The Multi-Billion Dollar Gamble

Recent discussions about the Inflation Reduction Act (IRA) have largely focused on 2026 pricing and whether CMS achieved real discounts (or just revealed mostly what was existing gross-to-net concessions Pharma leaders are weighing in on whether they came out ahead or not. But there's a larger, more costly issue on the horizon—one that could cost the industry billions. For companies not paying attention, the consequences could be significant.

The Real Cost of IRA MFP Compliance: A Multi-Billion Dollar Time Bomb

Price cuts are just the beginning. The IRA introduces a substantial operational challenge. Pharma companies must coordinate payments to around 60,000 dispensing entities for millions of Medicare beneficiaries, all within a tight 14-day window. This translates to billions of dollars changing hands each month. Even minor errors in payment calculations or deduplication with other discounts (like 340B) could lead to significant financial repercussions. And the risk of Civil Monetary Penalties (CMPs) is ever-present.

With less than a year until the June 1, 2025 deadline, manufacturers need to finalize their compliance plans. This involves overhauling IT systems, integrating financial systems, implementing compliance training, and managing payments for co-marketed drugs. Early estimates suggest that this preparation could cost companies between $5 million and $10 million in 2025 alone—before any MFP payments are even made.

By June 1^st 2025, every manufacturer with an MFP-designated drug must submit their MFP effectuation plans in writing to CMS. As of the latest Guidance, CMS has asked for manufacturer responses to six specific questions (and reserves the right to include more):

1.  Information regarding its plan to meet the 14-day prompt reimbursement window in reimbursing dispensing entities

2.  Process and methodology for extending Dispensing Entity reimbursement based on the lower of MFP or the dispensing entities’ 340B price

3.  Policies and procedures for calculating the reimbursed amount – whether that is based on acquisition cost or WAC (Wholesale Acquisition Cost)

4. Data transmission methodology to the Medicare Transaction Facilitator (MTF), which will be specific to data requirements listed in Sections 40.4.1 and 40.4.3 as of CMS’s May 3^rd 2024 Guidance to Industry document

5.  Where applicable, specifics on how the Primary Manufacturer will work with a Secondary Manufacturer in extending MFP-based reimbursement to the Dispensing Entity

6.  Plans for how the Primary Manufacturer will ensure their processes will comply with all applicable data privacy and security laws, regulations, policies, and CMS requirements.

The Billion-Dollar Fraud Risk Nobody's Talking About

Beyond the operational costs, there’s a growing concern about the fraud risks associated with the MFP. With 60,000 entities and rapid transaction processing, not to mention the 340B deduplication complexities, the MFP is a prime target for fraudulent activities. This isn’t just a theoretical concern—fraud could easily reach multi-billion-dollar levels.

Consider this: current estimates put 340B fraud at $3-5 billion annually. The MFP, with its larger scale and complexity, could face five times that amount. Even a 1-2% fraud rate could result in $2-4 billion in annual losses. Addressing this will require substantial investment in fraud detection technologies and strategic partnerships with fintech and high-volume payment providers.

KYC: The Multi-Billion Dollar Compliance Burden

"Know Your Customer" (KYC) may sound routine, but in this new landscape, it’s anything but. Verifying tens of thousands of dispensing entities to ensure compliance will require extensive resources, even with help from established supply chain partners. Failing to adequately implement KYC protocols could lead to significant fraud risks, along with regulatory fines and reputational damage that could reach into the billions.

Speed vs. Accuracy: The $100 Million Tightrope Walk

Companies are required to process payments within 14 days, but the pressure to get it right is immense. A mistake on a single MFP-impacted drug could result in up to $100 million in losses due to disputes, penalties, legal fees, and operational disruptions, not to mention Civil Monetary Penalties and other consequences, such as executives grilled in Congressional hearings. Given the opacity of some channel discounts beyond the manufacturer’s control, these calculations may be more difficult than CMS thought.

Cybersecurity: The Breach That Could Wipe Out Billions

As billions of dollars flow through these new systems, the threat of cyberattacks looms large. A single successful attack could not only divert millions but also expose sensitive data, triggering a cascade of regulatory fines and brand damage. Manufacturers may be somewhat insulated from this risk, but CMS is at risk of creating a “single point of failure” in its Medicare Transaction Facilitator. Manufacturers need to have plans on how to protect their data and that of their patients if the MTF goes offline, and potentially plans to ensure that MFP can still be delivered or pharmacies may be stuck with cash flow problems until the MTF can get back online (think Change Healthcare’s breach, but impacting every Medicare beneficiary on an IRA MFP drug).

The Stakes Are Higher Than Ever: Will You Be Ready?

Pharma executives, the stakes have never been higher. Operationalizing MFP isn’t just regulatory challenges—it’s a potential billion-dollar liabilities. If you’re not investing in planning and partnering for fraud prevention, KYC protocols, cybersecurity, and advanced payment systems now, you’re putting your revenue at risk for 2026 and beyond. The Cost of inaction? Up to billions in lost profits, regulatory fines, and reputational damage. The cost of preparation? A fraction of that, but the benefits are priceless. With less than a year before CMS expects these plans to be in place, your time to act is now. 

Pharmaceutical manufacturers facing the complexities of the Medicare Drug Price Negotiation Program (MFP) under the IRA need a solution that not only streamlines compliance but also mitigates significant risks like duplicate discounts, payment inaccuracies, and potential fraud. 40.4 Solutions offers a comprehensive, all-in-one service that takes on the operational burden of MFP implementation. We manage payments, ensure compliance with CMS requirements, and deploy advanced algorithms to prevent costly errors. With our expertise, pharma companies can focus on their core business, knowing that their MFP obligations are handled efficiently and securely. Don’t let the complexities of MFP put your business at risk—partner with 40.4 Solutions to safeguard your operations and protect your bottom line.

If your team is looking for support for MFP effectuation, operations, data, payments, and security, look no further. At 40.4 Solutions, we’re a team of seasoned leaders in policy, access, distribution, pricing, 340B, and compliance, and we are here to support manufacturers’ efforts in getting their plans in place and systems operational so that MFP effectuation doesn’t have to be a headache.

Get in touch with us today to set up a meeting and start talking about how we can support your company’s success in MFP effectuation. Visit our website to learn more.