Newsletter · 2026-07-20 · Ashutosh Agarwal

CMS Confirms Most Favored Nation Deals With All 17 Drugmakers - Drug Pricing & IRA Round 2 - Week of July 20, 2026

Drug-pricing and IRA policy podcast intelligence for the week of July 14 to 20, 2026. A CMS Deputy Administrator confirmed on the record that the administration has struck Most Favored Nation deals with all 17 major drugmakers on a list of high-volume medicines, while pharmacy-economics episodes put hard numbers on the PBM middleman spread.

Drug Pricing & IRA Round 2

Week of July 14–20, 2026: CMS Confirms Most Favored Nation Deals With All 17 Drugmakers

TL;DR

• The week's headline came straight from the government. Stephanie Carlton, the Deputy Administrator of the Centers for Medicare and Medicaid Services (CMS), went on the record and said the administration has now "struck deals with all of the 17 major drug manufacturers in this country" on Most Favored Nation (MFN) pricing, the idea that the US should not pay more for a drug than other wealthy countries do. She framed the target as "a specific list of high volume, high utilization meds." This is the first time we've heard the 17-deal number confirmed by a named CMS official rather than by outside commentators. (Conversations on Health Care)

• The best number for your book this week was about the middlemen, not the makers. A deep dive on pharmacy economics laid out a striking finding: for a generic drug that costs roughly 47 cents to make, the pharmacy benefit manager (PBM), the company that sits between drugmakers, insurers, and pharmacies, can pocket about $41 of every $100 spent. And in the phase before a patient hits their deductible, almost 80% of the top generic prescriptions are cheaper if you skip your insurance entirely and just pay cash. (Relentless Health Value)

• A rare, candid look inside a top pharma company came from a just-retired 25-year Johnson & Johnson veteran, who put hard numbers on the gross-to-net gap: drugmakers keep "less than 50 cents… on every US dollar" spent on drugs, the rest goes to the middlemen, and PBMs alone collected "$850 billion last year." Useful color, but note this was a re-release of an interview recorded last year, background, not fresh news. (Working Healthcare)

• CMS is aggressively policing Medicare drug/biologic spend outside the negotiation program too. Carlton described catching "skin substitutes" spending on a path to "almost 20 billion over the course of a few years" and cracking down, a reminder the agency is hunting for Part B savings on multiple fronts, not only through the formal drug-price negotiation. (Conversations on Health Care)

• Honest note on what stayed quiet: for the second week running, nothing surfaced on the things this letter tracks most closely, IRA Round 2 negotiation mechanics, the 2028 selected-drug list (and Part B drugs joining for the first time), Round 1's Maximum Fair Prices now in effect, or the small-molecule "pill penalty" / EPIC Act fix. No franchise-level revenue-at-risk numbers on any tracked name either. This was an MFN-and-middlemen week, not a Round 2 week.

What's new

1. A CMS official confirms the 17 MFN deals, on the record, with a target list

This is the development a book can lean on, because it comes from inside the agency doing the negotiating.

Quick plain-English backdrop: Most Favored Nation (MFN) pricing is the White House's demand that Americans stop paying more for a drug than people in other rich countries pay. Last week's letter had the 17-deal figure, but sourced from a generalist investing show. This week the number came from Stephanie Carlton, Deputy Administrator of CMS, in a July 16 conversation recorded at the Aspen Ideas Health festival.

Her words: "the challenge the president gave us over a year ago… He didn't want to pay more than other Westernized countries did, called most favored nation pricing. And folks said it was impossible. You know, a year later, we have struck deals with all of the 17 major drug manufacturers in this country to bring down those prescription drug costs." She described the mechanism as targeting "a specific list of high volume, high utilization meds." (Conversations on Health Care)

Why it matters for numbers: Two things. First, "all 17" and "high volume, high utilization meds" is the administration signaling that MFN is now a done set of agreements, not a threat, which lowers the tail risk of the 100% import tariff that was hanging over the group, but locks in real price concessions on the biggest sellers. Second, "high volume, high utilization" is code for exactly the franchises with the most US revenue at stake: the GLP-1 diabetes and weight-loss drugs and the other blockbuster brands. Carlton is a genuine government operator, so treat this as the closest thing to a primary source we got all week, but remember she is also selling the administration's story, so "struck deals" tells you agreements exist, not what the net price cuts actually are.

2. The middleman math: PBMs take $41 of every $100 on generics

The most useful, number-dense episode of the week was a July 15 Relentless Health Value deep dive on why cheap generic drugs stay cheap, and what happens when insurance gets involved. Host Stacey Richter walked through research from health-economics academics and pharmacists (Ge Bai, a PhD accountant; pharmacists Bryce Platt, Luke Slinde, and Benjamin Jolly).

Plain English first: a PBM (pharmacy benefit manager) is the company hired by insurers and employers to manage drug benefits, it decides which drugs are covered and negotiates prices. "Gross-to-net" is the gap between a drug's list price and what anyone actually collects after all the rebates and fees; a lot of money hides in that gap.

