $165 at year four.
Forty-one percent of users had $0 out-of-pocket costs because plan design or secondary coverage erased coinsurance. Those zeros are included in the overall average, which makes the savings look smaller than what is happening for people who do face cost sharing.
For the subgroup that does pay coinsurance or a deductible, the mechanism is straightforward. Under Medicare Part B buy-and-bill, coinsurance is a percentage of the allowed price. When biosimilar entry pulls that allowed price down, the patient’s OOP drops. Flat copays do not move the same way, so plans that rely on copays show less change in patient bills.
Biosimilar competition can reduce beneficiary costs when benefit design uses percentage-based cost sharing and when payers successfully steer to the lower-priced option. Average effects will look modest in settings where many patients already pay zero, and site-of-service and steering will continue to shape realized wallet impact.
Most Favored Litigation. On Tuesday, Bloomberg Law reported that former President Trump’s renewed drug pricing proposals are drawing legal skepticism from the pharmaceutical industry.
Most versions of these proposals rely on executive authority rather than new legislation. That means the real fight is not over whether prices should be lower, but whether the administration can implement such models through existing statutes or demonstration authority without running afoul of the Administrative Procedure Act or exceeding the Center for Medicare & Medicaid Services’ payment-setting powers. That was the Achilles’ heel of earlier Most Favored Nation efforts, and it has not disappeared just because the politics have changed.
The bigger question is whether to bother to proceed with these models if large cap pharma is exempt because of deals signed with the Administration. A political win was scored, is there a need to keep playing?
AIn’t That the Truth. On Sunday, STAT News interviewed Jesse Ehrenfeld, former American Medical Association president, about the growing role of clinical artificial intelligence and companies like Aidoc.
This is not a story about whether AI can read scans faster. That part is already happening. The more consequential shift is where AI is being embedded: inside clinical workflows, triage, documentation, and decision support. It is becoming part of how care is delivered, not just how images are read.
That matters for policy because once AI is integrated into workflow, it starts shaping what counts as “appropriate” care. If an AI tool flags, deprioritizes, or standardizes certain services, that logic can migrate into utilization management, prior authorization, and coverage decisions. Quietly. Without a rulemaking. And once those pathways are embedded, they can be hard to unwind, even if the underlying model performance is mixed or biased.
Ehrenfeld’s warning is less about technology and more about trust and accountability. Clinicians need to understand how tools are trained, where bias enters, and who is responsible when AI influences decisions. If AI feels imposed rather than supportive, backlash is inevitable, and it will not stay confined to hospitals. It will show up in regulation, lawsuits, and public narratives about “automation” replacing judgment.
For manufacturers, especially in complex and rare disease spaces, this is a leading indicator. Coverage decisions increasingly rest on “standard pathways.” If AI becomes part of defining those pathways, it indirectly shapes access. The strategic takeaway is to engage early in governance, validation, and how AI outputs are translated into policy before they become invisible infrastructure.
€100 Billion Reasons Not to Spook the Innovators. This week, EUCOPE released a new study estimating that small- and mid-sized biopharmaceutical companies contribute €98 billion to the European Union economy and support nearly 700,000 jobs.
Those numbers are impressive. But the more interesting part of the report is not the headline GDP contribution, it is the warning about growing exposure to global policy uncertainty.
Small and mid-sized biopharma firms are often where early innovation lives, particularly in rare disease and niche therapeutic areas. They are also more sensitive to regulatory volatility, pricing uncertainty, and shifting policy signals than large multinationals. EUCOPE’s message is that Europe wants the innovation halo, but policy volatility is starting to look like an investment deterrent. That matters because investment decisions do not just respond to incentives. They respond to predictability.
But this is not only a European story. Policy uncertainty travels. U.S. debates over MFN pricing, Medicare negotiation, and state affordability boards are watched closely abroad, just as European reforms influence global reference pricing dynamics. The practical effect is that launch sequencing, trial placement, and manufacturing footprint decisions start to reflect where rules are clearer, even if markets are smaller.
For pharma strategy teams, the implication is geography and timing. Stability is an input into innovation decisions, even if it is rarely labeled that way. If policymakers want the economic and clinical upside of biopharma innovation, they need to treat predictability as part of the innovation ecosystem. Otherwise, investment quietly migrates, and then everyone acts surprised.
