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As Congress and federal agencies increasingly examine the national security implications of US medicine supply chains, the Centers for Medicare & Medicaid Services enter the conversation, signaling that CMS drug supply chain reimbursement policy may be a powerful lever for strengthening domestic manufacturing.
How This CMS Drug Supply Chain Reimbursement Conversation Began
Tim Casey, senior director of Government Affairs at the United States Pharmacopeia, explained that bipartisan conversations across Capitol Hill increasingly focus on the intersection of national security and public health. Congress has studied these issues through hearings at the Senate Committee on Aging and the House Select Committee on China, and draft legislation may soon follow.
Why USP Prioritized Responding to CMS’s Request
“With the growing awareness of the national security implications of reliance on adversarial nations for critical medicines and ingredients, there has been bipartisan momentum to strengthen domestic manufacturing capacity,” Casey said. CMS’s request for comment aligns closely with USP’s commitment to supply chain resiliency efforts, including its recently launched Resiliency Center and its expanded USP Medicine Supply Map data analytics platform, which provides end-to-end insights from finished dosage forms to upstream key starting materials.
The Clinical Stakes Behind CMS Drug Supply Chain Reimbursement Policy
Drug shortages can severely disrupt patient access to critical medicines, as seen with generic sterile injectables used in hospitals. Generic drug manufacturers operate high-volume, low-margin businesses, and injectable products are especially vulnerable due to their complex manufacturing processes. Injectable medicines account for 63% of the USP Vulnerable Medicines List in 2025.
Why These Shortages Matter Beyond the Pharmacy
For patients, these shortages can be serious or even life-threatening, leading to increased mortality, adverse events, and treatment delays. For healthcare systems, shortages can also disrupt daily operations, increase labor costs, and contribute to workforce burnout as providers and pharmacists spend additional time identifying alternative therapies and managing supply constraints.
How CMS Drug Supply Chain Reimbursement Structures Currently Drive Shortages
Drug reimbursement models often shape incentives and outcomes across the healthcare system, and the medicine supply chain is no exception. In inpatient settings, drugs are reimbursed as part of a fixed bundled payment based on a patient’s diagnosis, and hospitals and group purchasing organizations face pressure to find savings, which often drives the purchasing of generic drugs toward the lowest-cost options.
The Downstream Effect on Manufacturing
Because generic drug manufacturers rely on high-volume production with relatively low profit margins, this cost pressure results in offshoring, market exits, and supplier consolidation, all of which increase supply chain vulnerabilities and the risk of drug shortages, Casey explained.
USP’s Proposed Fix Within This CMS Drug Supply Chain Reimbursement Framework
USP believes in assigning value to resilience, reliability, and quality in purchasing and reimbursement decisions to incentivize changes in purchasing patterns with the goal of better meeting patients’ needs. USP’s Drug Supply Chain Resilience Initiative proposes a system to define, evaluate, and provide a benchmark by providing criteria to value the resilience and reliability of manufacturers, promoting more sustainable prices for generic medicines.
How CMS Could Apply This Approach
“CMS can use an approach like this to provide data-driven, market-based incentives that support domestic manufacturing of essential medicines and ingredients,” Casey said, framing reimbursement reform as a practical policy tool rather than a purely regulatory intervention.
Quality Assurance Within CMS Drug Supply Chain Reimbursement Reform
CMS can continue working to level the playing field by ensuring manufacturers outside the U.S. are held to comparable quality testing standards. For medicines from countries that limit unannounced U.S. FDA inspections, CMS can incentivize health systems to purchase medicines from suppliers that participate in programs using validated methods to test products.
Why Transparency Reinforces This Reform
Transparency across the supply chain is foundational to strengthening resilience and the distribution of quality medicines, Casey said. Greater upstream visibility through supply chain mapping tools allows manufacturers, policymakers, and other industry members to identify hidden vulnerabilities, single-source dependencies, and supply chain chokepoints, enabling more strategic decision-making, and this visibility should extend across all US-approved medicines, not just those already experiencing shortages.
What This CMS Drug Supply Chain Reimbursement Discussion Means Going Forward
With bipartisan congressional interest already building through the Senate Aging Committee and House Select Committee on China, and CMS now actively soliciting comment on domestic manufacturing incentives, this moment represents what Casey frames as a rare window for meaningful policy reform. Given that USP’s Drug Supply Chain Resilience Initiative offers a concrete framework for valuing manufacturer resilience within reimbursement decisions, CMS may find in USP’s proposal a ready-made model for translating stated national security priorities into actionable payment policy changes.
What to Watch Going Forward
As CMS reviews comments submitted in response to its request, industry observers will likely watch whether the agency incorporates resilience-based purchasing criteria similar to USP’s proposed framework into future reimbursement rules, and whether Congress moves forward with draft legislation addressing medicine supply chain national security concerns. Given the direct link Casey draws between bundled payment pressure and generic manufacturer offshoring, how CMS ultimately balances cost containment against supply chain resilience in its CMS drug supply chain reimbursement policy could shape both drug shortage rates and domestic manufacturing capacity for years to come.
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