As always, thank you for welcoming Drug Channels into your inboxes, browsers, and apps. I’m continually inspired by the diverse and thoughtful people who follow, share, and challenge our work. Our DCI community now includes more than 110,000 subscribers and followers across the industry. If you haven't already done so, you can stay connected by signing up for an email subscription or following me on LinkedIn.
We loved bringing you our analysis and curated links throughout 2025, and we hope you enjoyed engaging with us—and with one another—across the DCI community.
Stay tuned! In addition to our second Drug Channels Leadership Forum, we have several exciting announcements coming your way in 2026.
Wishing you and your family health and happiness,
Adam and the DCI team
P.S. Join my nearly 67,000 LinkedIn followers for daily links to neat stuff, along with sharp and thoughtful commentary from the DCI community.
How Will Plans Cope As Pharma Net Pricing Trend Deflates ‘Gross-To-Net Bubble’?, The Pink Sheet
The Net Pricing Drug Channel (#NPDC) era is beginning.
In last week’s Drug Channels Outlook 2026, I outlined the major forces deflating the gross-to-net bubble:
And here’s the kicker: Plan sponsors are not prepared for this transition, which will ultimately push premiums higher as rebates evaporate.
Huge thanks to Cathy Kelly at The Pink Sheet for her great coverage of my webinar.
P.S. ICYMI: List Price Reductions Will Deflate the Gross-to-Net Bubble–and Threaten Pharmacy and 340B Profits from IRA-Negotiated Drugs
In last week’s Drug Channels Outlook 2026, I outlined the major forces deflating the gross-to-net bubble:
- Government: Uncapped Medicaid rebates; Inflation Reduction Act pricing; "Most Favored Nation" pressures
- Consumers: High deductibles and coinsurance; Discount cards; Rapid growth of cash-pay pharmacies and DTC options
And here’s the kicker: Plan sponsors are not prepared for this transition, which will ultimately push premiums higher as rebates evaporate.
Huge thanks to Cathy Kelly at The Pink Sheet for her great coverage of my webinar.
P.S. ICYMI: List Price Reductions Will Deflate the Gross-to-Net Bubble–and Threaten Pharmacy and 340B Profits from IRA-Negotiated Drugs
LillyDirect’s Jennifer Mazur on the platform’s new partnership with Walmart, future of DTC platforms, MM+M
Direct channels are altering pricing benchmarks and payment flows on the way to the Net Pricing Drug Channel.
Jennifer Mazur, GM of LillyDirect, shared great insights about this transformation in this MM+M interview:
Jennifer Mazur, GM of LillyDirect, shared great insights about this transformation in this MM+M interview:
- LillyDirect now drives 45% of new prescriptions for Lilly’s obesity medications.
- The new Walmart partnership expands convenience and transparency for patients.
“What will change the healthcare system are the models that truly put consumers at the center and rapidly redefine their experience – and their expectations of what a healthcare experience should be.”You’ll be able to hear Jennifer live during the “How Patient-Paid Prescriptions Are Changing the Drug Channel” at the Drug Channels Leadership Forum next March. (See more details below.)
Medicare Drug Price Negotiation Program: Negotiated Prices for Initial Price Applicability Year 2027, Centers for Medicare & Medicaid Services
Just before Thanksgiving, we got a look at the “maximum fair prices” (MFPs) for the 15 drugs selected for negotiation under the Inflation Reduction Act of 2022 (IRA).
Despite what you might have read, IRA negotiations will not save $12 billion (or $8.5 billion) in 2027. As usual, the administration’s talking points are more spin than substance.
CMS calculated the purported “savings” by comparing 2024 spending at actual net prices to spending at the 2027 MFP prices. This year, CMS added a supplemental estimate incorporating manufacturers' Coverage Gap Discount Program (CGDP) payments.
Both figures are misleading. The savings reflect a counterfactual comparison to 2024, not a projection of what spending will look like in 2027.
Here are the real issues:
1) CMS asked the wrong question. Many of the 15 selected drugs would have faced generic or biosimilar competition before 2027, which would have reduced net prices without the IRA’s intervention. Other products face strong therapeutic competitors and would have been negotiated by aggressive pharmacy benefit managers.
Thus, the analytically and intellectually honest comparison would have answered a much more challenging question: But for the IRA, what would net prices for these 15 drugs have been in 2027?
Then, compare the MFPs to those hypothetical non-IRA 2027 net prices.
2) CMS will pay manufacturers’ mandatory discounts. For drugs with an MFP, CMS will pay manufacturers' 10% and 20% mandatory discounts. The wider the spread between list and net prices, the more CMS will pay. (See my video explainer about what happens to mandatory discounts for MFP products. Start watching at 5:29.)
