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CMS Will Allow Medicare Advantage Plans to Use Step Therapy to Negotiate Drug Prices

Laura Joszt
The Trump administration will allow Medicare Advantage plans to negotiate prices for Part B drugs by providing them the opportunity to create plans that utilize step therapy. However, some in the healthcare industry view step therapy, also known as "fail first," as dangerous to patients with life-threatening diseases, such as cancer.
Updated at 4:25 pm on August 8, 2018.

The Trump administration will allow Medicare Advantage (MA) plans to negotiate prices for Part B drugs by providing them the opportunity to create plans that utilize step therapy.

During a press call, CMS Administrator Seema Verma explained that this new tool will bring down the cost of drugs for America’s seniors. She pitched the plan as giving patients the option to choose a plan that has them try more cost-effective drugs first before moving onto other, more expensive drugs. She gave the example that the plan would ensure a patient starts with a more cost-effective biosimilar before going on to a more costly biologic, if necessary.

“By allowing Medicare Advantage plans to negotiate for physician-administered drugs like private-sector insurers already do, we can drive down prices for some of the most expensive drugs seniors use,” HHS Secretary Alex Azar said in a statement.

Dan Best, senior advisor to Azar for drug pricing reform, explained that MA Part B drugs represented about $11.9 billion in spending in 2017. The administration does not expect all plans will utilize these tools, therefore savings would be similar to what the private sector sees for utilizing step therapy—between 15% and 20%, on average. MA plans that implement step therapy will be able to use the tool to negotiate better prices for more expensive treatments, and CMS will also allow these plans to negotiate Part B drug prices against competitors in Part D. MA currently covers 33% of all Medicare beneficiaries.

“Step therapy has the potential to lower drug spending and beneficiary costs," said AARP in a statement to The American Journal of Managed Care®. "However, any implementation of this proposal must include robust consumer protections, including extensive beneficiary education and outreach and meaningful improvements to existing exceptions and appeals processes. It’s also noteworthy that any savings would be substantially larger if the secretary were granted the authority to negotiate on behalf of all of Medicare.” 


Step therapy is not uncommon in private-sector plans, and physicians will be familiar with these policies, Verma said.

“It’s unique that Medicare Advantage has not used this,” she added.

Step therapy in MA plans can only be applied to new prescriptions, Verma explained, so patients who choose one of these plans will not have medications they are actively receiving be affected by the policy.

However, some in the healthcare industry believe that step therapy, also known as “fail first,” can have a negative impact on patients. The Community Oncology Alliance (COA) called step therapy “dangerous” for patients with cancer. Step therapy would require patients to try cheaper, and usually older, treatments before they can try novel therapies that are more expensive.

According to COA, step therapy can also delay delivery of care and leave patients facing a life-threatening disease without access to the most immediate and life-saving treatments.

“Cancer treatment is becoming more personalized and not all therapies produce the identical result from patient to patient. Having therapy options is imperative to successful treatment,” Jeff Vacirca, MD, FACP, president of COA and CEO of New York Cancer Specialists, said in a statement. “CMS’ action is the antithesis of where personalized cancer treatment is going — it’s old school, cookbook medicine that treats every patient as one size fits all. It’s telling me to effectively sit back and let some middleman make treatment decisions for my patients.”

The savings that plans accrue through these plans will largely need to be passed on to patients, according to Verma. Patients will see these savings through lower coinsurance and rewards programs, such as gift cards to patients.

“Does CMS truly believe that Medicare seniors will be enticed away from their physician-recommended treatment with the promise of a $50 Amazon gift card?” asked Ted Okon, executive director of COA. “Allowing middlemen to profit off of denying cancer patients needed medications is immoral and cruel.”

Since MA plans can start offering plans with step therapy in 2019, patients might also see savings returned to them through lower premiums in 2020.

MA plans that use step therapy will also be required to provide care coordination services that include discussing medication options with beneficiaries, providing beneficiaries with educational material and information about their medications, and implementing adherence strategies to their medication regimen.

“We look forward to seeing the results of this step toward tougher negotiation within Medicare and will continue efforts to expand negotiation tools throughout our programs,” Azar said.

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