Raising the bar: Why fair market value for bona fide service fees is more critical than ever

Bona fide service fees (BFSFs) are service/administrative fee payments made by manufacturers to third parties in the distribution and reimbursement channel and qualify as bona fide under the: 

• Medicaid Drug Rebate Program (MDRP) codified in 42 C.F.R. section 447.502; or 
• Medicare Part B under CY 2026 Final Rule (historically prior to the Final Rule, the criteria was similar to MDRP requirements) 

BFSF are excluded from MDRP when calculating Average Manufacturer Price (AMP) and Best Price for Medicaid rebates and 340B pricing purposes, as well as exclusion from the Medicare calculation of Average Sales Price (ASP) used to determine Medicare Part B reimbursement rates.  Each service or administrative fee needs to be assessed independently for each government program’s specific requirements before applying these transactions to Medicaid or Medicare price point calculations.  

Misclassifying a price concession as a BFSF can result in: 

• Inaccurate pricing being certified and reported to a government program 
• Over/Under paying Medicaid quarterly rebates 
• Over/Under 340B pricing being offered 
• Medicare reimbursement and coinsurance errors 
• Incorrect Medicare Part B drug inflationary rebate amounts 

Thus, fair market value (FMV) isn’t just a pricing exercise, it’s a compliance imperative.  

With the Centers for Medicare & Medicaid Services (CMS) sweeping changes in its 2026 Physician Fee Schedule Rule and each program (i.e., Medicaid and Medicare) having their own BFSF determination requirements, the stakes for getting BFSF FMV right have never been higher. 

What’s changing under CMS’s Medicare 2026 Final Rule 

CMS’s Medicare 2026 Final Rule aims to tighten the definition and documentation of BFSFs, particularly around FMV documentation and fee disposition. Here are the most impactful changes, including clarity around what was proposed vs. finalized, under the Medicare Part B program: 

Included in Final Rule: