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HMA Analysis of Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce Out-of-Pocket Expenses Final Rule

On May 16, 2019, the Centers for Medicare & Medicaid Services (CMS) issued its final rule, Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce Out-of-Pocket Expenses (Final Rule). The proposed rule, which was issued in November 2018, included a number of provisions intended to improve drug price transparency and expand use of utilization management tools to further Medicare Advantage and Part D cost-cutting efforts. However, in response to significant pushback from beneficiary advocates, physician groups, insurers, and pharmaceutical stakeholders, CMS elected not to implement key provisions. These include proposals to allow Part D plans to exclude protected class drugs from formularies as a result of price increases or if the drug is a new formulation of an existing single-source drug as well as proposed reforms to pharmacy price concessions that would require discounts be passed on to beneficiaries at the point of sale. Commenters in opposition to the pharmacy price concession proposal contend that these reforms would result in higher Part D premiums. While CMS has postponed addressing this provision in this Final Rule, the recently issued Department of Health and Human Services (HHS) Office of Inspector General (OIG) proposed rule, if finalized, may include fundamental changes to these pricing arrangements and other federal safe harbors to the anti-kickback statute. 

Key changes between the proposed rule and Final Rule are highlighted below.

Program Element Proposed Rule Provision Final Rule

Protected Drug Classes

CMS proposed to permit Part D sponsors to:

  1.  implement broader use of prior authorization (PA) and step therapy (ST) for protected-covered drugs;
  2. exclude a protected class drug from a formulary if it is only a new formulation of an existing single-source drug or biological without a unique route of administration; and
  3. exclude a protected class drug from a formulary if the drug’s price has increased over a set threshold

CMS did not make final its proposals to allow plans to exclude protected class drugs from formulary if the drug’s price increased above a certain threshold or to exclude protected class drugs that are new formulations of an existing single-source drug.

CMS did make final an exception permitting the use of PA and ST for new starts (i.e., enrollees initiating therapy) for all protected classes except antiretrovirals, which are typically used to treat HIV.

Pharmacy Price Concessions

CMS proposed a new definition of “negotiated price” as the lowest possible payment to a pharmacy, including the application of any performance-based pharmacy payment adjustments. The current definition excludes those adjustments that “cannot reasonably be determined” at the point of sale. CMS intended this change to ensure price concessions would be passed on to enrollees at the point of sale.

CMS opted not to address the price concessions proposal in the Final Rule and indicated the Agency will continue to review comments received for future rule making

E-Prescribing

CMS proposed to require Part D sponsors to adopt a Real Time Benefit Tool (RTBT) capable of integrating with at least one prescriber’s ePrescribing system or electronic health record (EHR) to inform prescribers when lower-cost alternative therapies are available at the point-of-prescribing

Finalized as proposed, effective January 1, 2021

Step Therapy and Part B Drugs

CMS proposed to codify Part D current plans’ ability to implement step therapy for Part B drugs, but requiring certain beneficiary protections such as limiting step therapy to new starts of medication, providing beneficiary and provider education, requiring Pharmacy & Therapeutic Committee review, and aligning organization determination and appeals process timelines with those of Part D

Finalized as proposed, effective January 1, 2020

Part D Explanation of Benefits

CMS proposed to require inclusion of negotiated price increases and lower cost therapeutic alternatives in the monthly Part D Explanation of Benefits to members

Finalized as proposed, effective January 1, 2021

Pharmacy Contract Gag Clauses

CMS proposed to restrict Part D sponsors from prohibiting or penalizing a pharmacy from disclosing the availability of a lower cash price to beneficiaries

Finalized as proposed, effective January 1, 2020

 

HMA continues to analyze these provisions and the impact of Medicare prescription drug reforms. For more information or questions about HMA’s Medicare Practice, please contact Mary Hsieh or Jon Blum.

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