Background

Medicare Part B drug reimbursement is tied closely to manufacturer-reported ASP, which CMS uses to calculate quarterly payment limits for separately payable drugs and biologicals furnished under the PFS. Over the past several years, particularly following enactment of the Inflation Reduction Act, CMS has signaled increasing scrutiny of manufacturer price reporting, the classification of service fees, and the forthcoming introduction of negotiated prices (namely, the MFP) and their interaction with ASP.

Historically, CMS permitted manufacturers to rely on reasonable assumptions when calculating ASP, particularly in complex contracting environments involving specialty distributors, group purchasing organizations, pharmacies, and third-party logistics providers. CMS also allowed certain fees paid by manufacturers, such as BFSFs, to be excluded from the ASP price-concession calculation when they met specific criteria.

In the CY 2024 and CY 2025 rulemaking cycles, CMS proposed several significant reforms to these frameworks, including detailed fair market value (FMV) methodologies for BFSFs, broader disclosure requirements, and new documentation standards for ASP reporting. Stakeholder pushback led CMS to finalize only some of these proposals in the 2026 PFS final rule, while signaling potential future rulemaking on the issues it declined to adopt.

Against this broader regulatory backdrop, the rule represents CMS’s most comprehensive update in years to ASP reporting requirements and BFSF compliance obligations.

CY 2026 Medicare PFS final rule: Key policies

MFP and ASP

In the rule, CMS clarified how units sold at MFP for selected drugs under the negotiation framework will be reflected in ASP calculations, to better align Medicare Part B reimbursement methodology once MFP pricing takes effect. CMS also announced a transition from the ASP-based drug payment limit file to a payment limit file that, for selected drugs, will reference MFP rather than ASP. This change will likely result in increased ASP where a manufacturer sells selected drugs at MFP.

Bundled arrangements and price concessions

CMS codified a definition of “bundled arrangement” in ASP reporting that encompasses scenarios where price concessions are conditioned on purchasing behavior or volume targets involving the same or different drugs, that generally aligns with Medicaid’s approach.

“Bundled Arrangement[”] means an arrangement . . . under which [a] rebate, discount, or other price concession is conditioned upon the purchase of the same . . . 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.

CMS introduced this definition to address manufacturers’ acknowledged failure to report a broad range of bundled price concessions in historical ASP submissions.

Beginning in 2026, manufacturers must identify bundled arrangements, apply proportional allocation across each bundle based on total dollar value, and document their methodologies (and assumptions, discussed below) in quarterly ASP submissions, which will be subject to CMS audit. The definition aligns with Medicaid’s long-standing standard, promoting consistency across federal programs and reducing pricing discrepancies between ASP and AMP/best price. CMS explicitly excluded value-based purchasing arrangements from this bundled reporting.

BFSFs

CMS did not adopt a proposed dramatic redefinition of BFSF. Instead, BFSF remains defined as a fee paid by a manufacturer to an entity that (i) represents FMV, (ii) for a bona fide, itemized service performed on behalf of the manufacturer, (iii) that the manufacturer would otherwise perform or contract for, and (iv) is not passed on in whole or in part to a client or customer of that entity regardless of whether the entity takes title to the drug. BFSFs are not treated as price concessions and accordingly are not required to be deducted when calculating ASP.

CMS also did not finalize the proposed more rigorous FMV methodologies or mandatory third-party independent valuation requirements for BFSF. However, it did finalize a requirement for manufacturers to obtain a certification or warranty from service fee recipients stating they will not pass through the fees to any client or customer. CMS declined to extend this prohibition to fees passed on to affiliates, determining that such an expansion would be overly broad and ambiguous.

Although CMS did not adopt the more rigorous proposed FMV and independent valuation methodologies, it strongly encouraged manufacturers to document which services are tied to cost or volume and how those analyses are conducted.

Reasonable assumption documentation

CMS now requires manufacturers to include reasonable assumption letters with quarterly ASP submissions, detailing the methodology behind any assumptions, such as treatment of BFSFs, bundled arrangements, and MFP units. Although CMS does not require a full refiling each quarter of every document, manufacturers should prepare to document the data sources, assumptions, and rationales for classifications of fees and price concessions. For existing BFSF contracts, CMS expects documentation by April 30, 2026.

Key takeaways

• ASP modelling. Given inclusion of MFP units and the broader push for transparency and documentation, manufacturers should model impacts on ASP, especially for selected drugs, and assess how price concessions, bundled arrangements, and fees will be treated.
• Documentation readiness. Manufacturers should review service fee arrangements and obtain certifications that fees are not passed through to clients or customers. They should also assemble documentation concerning underlying assumptions, methodologies, and data sources for ASP calculations involving BFSFs, MFP units, and bundled arrangements.
• Cross-program alignment. Manufacturers should coordinate their government-pricing teams to align assumptions and monitor their output for diverging methodologies, as CMS seeks to promote consistency across federal pricing programs and reduce discrepancies between ASP and AMP/best price.
• Monitor further rulemaking. CMS has flagged that additional adjustments, such as BFSF FMV methodologies and value-based purchasing arrangements, may be forthcoming. Stakeholders should continue to monitor CMS rules and guidance documents for updates.

Conclusion

The rule marks an important shift in the regulatory landscape for Part B drug pricing and manufacturer reporting obligations. While CMS did not adopt many of its more aggressive proposals, the rule nonetheless strengthens documentation and certification requirements around BFSFs and clarifies inclusion of MFP units in ASP calculations. Manufacturers should review the rule’s requirements to align internal processes, contracts, and reporting frameworks by the January 1, 2026, effective date.