Three of the first ten drugs selected for Medicare Drug Price Negotiation — Entresto, Stelara, and Xarelto — will lose their maximum fair prices after just one year. CMS confirmed in late 2025 that generic or biosimilar versions of these products were being bona fide marketed, triggering removal from the selected drug list effective January 1, 2027. The pattern is not an anomaly. For every subsequent negotiation cycle, some selected drugs will face competitor entry during the multi-year gap between selection and MFP implementation, and launch teams need to model when — and how — CMS's bona fide marketing determination reshapes payer behavior.
This article is for manufacturer market access teams, lifecycle planning groups, and payer strategy leads who need to understand CMS's monitoring process for generic and biosimilar entry against selected drugs, the timeline mechanics of deselection, and how the transition from MFP-in-effect to open competition changes formulary dynamics.
The lifecycle of an MFP: from selection to deselection
The Medicare Drug Price Negotiation Program operates on a multi-year timeline. For the initial cycle (initial price applicability year 2026), CMS selected drugs in 2023, negotiated in 2024, and published MFPs taking effect January 1, 2026. The time lag between selection and implementation — roughly two years — creates a window in which the competitive landscape can shift.
The statute addresses this through two mechanisms:
Pre-negotiation exclusion: Drugs are not eligible for selection if a generic or biosimilar using that drug as a reference product is already FDA-approved and being marketed. Authorized generics do not count for this purpose.
Post-selection removal: If a generic or biosimilar enters the market after a drug has been selected, CMS monitors for bona fide marketing and can remove the drug from the selected drug list.
The second mechanism is what happened to Entresto, Stelara, and Xarelto. These drugs were selected in 2023, received MFPs in 2024, and faced generic or biosimilar entry during 2025. CMS determined bona fide marketing was occurring, and the drugs will cease to be selected drugs as of January 1, 2027.
How CMS determines bona fide marketing
CMS's bona fide marketing determination is a "totality of the circumstances" inquiry — no single data source is dispositive. The Final Guidance for IPAY 2027 and the Draft Guidance for IPAY 2028 describe the data sources CMS uses:
Prescription Drug Event (PDE) data
CMS examines Part D claims data to determine whether a generic or biosimilar is being dispensed to Medicare beneficiaries. PDE data provides a direct signal of market presence through the Part D program. If no PDE records exist for a generic or biosimilar, CMS is unlikely to find bona fide marketing.
Average Manufacturer Price (AMP) data
Manufacturers of generic drugs report AMP to CMS under the Medicaid Drug Rebate Program. CMS uses AMP reports to determine whether a generic manufacturer is engaged in commercial activity that indicates genuine marketing, as opposed to holding an approval without launching.
Supply chain availability
CMS considers whether the generic or biosimilar is "regularly and consistently available for purchase through the pharmaceutical supply chain." A product that has FDA approval but limited or sporadic distribution may not meet the bona fide marketing standard.
Licensing and distribution agreements
The guidance specifies that CMS will examine whether any licenses or agreements between the primary manufacturer and the generic or biosimilar manufacturer limit the availability or distribution of the product. This is designed to prevent situations where a manufacturer launches a compliant authorized generic or licensed biosimilar that exists on paper but is constrained by contract terms from genuine market competition.
Litigation risk
Morgan Lewis reported in February 2025 that several manufacturers have challenged CMS's definition of "bona fide marketing" in court, arguing that the agency's totality-of-the-circumstances test constitutes an impermissible expansion of the statutory text. Manufacturers contend that the statute's reference to drugs that "are marketed" should be read more narrowly than CMS's guidance allows. The outcome of this litigation could affect how CMS makes deselection determinations in future cycles, though CMS has continued to operate under its existing guidance framework.
Ongoing monitoring after removal
Once CMS removes a drug from the selected drug list based on bona fide marketing, the agency continues to monitor whether the generic or biosimilar remains on the market. If the generic or biosimilar subsequently exits the market, the drug could potentially regain selected drug status in a future cycle, though this scenario has not yet occurred. FREOPP has noted that when a selected drug is deselected, it frees up a selection slot in a future cycle — meaning that deselected drugs are replaced by newly eligible drugs in subsequent negotiation rounds, expanding the program's reach over time.
