Proposed Changes Increase Drug Competition in Medicare Part D

Health Update

On November 26 2018, the Centers for Medicare & Medicaid Services (CMS) released the Proposed Rule, Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce Out-of-Pocket Expenses, which can be found here1. The proposed rule would make policy and technical changes for Medicare Advantage (MA) plans and Part D prescription drug plans. Comments will be accepted until 5 p.m. ET on January 25, 2019. It is expected that CMS will finalize these proposals, with changes, in the spring of 2019.

This proposed rule can be seen as another step in the administration’s implementation of its “HHS Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs.” It includes items from the Blueprint’s suggestions for strengthening insurers’ drug purchasing power. The proposed rule is limited to four current proposals and one proposal for possible implementation in 2020 or beyond.

The four current proposals are:

  1. Increasing plan flexibility to manage the so-called six protected classes of drugs;
  2. Requiring plans to use a real-time benefit determination system that would allow e-prescribers and those with electronic medical records (EMR) systems to access formulary status and beneficiary cost-sharing information at the point of prescribing;
  3. Requiring plans to include information on negotiated drug price changes and lower-cost generic and therapeutic alternatives in the Part D Explanation of Benefits that beneficiaries receive in any month during which they filled a prescription; and
  4. Codifying the already announced proposal to allow Medicare Advantage Plans to use step therapy (ST) in the management of Medicare Part B drugs.

The possible future proposal would require that Part D plans provide beneficiaries a negotiated price at the point of sale that includes all possible pharmacy price concessions (discounts). This proposal would not impact the application of manufacturer rebates to the negotiated price.

Protected Classes Proposal Would Drive the Greatest Change to Part D

Of the five proposals, the one on protected classes would make the most substantive changes to the Part D benefit. In particular, CMS would establish three new additional exceptions to the regulation on protected classes, effective 2020. Part D sponsors would be allowed, but not required, to exclude drugs based on these proposed exceptions.

First, CMS would allow Part D sponsors broader use of prior authorization and step therapy for protected-class drugs or biologics. Second, CMS proposes to give Part D sponsors the option to exclude a protected-class drug from a Part D formulary if the drug or biologic is a new formulation of an existing single-source drug or biological product and does not provide a unique route of administration. Third, CMS would allow Part D sponsors the option to exclude a protected-class drug or biologic from a formulary if the product’s price increases at a rate higher than the inflation rate. This latter proposal is significant because CMS is introducing a form of price control within the Part D benefit.

Importantly, CMS states that the proposed new exceptions for protected-class drugs would apply to enrollees regardless of whether they are initiating therapy (new starts) or are currently taking a drug (existing therapy). As always, CMS notes that Part D formularies, including components for protected classes, must meet all CMS formulary review requirements and be CMS-approved. CMS anticipates that if finalized, the proposed changes would have the most impact on anticonvulsants, antidepressants and antipsychotics and would have less impact on antineoplastics, antiretrovirals and immunosuppressants.

In 2014, CMS had proposed eliminating protected classes for antidepressants, antipsychotics, and immunosuppressants for the treatment of transplant rejection, and retaining anticonvulsants, antineoplastics and antiretrovirals.2 In response to comments, CMS did not finalize that proposal. In contrast, in this proposed rule, CMS retains all protected classes but proposes to give Part D sponsors more tools to manage formularies within these classes.

As in 2014, patient advocacy groups are likely to raise strong concerns about patient access to drugs in protected classes, especially since they affect enrollees with serious and debilitating conditions. Insurers and pharmacy benefit managers will favor opportunities to increase the use of formulary management tools.

1The addenda relating to the Part C/D Proposed Rule are available at https://www.gpo.gov/fdsys/pkg/FR-2018-11-30/pdf/2018-25945.pdf.

279 FR 1936.