NASHP has published a new version of model legislation enabling states to reference Medicare’s maximum fair prices (MFPs) for drugs. While the MFPs apply to drugs reimbursed by Medicare, this model extends MFPs to state markets, not by setting MFPs as the price, but by using them as upper payment limits (UPLs) on reimbursement for those drugs within a state.
States could apply MFPs as UPLs for the entire state-regulated commercial market or adopt this approach more narrowly, for example, only for a state employee health plan. The model does not include Medicaid due to the large drug rebates Medicaid already receives through the Medicaid Drug Rebate Program. Self-insured plans regulated under the federal Employee Retirement Income Security Act (ERISA) would be able to opt in to UPLs for savings.
The revised model includes a process to determine savings on a drug-by-drug basis. This process will allow states to target specific drugs with MFPs that offer the most significant savings for a state. For example, Vermont’s Green Mountain Care Board found that commercial plans in the state would have achieved $71.1 million in savings in 2024 from referencing the first 25 drugs for which MFPs were published and that the bulk of those savings would come from the GLP-1 agonists Ozempic, Rybelsus, and Wegovy, and the specialty biologics Stelara and Enbrel.
A Maryland analysis estimated that using the Ozempic MFP as an upper payment limit for state and local government would yield $5.8 million in annual cost savings for that market sector alone, a 36 percent reduction in current net costs.
Medicare began negotiating prescription drug prices in 2024 and has published MFPs for 25 drugs. The first MFPs went into effect January 1, 2026, and the second set of 15 drugs goes into effect January 1, 2027. The Centers for Medicare and Medicaid Services is currently undergoing negotiations with manufacturers for the third round of 15 additional drugs, bringing the total number of drugs to 40.
Since its inception, the Medicare drug price negotiation program has withstood numerous legal challenges attempting to block it. Most recently, in May 2026, the Supreme Court denied petitions by six drug companies requesting review of lower court decisions upholding the program.
The idea of referencing Medicare’s rates is not new for states. For example, several states base hospital and physician service payments on a percentage of Medicare’s rates. Some states do this only for their state employee health plan, while other states do so for the broader market. NASHP’s updated model legislation mirrors that approach by allowing states to leverage the newly available Medicare MFPs as reference rates for prescription drugs to achieve savings.
To learn more about the model, please see NASHP’s Q&A document, which includes an appendix identifying the 40 drugs for which MFPs are, or will soon be, available. Please contact Jennifer Reck at jreck@nashp.org with any questions or for additional state-only resources.
