Medicare considers passing pharmacy rebates to Part D patients

(Updated at 6:30 p.m. ET)

The Trump administration on Monday unveiled another list of proposals to lower drug prices, including a plan to force pharmacies to pass on the rebates they negotiate with drug companies to Medicare Part D enrollees.

This new policy could start as soon as 2020. It would re-define the “negotiated price,” reported by the pharmacy to the CMS as the point-of-sale price for a Part D drug, as the lowest possible payment.



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The CMS in a financial breakdown of the policy said beneficiaries would save between $7 billion and $9.2 billion in cost-sharing over a decade, but that their gains would be offset by higher premiums. It would cost the government between $13.6 billion and $16.6 billion in the same time frame, however, while pharmaceutical companies would save up to $5.8 billion.

The concept is a consideration tacked into the overarching proposed rule on lowering drug costs in Part D and Medicare Advantage. It’s based on a previous request for information that could be included in the final rule.

CMS Administrator Seema Verma emphasized in a call with reporters that the move would help smaller pharmacies compete with major chains that profit from negotiations with insurers.

“Independent pharmacies have raised concerns that back-end deals with health insurance plans are eroding competition,” she told reporters. “Plans can set performance requirements for pharmacies that [independents] can’t do, and beneficiaries aren’t seeing true cost at point-of-sale. Their cost-sharing is higher than what pharmacies are being reimbursed.”

A separate, much-anticipated proposal that would quash safe harbor protections for the rebates pharmacy benefit managers get from drug manufacturers is still waiting at the White House Office of Management and Budget and Verma didn’t give an updated timeline for its release.

In Monday’s proposed rule, the CMS also wants to give Part D plans more leeway to secure discounts for the six protected classes of costly therapeutic drugs — including antidepressants, antipsychotics, immunosuppressants and antiretrovirals — through prior-authorizations and step therapy.

Plans could exclude a protected drug from the formulary if it is simply a new formulation of an older single-source drug or biologic, or if the price of the drug has spiked beyond a certain rate of inflation over a specified period of time. Plans would have to guarantee that patients could acquire two drugs within any given class rather than limiting them to just one.

Verma blamed the current constraints around protected classes as one of the reasons Part D enrollees don’t get the higher discounts commercially insured patients see for the same drugs. She also said these rules were meant to be temporary as the Part D program launched, to make sure patients could secure the drugs they needed.

Now, drug manufacturers are taking advantage of the safeguards in order to charge Part D patients more, she said.

“Pharma has been allowed to command high prices for protected classes without repercussions,” Verma said, noting that people with commercial plans often see discounts between 20% and 30% on these same drugs, versus an average 6% discount for patients in Part D.

She also framed the change in terms of competition, a key talking point for officials as they unroll the drug pricing strategy.

“Because under the protected class policy, every drug needs to be covered and competition is thwarted,” she said.

Another insurer-favored provision in the proposed rule would let Medicare Advantage plans establish step therapy for Part B drugs, to secure lower-cost treatments for patients just starting new medications.

This follows a policy instated for 2019 and has proved controversial, as patient advocates and other critics say it can cut patients off from effective treatments if insurers deem them to be too expensive.

The CMS estimates that through lower cost-sharing patients would save an estimated $754 million over 10 years under the proposed change to protected classes and the step therapy policy.

But patient advocacy groups lambasted the proposal Monday night. The AIDS Institute shortly after the administration’s release said the policy would destabilize treatment for HIV patients on Medicare.

“Step therapy is unheard of in the treatment of HIV due to the danger of developing resistance to an entire class of drugs and potential side effects,” the group said in a release.

Verma, anticipating push-back on Monday’s call, defended the existing protections in Part B as adequate to secure necessary medications, and said the CMS has expedited the appeals process for patients whose physicians have recommended certain drugs that an insurer may deny.

Another stakeholder coalition called the Partnership for Part D Access came out swinging against the proposed protected classes policy, arguing that it could hurt people with multiple and chronic complications already involved in intricate treatment.

“For many patients with complex and hard-to-treat conditions, once they are on an effective regimen of prescription medications, they can manage their illness and achieve a high quality-of-life without the utilization of expensive inpatient or emergency department care,” said the coalition’s executive director Chuck Ingolglia, from the National Council for Behavioral Health.

Other provisions in the proposed rule includes the addition of drug costs and lower cost alternatives to the Part D Explanation of Benefits, as well as the implementation of the new law that bans insurers from prohibiting pharmacies from telling their enrollees when a drug costs less if they pay for it with cash.

The CMS also wants Part D insurers to establish a “real time benefits tool” that can be integrated with a provider’s electronic health records. Prescribing physicians could consult the dashboard to check if their patients’ plans include a lower-cost alternative to a prescription drug.

Verma said ultimately the success of the proposals would depend on how many Medicare enrollees opt for the plans where they are implemented.

“With step therapy and prior-authorization, a lot will depend on how the Part D plan uses the tools for negotiation,” Verma said. “At the end of the day, the patient is in the driver’s seat, and can choose the plan they want.”

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