Drug Pricing Strategy

The Net-Price Squeeze: What IRA and Most-Favored-Nation Pricing Mean for the Commercial Operating Model

Q: What is the IRA Medicare Drug Price Negotiation Program?

CMS selects high-spend, single-source Medicare drugs and negotiates a maximum fair price directly with the manufacturer. Selection expands each cycle: fifteen drugs for 2027, fifteen for 2028, which is the first round that can include Part B drugs and therefore buy-and-bill economics, and twenty a year from 2029. The calendar is published, so exposure is knowable in advance.

Q: How is Most-Favored-Nation pricing different from IRA negotiation?

IRA negotiation sets a price through a process between CMS and the manufacturer. MFN sets it by reference, tying the US price to the lowest price the manufacturer charges in a basket of comparable developed countries. The two reach the same brands by different routes and at different depths. Modeled against a basket of 12 peer nations, Entresto's MFN discount is 92%, against 53% under IRA negotiation.

Q: What is the pill penalty, and which products does it affect?

Small molecules become eligible for negotiation seven years after FDA approval, with the price effective at year nine. Biologics get eleven years, with the price effective at year thirteen. That four-year difference is the pill penalty. It applies to every small molecule as it ages into eligibility, whether already marketed or newly approved.

Q: Why is this a commercial operations problem and not only a market access one?

Because the money that funds promotion is net price per prescription, and that is what both policies reduce. A flat budget now defends a smaller pool of revenue. That changes how many representatives a brand can carry, which prescribers they call on, how channels are designed once patients can buy direct, and which variables sit inside the forecast.

Q: What should commercial teams do first?

Start with the brand list. The negotiation calendar is published through 2029, so exposure is knowable now. Then sequence the two changes with the longest lead times: rebuilding the measurement layer so cash-pay volume is visible to targeting, alignment and incentive crediting, and rebasing field deployment on net price rather than volume. The point of view sets out all six shifts, from pricing and contracting through to portfolio and resourcing.

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Two federal pricing reforms are converging on the same mature brands. They create an operating model problem, not only a pricing one.

Under the Inflation Reduction Act (IRA), Medicare’s first ten negotiated drug prices took effect on January 1, 2026. Most-Favored-Nation (MFN) pricing adds a second, potentially deeper discount: modeled at up to 92% off US list price for some molecules. Both land on the same brands: mature, high Medicare volume, mostly small molecule.

Most companies are working the problem inside pricing and market access. The harder part sits in sales and marketing, where the budget has not moved even though the revenue behind each prescription has. This point of view sets out six shifts across the commercial model, with the evidence behind each.

IRA and MFN Are Squeezing the Same Brands

IRA negotiation sets a maximum fair price through the Centers for Medicare & Medicaid Services (CMS). The first ten prices took effect on January 1, 2026, on drugs that accounted for about 19% of Part D spending in 2022. Up to fifteen more follow in 2027, up to fifteen in 2028, and up to twenty a year from 2029.

MFN pricing works by reference instead. It ties the US price to the lowest price a manufacturer charges in a basket of comparable developed countries. To date, 26 manufacturers have signed voluntary agreements since mid-2025.

The size of the discount differs sharply by molecule. Modeled against a basket of 12 peer nations, Entresto’s MFN discount reaches 92%, against 53% under its negotiated maximum fair price. For Imbruvica, it is 79% against 38%. The MFN figures compare US list price with the lowest published ex-factory price abroad, so they are upper bounds. The planning implication: a brand’s IRA discount is a poor guide to its MFN exposure, which can run far deeper.

MFN also opened a route to therapy that did not exist before. TrumpRx launched in February 2026, offering discounts of up to 80% on chronic disease medicines and GLP-1s. It is a referral portal, not a transaction channel: it routes patients to manufacturers’ own direct-to-consumer (DTC) storefronts. CMS has also indicated that the manufacturer agreements expire at the end of the current administration’s term. Both points bear on how much permanent change to the operating model is warranted today.

The Revenue Loss Is Already in Reported Results

Amgen’s Enbrel sales fell 19% in the first half of 2026, which the company attributed to a lower net selling price under Medicare Part D price setting and a higher 340B mix. That is disclosed revenue, not a model. CMS projects around $6 billion in Medicare savings for 2026, money that comes out of manufacturer net revenue.

Two further pressures compound the loss. List price cuts taken to match negotiated prices are compressing the gross-to-net bubble that has cushioned retail and 340B contract pharmacy margins. And more than $300 billion in branded revenue is projected to lose exclusivity between 2025 and 2030.

Where the Squeeze Lands in the Operating Model

With less net price behind each prescription, a commercial team cannot fund the same breadth of field coverage. Spend has to concentrate on the highest-elasticity prescribers rather than spread across the same call plan.

DTC pricing adds a measurement problem that is easy to miss. Cash-pay volume does not appear in the claims data behind share reporting, targeting, alignment and incentive crediting. A brand with meaningful DTC uptake will undercount its own performance, and field teams will be paid on an understated number.

Planning and portfolio decisions change too. Negotiation-eligibility year, MFN benchmark drift and tariff pass-through have to become standing inputs to brand and portfolio forecasts rather than one-off sensitivity runs. Biologics, rare-disease indications and pre-eligibility launches are comparatively insulated, which makes reallocation, not uniform cuts, the investment decision.

The clock on that decision is the pill penalty. Small molecules become negotiation-eligible at year seven, with the negotiated price effective at year nine. For biologics, those milestones are years eleven and thirteen. RA Capital estimates that roughly half of a drug’s lifetime revenue accrues in years 10 to 14, the window that negotiation now reaches for small molecules.

The brands under pressure are known today. The question is whether the commercial model changes before the net price does, or after.

What the Point of View Answers

Companies that treat this as a market access problem alone will underreact. Field deployment, channel design and analytics move on the same clock as pricing. The point of view works through the decisions that follow, including:

Which brands sit on the published negotiation calendar through 2029, and which are exposed to MFN but not to IRA?
What happens to share reporting, targeting and incentive crediting once a material share of volume is cash pay and invisible to claims data?
How much field coverage can a brand carry as net price per prescription falls, and where should the remaining spend concentrate?

Read the Full Point of View

The point of view sets out six shifts across the commercial model, with the evidence behind each: pricing and contracting, launch sequencing, channel strategy, field force and HCP engagement, forecasting and analytics, and portfolio and resourcing. It includes a molecule-level comparison of IRA and MFN discounts.