The CMS BFSF Rule: What You Need to Know Now

On October 31, 2025, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that announces final policy changes for Medicare payments under the Physician Fee Schedule (PFS) and other Medicare Part B issues, effective on or after January 1, 2026. As part of this new final rule, CMS has implemented new requirements for manufacturers and their downstream partners with respect to reasonable assumptions made regarding Bona Fide Service Fees (BFSFs), and verification that such fees are bona fide in that they are not passed on in whole or in part to clients of the entity collecting the fee.

Effective January 1, 2026, manufacturers of drugs payable under Medicare Part B are required, as part of the submission of average sales price (ASP) data, to submit reasonable assumptions including Fair Market Value (FMV) documentation for current, new, and renewed contracts, and certification from the recipient of a BFSF that the fee is not passed on in whole or in part to a client or customer of an entity, whether or not the entity takes title to the drug.

To avoid being calculated as part of a manufacturer’s ‘best price’ for purposes of government price reporting, any service fee paid by a manufacturer must be bona fide, meaning a legitimate fee for services rendered, which is not passed on to another entity other than the entity charging for such fee. Beginning in 2007, CMS first issued a four-part bona fide service fee test, which today includes the following four components:

1. The fee paid must be for a bona fide, itemized service that is actually performed on behalf of the manufacturer
2. The manufacturer would otherwise perform or contract for the service in the absence of the service arrangement
3. The fee represents Fair Market Value (FMV) for the services rendered
4. The fee is not passed on in whole or in part to a client or customer of any entity.

In previous years, compliance with the bona fide service fees test was mandatory, but did not require specific, affirmative action on the part of pharmaceutical manufacturers. They were required to comply with the rule and to include any fees that did not meet the definition of discounts in their best price for government price reporting. Still, there were no mandated standalone procedures to establish compliance (but manufacturers could voluntarily submit evidence as to the steps they took to ensure compliance).

With the new final rule, however, beginning this calendar year, manufacturers will be required to provide not only a verification form attesting to their due diligence regarding the proper attribution of bona fide service fees, but will also have to obtain from their service partners verification that no portion of such fees is passed on. Thus, there is now a two-step process by which manufacturers must overtly document their BFSF assessments, in addition to the pre-existing duty to report any fees paid that do not meet the BFSF test as part of their best price.

The landscape is shifting, and staying compliant requires expertise and agility. Whether you’re a manufacturer or service provider, Archbow’s specialized team is ready to guide you through every step of this transition—ensuring you not only meet requirements but stay ahead of the curve.

Fair Market Value documentation requirements under the new BFSF rule demand immediate attention and strategic planning. Contact us at info@archbow.com to ensure your organization is prepared for compliance and positioned to optimize your pricing strategy.