Reimbursement Fundamentals – Meet the Middleman (And the Beef)
On Tuesday, House and Senate appropriators rolled out a three-bill funding package that folds a negotiated pharmacy benefit manager (PBM) reform deal into the Labor, Health and Human Services minibus. The package is being sold as bipartisan and bicameral, and leadership is aiming to clear it before the shutdown deadline next week. It leans on prior Senate Finance work and pieces the House passed in 2023, with the focus on how PBMs are paid and what they disclose.
As a recap to what the issue is… PBMs sit between drug manufacturers, health plans, and pharmacies. Core jobs: negotiate manufacturer rebates, build formularies, set pharmacy networks, and adjudicate claims. In employer and Medicare Part D contracts, PBMs get paid through administrative fees, retained rebates, spread between what plans pay and what pharmacies receive, and performance or “price-concession” programs.
Why they are hated are facing calls for reform:
List-price incentives. Some PBM contracts tie compensation to a percentage of the drug’s list price or to the size of manufacturer rebates. When revenue scales with those figures, higher list prices can mean higher PBM income even if the net cost after rebates is similar. “Delinking” switches PBM pay to flat service fees so compensation does not rise when list prices do.
Spread pricing. In spread pricing, a health plan is charged one amount for a prescription while the pharmacy is paid a lower amount, and the PBM keeps the difference (“the spread”). Because the contract terms and transaction prices are often confidential, plan sponsors and pharmacies may not see how much is retained. This model has been common in Medicaid managed care and some employer arrangements.
Vertical steering. Many PBMs are part of companies that also own mail-order and specialty pharmacies. That structure creates an incentive to route patients to affiliated pharmacies or to set terms that favor them. Critics argue this can limit pharmacy choice and concentrate margin inside the PBM’s corporate family.
Opaque guarantees. Contracts frequently include rebate guarantees or pricing guarantees that promise a certain level of savings without showing the underlying cash flow. These guarantees can make it hard to tell what portion of rebates, fees, or discounts are passed through to the plan versus retained by the PBM. Stronger audits and standardized reporting aim to reveal those splits.
Pharmacy pressure. Direct and Indirect Remuneration (DIR) fees are post-adjudication adjustments in Medicare Part D that plans or pharmacy benefit managers (PBMs) take back from pharmacies after a claim is paid. They’re often tied to “performance” metrics like adherence, generic dispensing rate, formulary compliance, or audit findings, and are assessed months later, making cash flow unpredictable. Historically, these retroactive fees also kept patient cost sharing higher at the point of sale because the price concession was booked after the fact. Federal rule changes moved “pharmacy price concessions” into the point-of-sale price starting in 2024, but performance-based assessments and audit recoupments still exist in many contracts (and similar constructs show up in commercial arrangements). The net effect remains tighter margins and planning uncertainty for independents and small chains.
Accumulator/maximizer programs. Manufacturer copay assistance can be excluded from counting toward a patient’s deductible (accumulator) or captured by the plan up to a set cap (maximizer). These designs may lower plan spending but can leave patients facing a sudden out-of-pocket increase once assistance is exhausted mid-year.
PBMs argue what they do lowers premiums and reins in waste. Efforts for reform believe that PBMs can keep scale but shift to flat service fees, tighter audits, and add in some sunlight on net cost.
To be clear, we’ve been here before. In 2023, the House cleared the Lower Costs, More Transparency Act with PBM and price posting provisions, but the Senate did not take it up as a stand-alone. In 2024, committees teed up a year-end health deal that collapsed. Senate Finance returned in late 2025 with an updated PBM package that put delinking, reporting, pass-through, and pharmacy access back on the field.
Senate Finance leaders are signaling that what is in the minibus reflects months of bipartisan negotiation. The PBM industry is attacking delinking and broader disclosure as cost increasing. The open question is whether any of this survives into a final package.
What to watch next. Let’s see if this happens. Second, implementation timelines. Contracting for 2027 will be the first clean slate for many plans, but some reporting changes may happen earlier. Third, definitions. The details of delinked compensation, pass-through, and affiliate disclosures will drive real-world behavior. Fourth, spillovers. If fee models detach from price in Medicare, employers may question why commercial contracts still pay PBMs in ways that scale with list price.
Bottom line, even if passed, the appropriations package would not end the PBM business model. It would change how money moves. By shifting compensation toward flat service fees, tightening audits, and boosting plan sponsor transparency, the deal aims to reduce incentives to use a higher priced drug and give payers and employers better tools to look at pricing.