Insights from the Q1 Medicare MDP Rebate Processing Cycle
As of June 9th, the first Medicare Manufacturer Discount Program (MDP) processing cycle officially came to a close. With that milestone behind us, we wanted to share emerging trends from the Q1 2025 cycle.
MDP Background
As a brief refresher, the MDP program launched on January 1, 2025, replacing the Coverage Gap Discount Program (CGDP).
At a high level, manufacturers now face lower rebate rates, but their rebate liability extends across all scripts after the patient's initial deductible is met. Note that rebate rates will vary depending on Phase-In status (read more about that here: Phase-In of Medicare Part D Rebates). For a helpful visual breakdown of the cost sharing between all parties (manufacturer, plan, patient and Medicare), see Figure 4 from the Kaiser Family Foundation (KFF):
Q1 2025 Cycle Takeaways
- For rebates that Woven Data processes, Q1 2025 MDP manufacturer liability shifted significantly, with changes ranging from -81% to +237% compared to Q1 2024 CGDP liability.
- These shifts were due to structural changes in the rebate model—from a higher rebate percentage for limited units based on the patient's deductible under CGDP to a lower rebate rate applied to all units dispensed under MDP.
- In our experience, Phase-In status was by far the most significant driver of large liability changes. This proved especially impactful for products launched after August 16, 2022 (the date the Inflation Reduction Act was enacted). These products are not eligible for Phase-In, due to how the legislation ties eligibility to that fixed date—regardless of whether a manufacturer might otherwise meet the Phase-In criteria.
- Many manufacturers faced operational issues in Q1, including:
- The introduction of many new plan sponsors, some of which had not yet provided valid banking information. This led to portal errors (e.g. "Invalid Payee Data") that prevented manufacturers from initiating payment. This was an operational hassle as manufacturers had to monitor the portal and initiate multiple payments as new payees became available. We’re hopeful that these issues will largely be resolved by next cycle.
- The portal also required manufacturers to re-enter their banking details, which were not transferred from the CGDP application. Separate payments were required for MDP and CGDP.
- Importantly, Palmetto, the Third-Party Administrator (TPA) confirmed:
- Civil money penalties (CMPs) will not be imposed on manufacturers if the plan sponsor failed to update their EFT information in time.
- CMPs will also not be issued for payments that were initiated by manufacturers on or before June 9, even if the transaction still appears as "Pending" in the portal.
- For transactions that remain outstanding after the June 9, 2025 deadline:
- Palmetto has advised manufacturers to continue monitoring the portal, as new lines may become available for payment.
- Palmetto also clarified, as of this point, that "Deferring" a payment is typically only appropriate when the amount due is below a bank's ACH transfer threshold (e.g., $20.00)—not when the plan sponsor's banking info is missing or invalid.
Links
- Part D Information for Pharmaceutical Manufacturers - includes implementation Guidance, FAQs, Phase-In Eligibility files
- Phase-In of Medicare Part D Rebates (Woven Data Blog)
Recommendations
- Monitor your phase-in status by NDC-9, as published by CMS.
- Manufacturers can continue to rely on their initial accruals unless there were material deviations in the assumptions utilized to calculate them.
- Evaluate your process and timing around your CGDP accruals carefully as adjustments can still be billed by CMS until 1/1/2028. While manufacturers will not incur any liability for discounts under the Coverage Gap Discount Program for dates of service after December 31, 2024, Coverage Gap Discount Program invoicing will continue through January 31, 2028. (CMS Revised Final Guidance, page 2)
Published on June 11, 2025 by Jenny Bulkin