The timeline mechanics of deselection
The timing of the bona fide marketing determination affects how long an MFP applies. The statute establishes specific windows:
For IPAY 2026 drugs (first cycle)
If CMS determines bona fide marketing before the MFP takes effect (January 1, 2026), the negotiation process is suspended and no MFP is established. If the determination is made after the MFP is already in effect, the MFP continues to apply for the current year but the drug is removed from the selected drug list for the following year.
This is what happened to Entresto, Stelara, and Xarelto:
- CMS determined bona fide marketing after August 1, 2024.
- The IRA required these products to remain selected drugs with MFPs in effect for 2026.
- The earliest the MFPs could cease to apply was January 1, 2027.
- CMS will not "backfill" the three removed products with new selections.
For IPAY 2028 drugs (third cycle)
The timeline windows are more granular for the 2028 cycle, which is the first to include Part B drugs. KFF summarized the statute's timing rules:
- If the bona fide marketing determination is made between November 2, 2026 and March 31, 2028, the MFP applies only for 2028, and the drug is removed for 2029.
- If the determination is made between April 1, 2028 and March 31, 2029, the MFP applies for 2028 and 2029, and the drug is removed for 2030.
What launch teams should model: the 2028 cycle as a case study
The third negotiation cycle (IPAY 2028) provides the most complex monitoring scenario to date, because several selected drugs face imminent generic or biosimilar competition:
Xeljanz (tofacitinib) — generic expected 2026
Milliman's analysis notes that Xeljanz faces expected generic entry in 2026. If CMS determines bona fide marketing before the negotiation concludes in November 2026, the MFP may never be announced for this drug. The negotiation process would be suspended, and Xeljanz would remain a selected drug in name only.
Xolair (omalizumab) — biosimilar approved March 2025
The FDA approved Omlyclo (omalizumab-igec) in March 2025 as the first interchangeable biosimilar to Xolair, with additional omalizumab biosimilars expected between 2026 and 2027. If CMS confirms bona fide marketing before November 2026, the MFP for Xolair may never be announced. Payer systems are already adapting to omalizumab biosimilar availability: formulary updates adding Omlyclo alongside or in place of Xolair are expected to accelerate through 2026 as additional biosimilar launches materialize.
Trulicity (dulaglutide) — biosimilar expected 2027
Trulicity faces anticipated biosimilar entry in 2027, which could result in the drug being removed from the selected drug list after just one year of MFP applicability — mirroring the Entresto/Stelara/Xarelto pattern.
Tradjenta (linagliptin) — generic expected 2026, also selected for renegotiation
Tradjenta presents a unique case: it was selected for renegotiation for IPAY 2028 because it will exceed 16 years of exclusivity and be reclassified as a "long monopoly" drug. However, Tradjenta generics are expected later in 2026, which would result in Tradjenta's removal from the selected drug list entirely — making the renegotiation moot.
How payer behavior changes after deselection
When a drug loses its MFP and is removed from the selected drug list, Part D plan sponsors regain full formulary discretion. The consequences are significant:
Formulary repositioning
During the MFP-in-effect period, plans must cover the selected drug on formulary. Once the MFP lapses, plans can remove the branded product, add generic or biosimilar alternatives, and apply standard utilization management. For Stelara, this means plans can shift ustekinumab biosimilar products to preferred positions — which some plans already began doing in 2026 under the successor regulation exception's 30-day formulary change window.
Tiering and cost sharing
MFP drugs during the in-effect period were placed on plan formularies with varying tier assignments and cost-sharing structures. Avalere Health's analysis of 2026 formulary files found that some plans applied step therapy or non-preferred tiering to MFP drugs, though CMS stated it would scrutinize tiering that disadvantaged selected drugs relative to competitors. After deselection, these constraints disappear, and plans can freely position generics or biosimilars on lower tiers with lower cost sharing.
The competitive landscape opens
DLA Piper's March 2026 analysis compared MFP prices to biosimilar net prices and found that biosimilars were sometimes priced lower and required less patient cost sharing than the MFP — even before accounting for confidential manufacturer rebates to plan sponsors. This suggests that for some drugs, the MFP may not be the lowest available price once open competition begins, and plans will naturally gravitate toward the lowest-net-cost option.
