CMS Finalizes Key Requirements For Bona Fide Service Fees In CY 2026 Physician Fee Schedule Rule

On November 5, 2025, CMS published the CY 2026 Physician Fee Schedule Final Rule (Final Rule), which includes changes to how drug manufacturers must treat Bona Fide Service Fees (BFSFs) in the context of Average Sales Price (ASP) submissions. In the Final Rule, CMS opted not to finalize its proposal to modify the BFSF definition to require fair market value (FMV) methodology standards, FMV reassessments, and independent third-party valuations. This is a notable departure from the proposed rule, which we covered in a prior blog post. However, CMS is moving forward with several important provisions that impact how manufacturers and other stakeholders document and report BFSFs when calculating ASP for Medicare Part B drugs. This update highlights the finalized requirements that stakeholders should now prepare to implement effective January 1, 2026.

No Change to the Definition of BFSFs

CMS acknowledged stakeholder concerns and ultimately decided not to finalize the proposed revised definition of BFSFs. As we noted in our prior blog post, CMS proposed requirements for FMV assessments, requiring market-based or cost-plus methodology depending on whether the fees are tied to drug prices or sales volume (e.g., percentage of Wholesale Acquisition Cost). Under the proposed rule, FMV assessments must be conducted by an independent third-party valuator and must be updated at least as frequently as the service agreement's renewal. However, CMS opted to retain the current definition without these additional FMV requirements, preserving existing interpretive frameworks for determining whether fees qualify as bona fide.

ASP Submission Requirements

CMS finalized requirements that, effective January 1, 2026, manufacturers must submit to CMS reasonable assumption letters that include documentation of the methodology used to determine BFSF FMV and periodic reviews of FMV. Manufacturers must also submit certification letters from the recipients of BFSFs, evidencing that the fees are not passed on in whole or in part to an affiliate, client, or customer of the recipient of the fee. CMS indicated that it will provide a template of the reasonable assumptions letter for manufacturers to document BFSF FMV analyses. This introduces a burden on manufacturers, who previously could presume without evidence to the contrary that recipients do not pass on BFSFs.

Examples of Non-Qualifying BFSFs

In the proposed rule, CMS contemplated adding a non-exhaustive list of examples of payments that do not qualify as BFSFs. While CMS doubled down on its view that credit card fees to distributors do not qualify as BFSFs, it opted not to finalize this list of examples and how they should be considered in the calculation of manufacturers' ASP.

Looking Ahead

CMS's decision to maintain the current BFSF definition and not adopt requirements to use cost-plus methodology to establish FMV for fees based on the price of drugs is a win for manufacturers, which would have had to navigate significant changes to their ASP calculations. Nevertheless, CMS repeatedly emphasized that it would engage with interested parties to better understand FMV methodologies and evaluate reasonable assumption letters submitted over CY 2026 and based on this information, it may revisit these proposals in the future.

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