The findings that jump out: For everyday generic pills, the PBM "by a margin of 10 points makes the most money… extracting $41 out of every $100 spent on generic drugs that cost on average like 47 cents to manufacture." In other words, on cheap generics the paperwork costs more than the pill. (Relentless Health Value)

Citing a study in the Annals of Internal Medicine, the show noted that among the 20 most-prescribed generics, "43% of them actually will have a higher out-of-pocket payment from patients than the GoodRx price," and for prescriptions still in the deductible phase, that jumps to "79%." Translation: four out of five times, in the deductible phase, you'd pay less by ignoring your insurance and paying cash. (Relentless Health Value)

Generic drugs are also reaching patients more slowly. Pharmacist Bryce Platt: "Between 2009 and 2013, generic drugs reached 57% of their peak uptake within one month of launch. In the last five years, it took six months on average to reach that same level." He pinned the slowdown not on competition but on "more control of the coverage from the PBMs and the payers." (Relentless Health Value)

A "watch the wording" flag worth enjoying: the episode also uses the phrase "most favored nation", but for something completely different. In PBM–pharmacy contracts, an MFN clause is a rule that punishes a pharmacy for offering a lower cash price by clawing back its insurance reimbursement. Same three letters, opposite direction from the drug-pricing MFN above. Don't let the two get crossed in a model.

Why it matters for numbers: this is the gross-to-net plumbing that sets the real economics for both drugmakers and the PBM-owned insurers. The louder this "$41 of $100" narrative gets, the more political and regulatory risk builds under the PBM/managed-care profit pool, the exact spread these companies live on.

3. A retired J&J insider on where the drug dollar really goes (re-release, read as background)

On a July 14 re-release, the Working Healthcare podcast aired a candid interview with Chuck Melendi, who spent 25 years at Johnson & Johnson in sales, marketing, payer relations, and policy before retiring. Because he's out of the company, he spoke freely. Two caveats up front: this is a re-release of a conversation recorded last year, so the figures are dated (he cites J&J's 2023 revenue of about $85 billion), and he is an industry veteran making the industry's case, useful color, not neutral analysis.

His central point echoes the gross-to-net theme: drugmakers "who do R&D, do everything to bring a product to market, get less than 50 cents spent on every US dollar on drugs. The majority, greater than 50 percent, goes to the middleman." His tally: "$850 billion last year went to PBMs," and, citing Adam Fein of Drug Channels, the net price drugmakers actually collect has fallen "for the seventh straight year in a row" even as what patients pay keeps rising. He pegged typical rebates at "40 to 60 percent off of drugs as far as the net cost to payers." (Working Healthcare)

He also flagged two structural items a book should file away: the Trump-era rule that would force PBM rebates to flow through to patients has been "delayed to like 2032," and manufacturers keep responding to rebate demands by routing through offshore group-purchasing organizations. On strategy, he confirmed J&J has deliberately stayed out of the biosimilar and generic business, "we are not in the business of biosimilars and generics… we are going to focus on bringing innovative medicines to market", even as its own legacy biologics (he named the Remicade franchise) now face biosimilar competition from Amgen (Avsola) and Pfizer (Inflectra). (Working Healthcare)

The debate

The core argument hasn't changed from last week, but this week's CMS confirmation sharpens both sides.

"It's a bounded, buy-your-way-out headwind." The bull case got quiet support from Carlton's own framing. If the administration has genuinely "struck deals with all of the 17 major drug manufacturers," then the acute risk, the threatened 100% tariff on imported drugs, is largely defused, and what's left is a set of negotiated, finite price concessions on a defined list of high-volume drugs. Companies bought certainty. The concessions are real but knowable, the Street can model them, and the sector's long-run engine (new drug discovery) keeps running. (Conversations on Health Care)

"It's structural margin compression on the exact drugs that pay the bills." The bear reading of the same quote is less comforting. "A specific list of high volume, high utilization meds" is precisely the blockbuster franchises that fund everything else, and the administration is now pressing on them from several directions at once: MFN reference pricing, formal Medicare negotiation, and separate Part B spending crackdowns (Carlton's skin-substitutes example shows CMS will move hard and fast when it spots a big Part B number). Add the middleman squeeze the pharmacy-economics episode documented, and the US blockbuster economics that fund the next decade of R&D get chipped at from both the price side and the channel side. (Conversations on Health Care; Relentless Health Value)

The swing factor is the same as last week: the details behind the word "deals." Carlton confirmed the deals exist; nobody this week put a net-price number on them. Until the actual rebate percentages and the "specific list" are public, the bull-vs-bear gap is a gap about magnitude, not direction. Watch for the list.

Stocks in play

Straight talk, again: no podcast this week attached a revenue-at-risk number to a named franchise. Nobody modeled Eliquis, Keytruda, Stelara, Imbruvica, Xarelto, Jardiance, Ozempic, Wegovy, Farxiga, Tagrisso, or Venclexta. So rather than invent figures, here is what the week's episodes actually implied for specific names.

