VA Issues Guidance on Treatment of “Maximum Fair Price” in Statutory Price Calculation

In comparison, the IRA does address Medicaid Drug Rebate Program treatment of the MFP, providing that the MFP is to be included in best price, but MFP sales are to be excluded from the average manufacturer price (AMP). Additionally, the Centers for Medicare and Medicaid Services (CMS) recently proposed that sales of drugs subject to the MFP must be included in the Medicare average sales price (ASP), as addressed in our recent alert.

Background on the MFP

• The IRA established a “Drug Price Negotiation Program” (Program) that seeks to lower the prices of certain drugs with high Medicare spend and no “marketed” generic/biosimilar competition.  The Program will apply to Medicare Part D drugs staring in 2026, and to Part B drugs in 2028, as noted in our recent client alert.
• Under the Program, manufacturers of selected drugs must agree to “negotiate” an MFP with CMS and then offer MFP-based pricing to Medicare beneficiaries, or risk significant excise taxes or civil monetary penalties. MFPs generally are capped by reference to the lesser of a statutory percentage of a specified Non-FAMP or some other metric tied to Medicare reimbursement.
• MFP pricing differs from pricing generally established under the Part D program in that MFP pricing is established by way of a “negotiation” between the manufacturer and the Federal government (CMS).  Under the standard Part D program framework (apart from where MFP now applies) pricing is established per a commercial negotiation between the manufacturer and the Part D plan(s).
• For MFPs taking effect in 2026, the MFP will serve as the reimbursement rate as between a Part D plan and a dispensing entity (i.e., pharmacy) and for purposes of determining any out-of-pocket obligation for the Medicare beneficiary. The MFP will also serve as the price the manufacturer must make available to dispensing entities (either through a purchase agreement or a back-end rebate).

VA Rationale for Non-FAMP treatment of MFP

In its October 2025 Supplemental DML, the VA follows guidance it issued in a DML in 2006, which addressed treatment of sales under the then-new Medicare Part D program. In its 2006 DML, VA concluded that “manufacturers’ sales of covered drugs to Medicare Part D plans are commercial sales” and thus concluded that there was no basis to exclude them from Non-FAMPs as “Federal sales.”

In its Supplemental DML, VA does not address the differences between standard Part D pricing and MFP pricing. As detailed above, Part D pricing is established by way of a negotiation between a manufacturer and a commercial Part D plan, whereas MFP pricing is established per a “negotiation” with the Federal government that, by statute, caps the manufacturer’s offered pricing by reference to statutory Non-FAMP prices or Federal reimbursement metrics. These differences are significant and could be a basis for diverging from the approach outlined in the 2006 DML, and for treating MFP sales as Federal. It could well be argued that MFP sales are more akin to Public Health Service (PHS) 340B sales that also are subject to Federal statutory price caps. Since the early days of the VHCA program, PHS 340B sales at the statutory ceiling price have been treated as Federal sales and on that basis are excluded from the Non-FAMP calculation.

Whether the VA’s guidance in its Supplemental DML will impact the Non-FAMP for any given NDC-11, and ultimately impact Federal Ceiling Price, will depend on two factors:

1. The Non-FAMP calculation “method” utilized for the NDC-11 (“standard”/wholesaler vs. “direct”), and
2. Whether the MFP is extended through wholesalers or to the customer directly.

Where a Non-FAMP for an NDC-11 is calculated using the “standard” wholesaler method and the MFP is extended as a back-end rebate direct to the customer, the MFP-based discounted transaction would not flow into the Non-FAMP calculation. Conversely, if the Non-FAMP is calculated using the direct method (presumably because the NDC-11 is generally sold direct and not through wholesalers), then direct-to-customer price concessions would be included in Non-FAMP.

Given the complexity here and the potential for disparate impact based on the way MFP pricing is extended to customers, it is critical for each company with one or more products that will be subject to MFPs to consider how best to extend MFP-based pricing on an NDC-11-specific basis.

Authored by Joy Sturm, Allison Pugsley, Alice Valder Curran, Kathleen Peterson, and Samantha Marshall.