CMS Aims at Drug Prices Through Part D, MA Step Therapy, Pharmacy Rebates

Allison Inserro

This story has been updated.

CMS said Monday it is easing restrictions on how Medicare Part D manages the 6 protected drug classes that must be included in those plans, is taking action on pharmacy rebates, and is allowing step therapy in Medicare Advantage (MA) plans, all in an effort to force lower drug prices.

In making the changes, CMS is looking to implement strategies in the private insurance market. Both Medicare Advantage and Part D, administered by private companies, operate through the power of consumer choice, CMS Administrator Seema Verma said.

“Consumer choice puts pressure on plans to improve quality and lower cost,” she said. Part D premiums are falling, as are MA premiums, she said.

Verma claimed drug discounts in the 6 protected classes are higher in the private market (20% to 30%) but only 6% in MA plans. “The protected class policy is in need of an update,” said CMS Administrator Seema Verma, in explaining the proposed changes.

Under the proposal, CMS is looking to give Part D plans more flexibility for which drugs must be included in the protected drug classes. They are antidepressants, antipsychotics, anticonvulsants, immunosuppressants for treatment of transplant rejection, antiretrovirals, and antineoplastics.

Currently, all drugs in those classes must be included on Part D formularies, and that creates an incentive to keep prices high, CMS said. While all 6 classes would remain, Part D plans would have 3 ways in which they could seek to limit drug utilization: The changes will take effect in 2020.

In addition, CMS is proposing a policy where MA plans implement step therapy for Part B drugs. CMS already put this into place for 2019 plans, drawing concerns from patient advocacy groups, which call them a “fail first” policy.

During a call explaining the proposal, Verma said there were protections built in to prevent patients from losing access to medications. The step therapy requirements would only apply to new prescriptions, must be reviewed and approved by the plan’s pharmacy and therapeutics committee, and coverage requests related to Part B drugs will be subject to shorter adjudication timeframes that match Part D rules.

Those protections are not enough for patients with cancer, said the Community Oncology Alliance (COA) and the American Society of Clinical Oncology (ASCO), both of which blasted the plan.

"In oncology there are few therapeutic and generic-to-brand equivalents that can be substituted when formularies are restricted, so patients need uninhibited access to the therapies their oncologists prescribe," said Jeff Vacirca, MD, FACP, COA president.

"Although CMS claims this proposal includes patient safeguards, navigating those hurdles while dealing with cancer is cumbersome, agonizing, and an unnecessary burden. Additionally, delays in starting cancer treatment can have grave consequences and are inexcusable."

"While ASCO supports efforts to control drug prices, we are keenly aware that optimal cancer care requires patient access to the most medically appropriate drug, at the most opportune time, based on the highest quality evidence," said Clifford A. Hudis, MD, FACP, FASCO, the chief executive officer of ASCO. "Therefore, ASCO has significant concerns about the Centers for Medicare & Medicaid Services' (CMS) proposed rule to reduce the number of prescription drugs that must be made available to Medicare beneficiaries with chronic, potentially life-threatening illnesses including cancer.

CMS would also change the definition of “negotiated prices” as they relate to Part D, which impact beneficiaries’ out-of-pocket costs. It would be replaced by the lowest amount a pharmacy could receive as reimbursement for a covered Part D drug.

The agency said that because of performance-based pharmacy payment arrangements, the negotiated price is increasingly higher than the final payment to pharmacies, unless it incorporates the large price concessions. Higher negotiated prices lead to higher beneficiary cost-sharing, CMS said.

CMS also said it was considering adding a definition of “price concession” in a "broad manner" and would include all forms of subsidies and pharmacy rebates. 

In addition, the proposal released Monday would prohibit plans from penalizing pharmacies for disclosing a lower cash price.

PhRMA, the lobbying arm of the pharmaceutical industry, said it had “significant concerns” about the impact of the proposals.

“The protections in Part D were put in place to protect access for the most vulnerable patients and ensure insurance design did not discriminate based on disease,” said Juliet C. Johnson, deputy vice president of public affairs, in a statement emailed to The American Journal of Managed Care®.

“Letting plans restrict access to the medicines that patients rely on, particularly for those with serious and complex health conditions like HIV/AIDS, cancer and mental illness, reduces adherence to those medicines, jeopardizing their health, increasing their need for inpatient care and resulting in poorer health outcomes for seniors and higher costs for taxpayers,” she said.

CMS said the step therapy changes alone would save the government between $145 and $185 million for 2020 to 2024 and between $195 and $240 million for 2025 to 2029.

America’s Health Insurance Plans (AHIP), the trade group representing commercial payers and which has blamed drug companies for high pharmaceutical costs, was pleased with the proposal. 

“We commend the Administration for its continued focus on reducing drug prices and appreciate its commitment to strengthen negotiating leverage, including for drugs for which rebates have often been limited or unavailable," said Matt Eyles, president and chief executive officer of AHIP.  "This will enable Part D coverage providers to work even harder to lower costs for the patients they serve, while preserving access to the medications these patients need."

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