The GLP-1 leaders, Novo Nordisk (NVO), Eli Lilly (LLY), implicated by the MFN "high volume, high utilization" framing. Bull: if all 17 deals are signed, the 100% tariff threat is off the table, and GLP-1 demand remains the strongest secular story in the group. Bear: "high volume, high utilization meds" is a near-perfect description of the GLP-1 category, the drugs with the most US spend and therefore the most obvious MFN and future-negotiation targets. This is the group most exposed to whatever net-price cuts the "specific list" contains. Next to watch: publication of the MFN "specific list" and the actual net-price concessions; whether Ozempic/Wegovy land on a future selected-drug list. (Conversations on Health Care)

Johnson & Johnson (JNJ), background color only, from the re-released insider interview. Bull: J&J's deliberate choice to skip biosimilars/generics and concentrate on "innovative medicines" is a bet on pricing power surviving policy pressure; its oncology push has moved it from roughly the industry's ninth-largest oncology player toward the top two. Bear: that same choice means no generic/biosimilar cushion when legacy biologics erode, the Remicade franchise now faces Amgen and Pfizer biosimilars, and J&J's biggest brands sit squarely in the MFN/negotiation crosshairs. Next to watch: Stelara and the rest of the immunology franchise against the negotiation and MFN timelines (no fresh podcast commentary this week). (Working Healthcare)

PFE, MRK, BMY, AZN, ABBV, no company-specific podcast commentary this week. The only read-through is the sector-level one: all of them are among "the 17," and all have blockbusters that fit the "high volume, high utilization" description. Franchise-level revenue-at-risk on Eliquis, Keytruda, Pomalyst, Farxiga, Tagrisso, Imbruvica, or Venclexta will have to come from filings and Street models; the podcasts did not provide it.

Read-throughs

PBMs / managed care (CVS, CI, UNH). This was the week's real signal for these names. The Relentless Health episode's "$41 of every $100" and "79% cheaper in cash" findings are ammunition for the growing political case against PBM economics, and the retired J&J insider's "$850 billion to PBMs" line adds a number to the same story. Both are, in part, advocacy, the pharmacy-economics guests want the PBM spread shrunk, and the ex-J&J executive is making pharma's case, so weight them as narrative pressure, not settled fact. But narrative pressure is exactly what re-rates a regulated profit pool. The safe-harbor rebate-passthrough rule sitting delayed to "2032" is the slow-moving version of that same overhang. (Relentless Health Value; Working Healthcare)

Biosimilar / generic makers (incl. TEVA). Two crosscurrents. The negative: generic launch ramps have slowed sharply, from 57% of peak uptake in one month (2009–2013) to six months on average lately, because payers and PBMs, not competition, now gate adoption. That's a direct headwind to how fast a generic maker can capture volume after launch. The positive: the cash-pay channel (Cost Plus, and cash-only pharmacies like the Ohio "Freedom Pharmacy" example) is a genuine, growing route around the PBMs that honors low generic prices, a structural tailwind for whoever can serve it. (Relentless Health Value)

Part B spending discipline (a 2028 preview). Carlton's skin-substitutes example, catching spend headed toward "almost 20 billion" and cutting it, is a small but telling read on how aggressively CMS will police Part B (physician-administered) drug and biologic spending. That matters because the 2028 IRA selected-drug list will include Part B drugs for the first time; this week's episode is a reminder the agency has both the appetite and, increasingly, the AI tooling to go after big Part B numbers. (Conversations on Health Care)

Small-molecule vs. biologic R&D mix, and ex-US launch strategy. No fresh commentary this week; the pill-penalty / EPIC Act debate and the launch-sequencing question that last week's episodes raised got no new airing.

What changed vs. last week

Last week (July 7–13) was about two things: CMS's proposed ~37% cut to 340B hospital drug reimbursement (ASP−33.4%, open for comment through end of August), and the MFN story as told by outside commentators and a policy specialist.

What genuinely moved this week: The MFN "17 deals" claim graduated from outside commentary to an on-the-record CMS statement. A named Deputy Administrator confirming "all of the 17 major drug manufacturers" and describing the target as "a specific list of high volume, high utilization meds" is a real upgrade in source quality, even if the net-price details are still missing. The gross-to-net / PBM story got a fresh, number-heavy airing ($41 of $100 on generics; 79% cheaper in cash in the deductible phase; generic uptake slowing to six months), which is new detail versus last week and squarely relevant to the PBM/managed-care read-through.

What did not move (still quiet): no update on the 340B OPPS proposed rule beyond last week's comment-window story; nothing on IRA Round 2 negotiation mechanics; nothing on the 2028 selected-drug list or its first-ever Part B inclusion; nothing on Round 1's Maximum Fair Prices now in effect; and nothing on the small-molecule "pill penalty" / EPIC Act fix. Those remain the threads to watch for a genuine "what changed" ahead.