Medicare Proposes Changes to Drug Pricing, Causing Some Discord

Alicia Ault

November 27, 2018

Medicare says its proposal will give Part D drug plans more power to negotiate with pharmaceutical companies, but some patient and provider groups say that it will reduce access and shift costs onto beneficiaries.

The Centers for Medicare & Medicaid Services (CMS) said in its proposed rule that it would start allowing Part D plans to exclude a drug from the "protected" classes on their formularies if the increase in the drug's price is greater than inflation or if CMS determines that the drug is not a significant innovation over the original product. The agency also said Part D plans could use both step therapy and prior authorization for drugs within those protected classes. The goal is to give Part D plans more leverage to get bigger discounts from pharmaceutical companies.

CMS estimated that allowing more flexibility would save the government $1.8 billion and beneficiaries $692 million over 10 years. But it did not say how the savings would trickle down to beneficiaries.

On a call with reporters, CMS Administrator Seema Verma said that because of restrictions that have been in place for protected classes, "beneficiaries taking these drugs have not seen the types of discounts that beneficiaries taking other drugs experience, and this is not fair."

She added that "the lack of any ability of Part D plans to manage drugs in protected classes has allowed the pharmaceutical industry to command high prices for protected class drugs in Part D." Verma said that "insurance plans in the private market don't face the same constraint."

"Disconcerting" for Cancer Patients

But oncology advocates and providers cried foul.

Ted Okon, executive director of the Community Oncology Alliance, said that step therapy, which is widely used by commercial insurers, has led to lengthy delays in cancer patients getting needed medications. Seeing Medicare adopt the same tactics is "really very disconcerting," Okon told Medscape Medical News. Step therapy has been banned in 19 states, he said.

Seema told reporters that the Part D program had "robust beneficiary protections," including CMS review of Part D plan formularies, an expedited appeals process — which requires that claims be adjudicated within 24 hours — and a requirement that plans cover at least two drugs in every therapeutic class.

Those types of protections in the private sector have not prevented lengthy and life-threatening delays, said Okon. The CMS proposal "is literally sacrificing lives in the interest of a political win on drug prices," he said.

"The bottom line here is these plans either have to push more and more, or they are not going to get concessions from the drug companies, and the more they push, they may well get the concessions, but the harder they push will have ramifications on patient care," Okon said.

American Cancer Society Cancer Action Network President Chris Hansen agreed. "While we support the administration's intent to improve drug affordability, the proposed changes could have life or death consequences for cancer patients on Medicare," said Hansen in a statement.

Instead of saving money, the proposal "could actually have the inverse effect, raising costs in other parts of the program and likely resulting in tremendous cost-shifting to patients," he said.

Protected Classes No More?

In 2014, CMS created six protected classes — anticonvulsants, antidepressants, antineoplastics, antipsychotics, antiretrovirals, and immunosuppressants — to ensure beneficiary access under Part D plans. All of the drugs in those categories have to be covered by a Part D plan, and at least two products must be available in each category.

According to CMS, the proposed rule maintains protection for those classes, as well as the two-drug minimum, but Okon said that the agency has "neutered them to such a degree that they aren't protected."

Hansen agreed that the proposed changes to the protected classes "could hinder many beneficiaries' access to their medication." He also said that if Medicare beneficiaries couldn't access the most medically appropriate drugs, those patients "will likely incur higher costs, such as additional physician services or emergency room utilization."

CMS, however, maintains that costs of drugs in the protected classes are spinning out of control. The agency said that Part D spending on the antipsychotic lurasidone (Latuda, Sunovion) grew 19% a year from 2013 to 2017 and that it is used by more than 100,000 Medicare beneficiaries. "Because under the protected class policy, nearly every individual drug has to be covered, competition is thwarted," said Verma and HHS Secretary Alex Azar, MD, in a blog post.

The rule also proposes to do the following:

  • Require plans to provide real-time explanations of prescription drug benefits by January 1, 2020. Many commercial plans offer tools that let physicians and patients see how much a drug will cost, including what patients will pay out of pocket, before it is prescribed. CMS wants to require use of such tools for Part D.

  • Formally codify step therapy for Part B drugs in Medicare Advantage. In August, CMS announced that it would be instituting that policy change, but doing so requires a formal regulation. Under the final proposal, step therapy could only apply to newly initiated medications and must be reviewed and approved by the plan's pharmacy and therapeutics committee. In addition, coverage requests related to Part B drugs will be subject to shorter adjudication times that mirror the current rules in Part D.

  • Implement the prohibition against gag clauses in pharmacy contracts. The prohibition was passed as part of a huge bill regarding opioids that was signed by President Trump in October. The provision restricts Part D sponsors from prohibiting or penalizing a pharmacy from disclosing a lower cash price to a Medicare beneficiary.

Verma also noted that CMS was seeking input on the possibility of implementing performance-based pharmacy payments. These rebates to pharmacies are often based on the negotiated price — that is, the price at the point of sale that is reported to CMS. Those negotiated prices are often higher than the final price paid by manufacturers to the pharmacy, which often puts community pharmacies at a disadvantage. The negotiated price is also used to calculate beneficiary cost sharing.

CMS is not formally proposing anything now but said it could find a way to reduce the cost to beneficiaries and take on these rebates by 2020.

The agency is accepting comments until January 23. If finalized, the proposal would go into effect in 2020, said Verma.

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