The Complexities of Medicare Part B Drug Negotiations vs Part D: H. John Beardsley and Fauzea Hussain

According to H. John Beardsley of CoverMyMeds and Fauzea Hussain of McKesson, the upcoming 2028 Medicare Part B drug negotiations will present significant challenges for healthcare providers, necessitating the establishment of new payment systems between pharmacy benefit managers (PBMs) and provider offices. The absence of existing payment infrastructure for Part B drugs, unlike Part D, will require the creation of new data flows and management processes, potentially impacting 340B program considerations and patient access. Stakeholders should proactively prepare for these changes, recognizing that the transition will not be a linear learning process.

Analysis

The impending Medicare Part B drug negotiations, slated to take effect in 2028, are anticipated to introduce substantial operational and financial challenges for healthcare providers, as highlighted by representatives from CoverMyMeds and McKesson. A primary concern is the absence of established payment systems between pharmacy benefit managers (PBMs) and provider offices for Part B drugs, a stark contrast to the existing infrastructure for Part D; this necessitates the development of entirely new 'payment pipes,' data flow mechanisms, and management processes. Provider offices, which typically lack sophisticated standalone revenue cycle management for drugs unlike retail pharmacies, face a more complex adaptation. Furthermore, the negotiations are expected to have significant implications for the 340B drug pricing program, compelling health systems to re-evaluate the relative value of drugs subject to Maximum Fair Price (MFP) negotiations. The overall sentiment surrounding these changes is moderately negative, reflecting concerns about potential disruptions, increased costs, and the critical need to preserve patient access, with McKesson (MCK) identified as a key entity that will need to navigate these regulatory shifts.

Key Decisions for Investors

• Investors should closely monitor healthcare providers and pharmaceutical supply chain companies, including McKesson (MCK), for their strategic responses and investments towards adapting to the 2028 Medicare Part B negotiation framework, particularly regarding new required payment systems and potential 340B program adjustments.
• Potential for increased operational expenditures and margin pressures should be factored into valuations for affected entities as they build out necessary infrastructure and processes ahead of the changes.
• Given the extended timeline, companies that proactively address these challenges and demonstrate clear adaptation strategies may present more resilient long-term investment opportunities compared to those that delay preparations.