What Plan Sponsors Need to Know About WAC Pricing Shifts

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Created under the Inflation Reduction Act of 2022 (IRA), these negotiated prices — known as Maximum Fair Prices (MFPs) — are no longer just a theoretical policy lever but an operational reality for plan sponsors. Beginning January 1, 2026, the first 10 high-expenditure drugs subject to negotiation under MFP officially took effect, with additional drugs scheduled to follow in 2027, 2028 and beyond.

While the program is technically limited to Medicare Part D, its implications extend well beyond Medicare beneficiaries and will reverberate across the broader healthcare system, influencing everything from pricing strategies and payment flows to formulary design. MFPs are not a simple pricing update; they are a significant market event that requires active management and strategic recalibration. For commercial plan sponsors, this shift introduces new operational complexities and strategic considerations that must be actively managed rather than passively absorbed.

Explore 3 critical realities plan sponsors should understand as MFP takes hold:

Why negotiated MFPs will have consequences for commercial plans
How this price compression will impact drug cost economics
How Optum Rx can help provide clients with the strategic guidance needed to navigate this market event and related changes

MFP negotiated prices will have consequences for commercial plan sponsors

Under the IRA, the Centers for Medicare & Medicaid Services (CMS) is required to negotiate prices directly with manufacturers for some of the most expensive and widely used prescription medicines. Although MFP applies only to Medicare Part D, commercial plan sponsors shouldn’t assume they’re insulated from these changes, as pricing adjustments in government programs have historically led to downstream effects in the commercial space.

Thus, the negotiated that went into effect on January 1 are price signals, effectively resetting cost expectations and contracting approaches across the industry.

Changes in the wholesale acquisition cost (WAC) set by drug manufacturers — often due to generic competition, biosimilar entry or therapeutic class pressure — are not uncommon. However, the scale of the WAC reductions expected in the wake of MFP is notable. Current estimates suggest WAC reductions ranging from 43% to 75% for affected drugs, far exceeding typical annual adjustments.

It’s important to note that WAC reductions for drugs selected for MFP can also compress the prices of similar drugs in their category. For example, price reductions for the diabetes drug Jardiance® will impact Synjardy®, a combination medication containing both Jardiance® and metformin.

This new level of compression represents a structural shift rather than an annual market fluctuation. Since manufacturers may adjust list prices and contracting approaches to account for reduced revenue on negotiated products, plan sponsors and pharmacy care services providers alike must recalibrate their strategies in response.

Price compression will amplify the transition to lowest net cost

The arrival of the MFP coincides with an existing trend toward less reliance on rebates to lower drug costs. As manufacturers adjust WAC to align with negotiated prices, plan sponsors may see lower upfront acquisition costs. This is a clear win for clients and members, helping drive lower prices at the pharmacy counter and, potentially, improved affordability for members.

However, many of the MFP-selected drugs have historically generated significant rebate revenue for plans. In general, under the new model, these negotiated drugs will not offer additional discounts beyond the standardized access price. As a result, rebate revenue associated with these drugs may decline sharply, ranging from double-digit reductions to complete elimination.

While the net impact is expected to be cost-neutral or cost saving in the aggregate for most drugs, for some medicines, plans may experience increased net liability if lost rebates exceed the benefit of lower WAC. For plan sponsors, this creates a fundamental shift in economics. Savings that once appeared on the back end in the form of rebates are now delivered upfront through lower ingredient costs.

The shift away from rebate-driven economics mirrors prior policy changes, such as the removal of the Medicaid rebate cap on Average Manufacturer Price. That change, which took effect in January 2024, similarly altered manufacturer pricing and payment dynamics. The arrival of MFPs represents another such inflection point — one with multiple moving parts and long-term implications for how prescription drugs are priced and managed.

Optum Rx is a strategic partner in an evolving cost landscape

Optum Rx is committed to ensuring the lowest net cost for our clients, regardless of how we achieve it. Anticipating this market shift, in 2023 Optum Rx unveiled Cost Made Clear payment solutions to give clients new options beyond traditional payment models that prioritize revenue from rebates. Cost Made Clear offerings include a model that bases costs on independent costs baselines, as well as a flexible, passthrough mode that uses average ingredient costs and reflects real-time network price improvements.

We know this period of transition to lower list prices will come with new operational complexities. Beyond changes in cashflow timing, formularies and utilization-management strategies may need to be reassessed as the economics of certain drugs shift. What once appeared to be a cost-effective drug due to high rebates may now look different when evaluated on a net-cost basis.

Because these market events weren’t considered when some existing rebate guarantees were written, the arrival of MFP-induced WAC reductions also triggers contractual considerations. Reservation-of-rights clauses permit modifications to financial terms when external market events, such as MFP, fundamentally alter the original agreement and require rebalancing of the economics.

As the number of drugs subject to MFP price negotiations expands in the coming years, strategic decisions made now will matter more as volume and complexity increase. Optum Rx is positioned to help you navigate this transition as your strategic advisor. As with other regulatory-driven disruptions, we’re committed to providing transparency and guidance to help you better understand how price changes may affect your specific populations and drug mix.

Speak with your Optum Rx partner for an individualized financial analysis that can provide greater visibility into how WAC reductions and rebate losses will net out in your plan.

Beyond contract adjustments, Optum Rx will assist you operationally through updated formulary structures, benefit design and pricing model options that focus on net cost management rather than rebate maximization — helping you align with the direction of the market while continuing to meet affordability goals and ensure member access.