In July 2025, the Centers for Medicare & Medicaid Services (CMS) published the proposed rule CMS-1832-P. This rule, part of the annual Medicare Physician Fee Schedule (PFS) update, introduces significant changes that could reshape how pharmaceutical manufacturers calculate and report Average Sales Price (ASP). For manufacturers, staying ahead of these regulatory shifts is essential for maintaining compliance and ensuring accurate government pricing.
This blog explores the three most critical proposals within CMS-1832-P that every pharmaceutical manufacturer should understand. We will examine the proposed changes to payment methodology for skin substitutes, new clarifications on price concessions and bona fide service fees (BFSFs), and the inclusion of units sold at the Maximum Fair Price (MFP) in ASP calculations. Understanding these key themes is the first step toward preparing your organization for what lies ahead.
1. Skin Substitutes: A Shift in Payment Methodology
CMS-1832-P introduces a significant shift in how skin substitutes are paid, moving away from the current ASP methodology. This has major financial and operational implications for manufacturers, potentially disrupting revenue models and requiring adjustments to pricing strategies, supply chain logistics, and production workflows. Businesses must evaluate whether their existing systems and infrastructure can accommodate these operational changes to ensure continuity, compliance, and profitability under the new payment framework.
Current vs. Proposed:
- Currently: Most skin substitutes are reimbursed as biologicals under the ASP method, with unique billing codes and payment limits per product.
- Proposed:Skin substitutes would be reclassified and paid as “incident-to” supplies when used with a covered application. This means manufacturers may no longer need to calculate ASP for these products. CMS proposes categorizing them into three groups (PMA-approved, 510(k)-cleared, and 361 HCT/Ps) and introducing a single national payment rate of $125.38 per cm², a stark change from today’s product-specific rates.
Industry Impact:
This change could drastically reduce Medicare spending on skin substitutes by an estimated 90%. While CMS aims to maintain patient access, manufacturers must prepare for a fundamentally different reimbursement environment.
2. ASP: New Rules on Price Concessions and BFSFs
CMS is tightening rules around price concessions, bona fide service fees (BFSFs), and bundled arrangements to ensure ASP accurately reflects a drug’s net price. These changes will require manufacturers to review their ASP reporting practices, ensure all price concessions and bundled fees are properly accounted for, and standardize internal processes for determining fair market value, tracking concessions, and maintaining thorough documentation.
Key Changes:
- Price Concessions & Bundled Discounts: All discounts in bundled arrangements, contingent or not, must be proportionally allocated across all bundled National Drug Codes (NDCs) when calculating ASP.
- Fair Market Value (FMV): Manufacturers must periodically review FMV for BFSFs, ensuring fees aren’t masking price concessions.
Starting January 1, 2026, manufacturers will face new quarterly reporting requirements:
- Assumptions used in ASP calculations.
- Documentation of FMV reviews and methodology.
- Certification letters confirming BFSFs aren’t passed to affiliates, clients, or customers.
These changes increase accountability but add administrative demands, requiring manufacturers to update tracking and reporting systems.
3. ASP and Maximum Fair Price (MFP): A Critical Clarification
The CMS-1832-P proposed rule also answers a key question about the Medicare Drug Price Negotiation Program: how will sales at the Maximum Fair Price (MFP) affect ASP calculations?
CMS clarifies that units of selected drugs sold at the MFP must be included when calculating a manufacturer’s quarterly ASP. These sales will not be excluded and will carry their full weight in the computation. This change will become especially relevant in 2028, when Part B drugs become eligible for MFP negotiations. Including these lower-priced units will apply downward pressure on the ASP for negotiated drugs, making it essential for manufacturers to model the potential impact on future reimbursement rates.
Preparing for Compliance: Your Next Steps
The changes outlined in CMS-1832-P point toward a more complex and scrutinized future for government pricing. Pharmaceutical manufacturers must act now to understand the potential impact on their operations and systems.
Navigating these regulations requires powerful and reliable solutions. Model N is committed to helping manufacturers manage government pricing requirements and maintain compliance with confidence. Our solutions are designed to adapt to regulatory changes, ensuring you can meet your compliance obligations. If these proposals are finalized, our software can help you remain compliant.
To learn more about how Model N supports manufacturers with ASP reporting, visit our Government Pricing solutions page.
