CMS Proposed Rule Threatens Subcutaneous Blockbuster Strategies for Keytruda, Opdivo; Impacts 2029 Medicare Pricing
The Centers for Medicare and Medicaid Services (CMS) proposed a rule to subject subcutaneous Keytruda and Opdivo to 2029 Medicare price negotiations alongside IV versions. This targets "evergreening" strategies by Merck & Co. and Bristol Myers Squibb, directly impacting their commercial lifecycle management for these $41 billion cancer immunotherapies. Procurement and regulatory teams must reassess future pricing and market access strategies.
US Regulatory Shift Targets Subcutaneous Formulations of Blockbuster Immunotherapies
The Centers for Medicare and Medicaid Services (CMS) published a proposed rule on June 12, 2026, signaling a direct challenge to pharmaceutical companies' strategies for extending the market exclusivity of high-revenue drugs. This federal rule, slated for implementation in 2029, aims to close a perceived "loophole" that has allowed drugmakers to transition medicines from intravenous (IV) to subcutaneous (SC) administration, effectively prolonging their patent-protected life—a practice commonly termed "evergreening." For procurement directors, this means a fundamental re-evaluation of long-term drug acquisition costs, particularly for major oncology assets. Regulatory affairs heads must immediately assess the implications for pipeline products and existing portfolio drugs nearing patent expiry, as this precedent could reshape future regulatory submissions and market access strategies. The immediate impact is expected on Merck & Co.'s Keytruda and Bristol Myers Squibb's Opdivo, both critical cancer immunotherapies. This regulatory action underscores a broader governmental effort, mandated by the Inflation Reduction Act of 2022, to control drug expenditures within the Medicare program, which serves enrollees aged 65 and older and individuals with disabilities. Business development executives must now factor this aggressive stance into their valuation models for new drug candidates and licensing agreements, especially those involving formulation changes designed to extend product lifecycles.
Commercial Strategy Under Threat: Keytruda and Opdivo's Revenue Sustainment
The proposed CMS rule directly impacts the commercial strategies of Merck & Co. and Bristol Myers Squibb, who have invested significantly in developing subcutaneous formulations of Keytruda and Opdivo, respectively. These under-the-skin injections represent a crucial component of their plans to sustain revenue from these mega-blockbuster products, which collectively generated $41 billion in global sales last year. The IV formulations of both Keytruda and Opdivo are approaching the end of their patent-protected lives in 2028, making the transition to SC versions a vital move to mitigate the anticipated revenue decline from biosimilar competition. For supply chain VPs, this regulatory development necessitates a review of manufacturing and distribution strategies for both IV and SC formulations. The convenience offered by subcutaneous shots—reducing patient time in infusion centers and easing capacity constraints for healthcare facilities—is a key selling point. However, if these newer formulations are subject to price negotiations at the same time as their IV counterparts, the commercial advantage derived from this convenience may not translate into premium pricing. Business development executives must now re-evaluate the return on investment for formulation development projects, considering the reduced pricing flexibility this rule imposes. The strategic rationale behind these transitions, focused on patient convenience and healthcare system efficiency, now faces a significant pricing hurdle in the US market.
Biosimilar Competition Creates Pricing Negotiation Uncertainty for 2029
A critical nuance within the proposed CMS rule introduces a layer of uncertainty for the 2029 price negotiations: drugs subject to biosimilar or generic competition can be "deselected" from the program, applying to all formulations. This provision could significantly alter the commercial landscape for Keytruda and Opdivo. Leerink Partners analyst David Risinger highlighted this complexity, noting that biosimilar versions of both Opdivo and Keytruda are anticipated to enter the market in December 2028. This timing is crucial, as it raises questions about whether biosimilar entry will occur "soon enough to preclude CMS selecting Opdivo Qvantig and Keytruda QLEX," referring to their subcutaneous forms. For procurement directors, this creates a dynamic environment where monitoring biosimilar development timelines becomes paramount. The potential for biosimilar competition to exempt these drugs from price negotiations could lead to different pricing outcomes than initially feared, potentially offering alternative cost-saving avenues. Regulatory affairs heads must closely track CMS's final interpretation and application of this deselection clause, as it will dictate the regulatory pathway and commercial viability of new formulations. Supply chain VPs should prepare for scenarios where demand shifts rapidly between originator products and biosimilars, or between IV and SC formulations, depending on the final pricing and market access dynamics established by CMS.
Drug Delivery Technology Sector Implications and Supplier Stability
The proposed CMS rule also has implications for companies specializing in drug delivery technologies, particularly those enabling the transition from IV to subcutaneous administration. Halozyme, a key player in this space, developed the delivery technology that facilitated the subcutaneous transition for Bristol Myers Squibb's Opdivo and Johnson & Johnson's Darzalex. While the rule targets the drug products themselves, it indirectly affects the value proposition of such enabling technologies. Halozyme, however, has publicly stated that it forecasts "zero to minimal impact to its royalty revenues through at least 2035." This projection suggests that Halozyme believes its existing licensing agreements and the broader utility of its technology will insulate it from the immediate pricing pressures on the final drug products. For procurement directors and supply chain VPs, this provides a degree of stability regarding critical technology suppliers. However, business development executives evaluating future partnerships with drug delivery technology providers must consider the evolving regulatory landscape. The perceived value of technologies that enable "evergreening" strategies may diminish if regulators continue to close such loopholes. This regulatory scrutiny could drive innovation towards delivery technologies that offer genuine clinical differentiation beyond mere convenience, or those that significantly reduce manufacturing costs, rather than primarily extending patent life.
Broader Industry Repercussions and Future Regulatory Landscape
The Centers for Medicare and Medicaid Services' proposed rule sets a significant precedent for the global chemical and life sciences industry, extending beyond Keytruda and Opdivo. This action is a direct consequence of the Inflation Reduction Act of 2022, which empowers Medicare to negotiate drug prices. The first round of these negotiations went into effect this year, and the 2029 round will be the fourth annual cycle. Given the combined global sales of Keytruda and Opdivo totaling $41 billion last year, and their broad application across various cancers, their impact on the Medicare budget is substantial. This regulatory move signals CMS's intent to aggressively pursue cost containment across the entire drug lifecycle, including strategies involving new formulations. For regulatory affairs heads, this necessitates a proactive assessment of all high-revenue products with potential for formulation changes, particularly those nearing patent expiry. Business development executives must integrate this heightened regulatory risk into their M&A and licensing strategies, understanding that the commercial attractiveness of lifecycle management initiatives through formulation switches may be significantly curtailed in the US market. CMS is expected to release the list of 20 drugs subject to 2029 price negotiations by February 1, 2027, providing further clarity on the scope of this regulatory impact. All senior decision-makers should anticipate similar scrutiny for other blockbuster drugs across various therapy areas.