CMS Broadens Drug Price Negotiations to Part B Therapies

In a recent discussion, John Stanford, executive director at Incubate,reacted to the Centers for Medicare & Medicaid Services’ (CMS) decision to expand Medicare drug price negotiations to include Part B medicines for the first time. The third round of selected drugs broadens the scope of the Inflation Reduction Act (IRA)’s pricing provisions beyond Part D retail prescriptions to physician-administered therapies, such as infused drugs typically reimbursed under Part B.

According to Stanford, the expansion represents a significant shift because it introduces new stakeholders—particularly physicians—into the policy’s financial impact. Part B drugs are commonly administered in clinical settings, where providers purchase and are reimbursed for medications under a bundled payment structure. He suggested that reimbursement changes tied to negotiated prices could create financial pressure for physician practices, although the precise operational effects remain unclear.

The second major concern raised relates to what Stanford described as structural disincentives for small-molecule drug development, often referred to by critics as the “pill penalty.” Under current law, small-molecule drugs become eligible for price negotiation sooner than biologics. Stanford argued that several drugs included in the latest selection round would not have qualified if the eligibility timelines were aligned.

Citing a recent survey conducted by Incubate, who represents the patient, corporate, and investment communities, he stated that 80% of investors report decreased interest in funding small-molecule development due to the policy framework. Stanfrod also contended that this dynamic may dampen capital allocation toward certain therapeutic modalities and could have broader implications for Us competitiveness in biopharmaceutical innovation.

While supporters of Medicare negotiation cite cost savings for beneficiaries and the federal government, critics argue the policy may influence research and development priorities. The long-term effects on provider economics, drug pipelines, and global competitiveness remain areas of active debate as implementation progresses.

Stanford also comments on the potential policy adjustment that could balance cost containment goals with continued life sciences innovation and investor confidence, and much more.

A transcript of his conversation with PC can be found below.

PC: CMS has announced a third round of drugs subject to Medicare price controls, expanding the program to include Part B medicines for the first time. From your perspective, what is the significance of this expansion?

Stanford: From our perspective, as the life science investors, the expansion to part B is a new and dark chapter for this price control moment that we're in. I think there are two consequences of expanding to Part B. One of them is that it brings in a whole new set of actors who are going to feel the pain of this process, and that's doctors. Because part B, of course, includes infused medicines. Doctors—the way they bundle some of these payments—we're not 100% sure how this is going to play out, but we expect doctors to also be losers [in this announcement].

From a selfish advocacy perspective of someone who's trying to undo the damage of these price controls, it's great that doctors will now be joining us, I imagine, urging for changes to this policy. So that's one big element. The second element is it reinforces the bad parts of these programs, the announcement of what drugs were having. Incubate has led the fight on fixing something called the pill penalty, which I'm sure we'll talk about more.

This really harms small-molecule drugs. Four out of the 15 drugs selected this time around would not be subject to price controls if we got rid of the pill penalty. Before people celebrate too much of “oh, we got these discounts early, we got this price control earlier,” it is absolutely stopping investment in small molecules.

We recently just issued a survey that still shows eight out of 10 investors are less interested in small molecules (pills) because of this penalty. We saw the announcement, we knew it was coming, and yet we're still gritting our teeth saying, why are we doing this? Every other article and every other video in this space is saying, China is eating our lunch, and this policy is one of the reasons why.