CMS aims to tackle drug costs by giving payers more bargaining power
- In its latest attempt to lower drug costs, the Centers for Medicare and Medicaid Services released a proposed rule Monday that would allow Medicare Part D plans to use tools such as step therapy, prior authorization and exclusion of protected drugs in certain cases.
- For more than a decade, Part D plan sponsors have had to cover drugs in six protected classes due to concerns over patient access. Those requirements have been a barrier to cutting pharmaceutical costs, CMS Administrator Seema Verma said during a conference call, adding the rule would go into effect in 2020 if finalized.
- The proposed rule would impose requirements on Medicare Advantage plans that seek to use step therapy to control costs for Part B drugs. Plans would be required to only use step therapy when a patient starts a new medication and the decision must be reviewed and approved by the plan's pharmacy and therapeutics committee.
If a drug manufacturer raises the price of a protected drug beyond a certain threshold it risks being excluded from payers' formularies, according to the proposed rule. Payers could also exclude a protected class drug that is not a significant innovation over the original product, Verma said Monday.
The proposed changes to protected class drugs could save the government more than $2 billion over 10 years and enrollees more than $692 million, according to CMS figures.
Verma has criticized protected class drugs as a way to effectively bar Part D plans from negotiating when private market plans can generate discounts of up to 30% for the same drugs.
Part D plans have to cover "essentially all available products" in six classes: antiretrovirals, immunosuppressants, antidepressants, antipsychotics, anticonvulsant agents and antineoplastics.
Among drugmakers, such a change would have the most impact on Gilead Sciences and GlaxoSmithKline, which both sell antiretroviral therapies, Height Securities analyst Andrea Harris wrote in a Nov. 27 note.
But Verma said the policy was never meant to be a permanent solution to guaranteeing patient access to key drugs for conditions like HIV. "The protected class policy is in need of an update," she said.
However, one patient advocacy group called it a potential "nightmare" for cancer patients.
The Community Oncology Alliance said it will subjects patients to "fail first step therapy and formulary restrictions that potentially restrict them from receiving the evidence-based therapies that their trained physicians prescribe as first line cancer treatment."
This summer, the Trump administration unveiled its blueprint to lower drug costs and out-of-pocket expenses for consumers. The plan, known as American Patients First, outlined potential areas to target. This proposed rule sets into motion some of the blueprint's ideas.
One area for future consideration is redefining negotiated price as the baseline, or the lowest possible payment to a pharmacy.
It has become more common for the negotiated price to be higher than the final payment to the pharmacy, affecting beneficiaries' out-of-pocket payments. Redefining the negotiated price to reflect the lowest possible cost would mean "beneficiaries receive the maximum benefit" at the pharmacy counter, CMS said in its blog.
"The policy CMS is considering would help with the higher prices that result in more out-of-pocket spending for beneficiaries and faster advancement through the Part D benefit, resulting in improved pricing transparency and market competition," Leerink analysts wrote in a Nov. 26 note to investors.
The industry group that represents payers commended the administration for a change that will give them greater bargaining power.
"Drug prices are out of control and leave too many Americans, including Medicare beneficiaries, to choose between paying their bills and paying for their medications," Matt Eyles, CEO of America's Health Insurance Plans, said in a statement.