What to build into monitoring workflows
For teams managing MFP-selected products or their competitors:
Track ANDA and 351(k) approval dates for generic and biosimilar applications referencing selected drugs. The FDA's Orange Book and Purple Book, combined with FDA approval databases, provide early signals of competitor entry timing.
Monitor PDE data quarterly. CMS uses PDE data as a primary input for bona fide marketing determinations. If generic or biosimilar claims start appearing in Part D data, the deselection clock may be ticking.
Map the 30-day formulary window against plan bid cycles. The successor regulation exception gives plans 30 days after a generic or biosimilar launch to execute formulary changes. For mid-year launches, this means rapid formulary shifts; for launches before the June FRF submission, the shift happens at annual enrollment.
Model two scenarios: MFP-in-effect and post-deselection. The financial profiles are different. Under MFP, the drug has guaranteed formulary presence and a known price ceiling. After deselection, the drug competes on net cost, rebate position, and payer preference — a fundamentally different commercial environment.
Watch CMS guidance cycles. CMS issues program instructions and guidance for each negotiation cycle. The Draft Guidance for IPAY 2028, released May 2025, includes new provisions on renegotiation and expanded bona fide marketing monitoring. Comments and final guidance can shift the operational timeline.
Sources
- CMS, "Medicare Drug Price Negotiation Program: Selected Drugs and Negotiated Prices." https://www.cms.gov/initiatives/medicare-prescription-drug-affordability/overview/medicare-drug-price-negotiation-program/selected-drugs-negotiated-prices
- CMS, "Medicare Drug Price Negotiation Program: Final Guidance for IPAY 2027." https://www.cms.gov/files/document/medicare-drug-price-negotiation-final-guidance-ipay-2027-and-manufacturer-effectuation-mfp-2026-2027.pdf
- KFF, "Key Facts About Medicare Drug Price Negotiation," updated 2026. https://www.kff.org/medicare/key-facts-about-medicare-drug-price-negotiation
- Milliman, "Medicare drug price negotiation: New dynamics as the tide turns to Part B." https://www.milliman.com/en/insight/medicare-drug-price-negotiation-part-b-dynamics
- DLA Piper, "Evaluating biologic drug costs: Medicare negotiated prices versus biosimilar competition," March 2026. https://www.dlapiper.com/insights/publications/2026/03/evaluating-biologic-drug-costs
- NCPA, "Entresto, Stelara and Xarelto will exit the Medicare Drug Price Negotiation Program beginning Jan. 1, 2027," December 2025. https://ncpa.org/newsroom/qam/2025/12/02/entresto-stelara-and-xarelto-will-exit-medicare-drug-price-negotiation
- Cardinal Health, "CMS releases IRA's Medicare Part D 2027 updates." https://www.cardinalhealth.com/en/services/specialty-physician-practice/resources/healthcare-policy/ira-medicare-part-d-2027-updates.html
- CMS, "Fact Sheet: CMS Announces Manufacturer Participation in Third Cycle of Negotiation," March 2026. https://www.cms.gov/files/document/fact-sheet-medicare-drug-price-negotiation-third-cycle.pdf
- Brookings Institution, "Articulating policy options regarding implementation of the Medicare drug price negotiation program's renegotiation provision." https://www.brookings.edu/articles/articulating-policy-options-regarding-implementation-of-the-medicare-drug-price-negotiation-programs-renegotiation-provision
- Avalere Health, "Part D Formulary Management Tightens in 2026." https://advisory.avalerehealth.com/insights/part-d-formulary-management-tightens-in-2026
- Morgan Lewis, "IRA Litigation: Manufacturers Challenge CMS's Definitions of 'QSSD' and 'Bona Fide Marketing'," February 2025. https://www.morganlewis.com/pubs/2025/02/ira-litigation-manufacturers-challenge-cmss-definitions-of-qssd-and-bona-fide-marketing
- FREOPP, "Improving the Medicare Drug Price Negotiation Program: a $90 billion opportunity." https://freopp.org/whitepapers/improving-the-medicare-drug-price-negotiation-program-a-90-billion-opportunity