3) CMS ignores major offsetting costs. The headline “savings” conveniently omit the unfunded “demonstration” giveaways: $5 billion for 2025 and an estimated $3 billion for 2026. And how much will be required to prop up collapsing stand-alone Part D plans in 2027?
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Inma Hernandez and colleagues laid out the first two issues beautifully in their Health Affairs article. Ironically, Inma now works for CMS, which may explain the lower $8.5B figure that includes CGDP spending. (CMS’s documentation is far from clear.) I suspect she’s gritting her teeth as her boss presents politically convenient numbers.
The unexpected costs and unintended consequences of the IRA will continue to mount—along with increasingly aggressive attempts to spin the narrative. Be wary!
Despite what you might have read, IRA negotiations will not save $12 billion (or $8.5 billion) in 2027. As usual, the administration’s talking points are more spin than substance.
CMS calculated the purported “savings” by comparing 2024 spending at actual net prices to spending at the 2027 MFP prices. This year, CMS added a supplemental estimate incorporating manufacturers' Coverage Gap Discount Program (CGDP) payments.
Both figures are misleading. The savings reflect a counterfactual comparison to 2024, not a projection of what spending will look like in 2027.
Here are the real issues:
1) CMS asked the wrong question. Many of the 15 selected drugs would have faced generic or biosimilar competition before 2027, which would have reduced net prices without the IRA’s intervention. Other products face strong therapeutic competitors and would have been negotiated by aggressive pharmacy benefit managers.
Thus, the analytically and intellectually honest comparison would have answered a much more challenging question: But for the IRA, what would net prices for these 15 drugs have been in 2027?
Then, compare the MFPs to those hypothetical non-IRA 2027 net prices.
2) CMS will pay manufacturers’ mandatory discounts. For drugs with an MFP, CMS will pay manufacturers' 10% and 20% mandatory discounts. The wider the spread between list and net prices, the more CMS will pay. (See my video explainer about what happens to mandatory discounts for MFP products. Start watching at 5:29.)
3) CMS ignores major offsetting costs. The headline “savings” conveniently omit the unfunded “demonstration” giveaways: $5 billion for 2025 and an estimated $3 billion for 2026. And how much will be required to prop up collapsing stand-alone Part D plans in 2027?
---
Inma Hernandez and colleagues laid out the first two issues beautifully in their Health Affairs article. Ironically, Inma now works for CMS, which may explain the lower $8.5B figure that includes CGDP spending. (CMS’s documentation is far from clear.) I suspect she’s gritting her teeth as her boss presents politically convenient numbers.
The unexpected costs and unintended consequences of the IRA will continue to mount—along with increasingly aggressive attempts to spin the narrative. Be wary!
Results from an Annual Medicaid Budget Survey for State Fiscal Years 2025 and 2026, KFF
Despite all the controversy around PBMs’ role in state Medicaid contracts, you may be surprised to learn that most states still rely on integrated pharmacy management.
As of July 2025:
As of July 2025:
- Only eight states exclude (“carve out”) pharmacy benefits from their managed Medicaid providers, including the two highest enrollment states: New York and California. (California transitioned from managed care to fee-for-service in 2022, while New York did so in 2023.)
- Three states (Kentucky, Louisiana, and Mississippi) use a single PBM for the managed care population instead of a traditional carve-out model, although Louisiana switched back to carve in as of October 2025.
- Thirty-one states plus D.C. continue to carve in pharmacy benefits with their managed care contracts. Among the states that carved in drugs to MCOs, several retain control over such selected drug classes as behavioral health, HIV, hemophilia products, and hepatitis C antivirals.
Drug Channels Leadership Forum, Drug Channels Institute
Here at DCI, we’re super excited for the 2026 Drug Channels Leadership Forum (DCLF)—taking place from March 16–18, 2026, at the Turnberry Resort & Spa in Miami. This invite-only gathering will bring together senior leaders from across the drug channel ecosystem.
You must request an invitation to be considered for attendance. We’ll be sending another set of invitations in January, so be sure to request your spot soon.
The 2026 program features fireside chats with me, plus dynamic panel discussions led by an exceptional group of executives and subject matter experts. View the full 2026 Drug Channels Leadership Forum agenda. Check out the lineup.
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You must request an invitation to be considered for attendance. We’ll be sending another set of invitations in January, so be sure to request your spot soon.
The 2026 program features fireside chats with me, plus dynamic panel discussions led by an exceptional group of executives and subject matter experts. View the full 2026 Drug Channels Leadership Forum agenda. Check out the lineup.
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