2026 CMS Proposed Rule: BFSF Changes and Potential Risks for Pharma Manufacturers

CMS released its 2026 Proposed Rule this summer, outlining payment and coverage policy updates for Medicare Part B and related programs. For pharmaceutical manufacturers, the most significant development is the long-awaited clarification on bona fide service fees (BFSFs). 

If finalized, these provisions will place new compliance demands on manufacturers. Although primarily focused on Average Sales Price (ASP) reporting, the ruling is expected to extend into other CMS programs such as the Medicaid Drug Rebate Program—raising the stakes for all manufacturers with a Medicaid NDRA. 

Why BFSFs Matter 

BFSFs have been a source of regulatory uncertainty since CMS introduced its Four-Part Test in 2007. Despite the attempted guidance, questions about fair market value (FMV), pass-through arrangements, and classification in government pricing calculations continued, leaving room for varied interpretations. 

Proposed Changes to BFSFs 

1. Fair Market Value (FMV) Standards

• • Fees not tied to drug price/volume must reflect comparable market transactions or cost-plus-reasonable markup

• • Price/volume-based fees require an independent third-party valuation

• • FMV reviews must occur at least every contract renewal (commonly annual)

2. “Passed-On” Certification

• • CMS removes the presumption that BFSFs are not passed through

• • Manufacturers must obtain written certifications from service providers confirming fees are not passed to clients, customers, or affiliates

3. Quarterly Documentation & Reporting Requirements

• • Detailed FMV methodology and periodic review records

• • Service provider certifications

• • Any assumptions applied to ASP reporting 

Compliance Implications 

• Operational Impact: New documentation, reporting, and certification requirements will increase administrative workload

• Financial Risk: Volume- or percentage-based fees will be presumed price concessions unless substantiated through rigorous cost-based FMV analysis

• Broader Reach: While centered on ASP reporting, these rules may be applied to Medicaid and other CMS programs, extending their impact across the government pricing landscape

Next Steps 

With the final ruling expected by the end of 2025 and implementation in early 2026, pharmaceutical manufacturers should begin preparing now by: 

• Reviewing existing BFSF agreements

• Strengthening FMV analysis processes

• Securing provider certifications

• Updating SOPs to align with CMS’s clarified standards

Conclusion 

The 2026 CMS Proposed Rule represents a major turning point in BFSF regulation. By setting clearer standards around FMV, pass-through certification, and reporting, CMS is signaling increased scrutiny of service fee arrangements. For manufacturers, the path forward requires early preparation, enhanced documentation, and a strengthened compliance structure to minimize risk and ensure accuracy in government pricing calculations.