CMS Utilizes Dartboard Approach to Modernizing the Medicare Drug Benefit

Controlling pharmaceutical prices remains a hot topic, judging from the 6,415 comments received in response to the CMS proposed rule: "Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce Out-of-Pocket Expenses." The comments were posted to the online docket, notwithstanding the federal government shutdown. (The notice-and-comment period ended Jan. 25).

As part of the Trump administration's evolving healthcare strategy (which also includes the 'Five-Part Plan for Medicare Part D'), the nearly 200-page long proposed rule would use several strategies to control drug prices ranging from getting rid of gag clauses in pharmacy contracts and mandating new point-of-service formulary software be available to prescribers to the controversial measure of allowing health plans to restrict access to six previously-protected categories of drugs.

"The administration has thrown a lot of darts at the wall, to see which ones are going to stick," said Juliette Cubanski, PhD, associate director of the Kaiser Family Foundation's Program on Medicare Policy in Washington, DC.

"There are 29 stand-alone Part D plans in Tennessee, and this regulation would have a great impact," added Sheila Burke, RN, MPA, chair of government relations and public policy at Baker Donelson, a national law firm with 22 offices including locations in Nashville and Washington, DC. "This is one area where there is the potential for bipartisan action," she continued. "Congress members on both sides of the aisle ... and the administration ... are strongly interested, so one can assume there will be action."

Fear of the Backroom Deal

The proposed regulation appears to take a suspicious view of undisclosed discounts, even defining the terms "negotiated price" and "price concessions" in order to counter "so-called PBM spread."

"Pricing for pharmaceuticals is done in a way that is kind of complicated. What a pharma company offers as a list price is not always the price that is actually paid," said Leah Binder, MA, MGA, president and CEO of The Leapfrog Group, a D.C.-based organization focused on healthcare transparency to foster informed purchasing decisions.

Some of the fear on the part of regulators and other stakeholders stems from the concern that pharmacy benefits managers (PBMs) could be using their massive buying power to negotiate discounts with pharmaceutical manufacturers but not sharing those discounts with Medicare or with beneficiaries.

PBMs are also supposed to serve other functions beyond negotiating discounts to improve cost effectiveness, noted James Manfred, executive director at Vanderbilt Health Pharmacy Group.

"Fees for medication therapy management would be separate," said Manfred. "If the patient doesn't take her medication right, the PBM will come back and take money from the pharmacy she goes to ... for example, if my mom isn't compliant, or she is supposed to get a 30-day supply of a drug every 30 days, they're supposed to do outreach to get the patient to pick up the medication when they are due to get it," he explained.

"There must be 200 to 300 PBMs in that space at least, although large ones make up 90 percent of the market," he continued.

Manfred also noted some PBMs use a transparent model, such as Vanderbilt's PBM of more than five years, Navitus, which manages more than four million covered lives and is licensed in all 50 states. Navitus uses a pass-through approach so that 100 percent of discounts or rebates go back to the client. Their business model generates revenue through a set per member per month administrative fee.

Caveat Emptor

Buyer beware ... a lack of pricing transparency can sometimes lead to beneficiaries paying more than needed.

"In addition to advocating for quality, we are also big proponents of transparency," said Leapfrog's Binder. "One thing we like about the proposed rule for Part D is that it is moving us down that road. We don't want the pharmacist to not tell you the truth. For example, there are sometimes clauses between, say, a PBM or a health plan and the pharmacy called 'claw-back provisions' that forbid doctors from telling you that there's a lower-cost alternative for the same drug you're getting, perhaps where the copay for a medication may be more than cost of the medication."

Such situations typically arise in the case where generic versions of a drug are available, Binder explained. In those cases, she added, "The policy should just say just sell it to me as if I wasn't insured, because it could cost much less money."

Access to Medications

A controversial aspect of the proposed regulation is that it would also allow health plans and plan sponsors to have greater flexibility in restricting access to medications in six classes of previously-protected drugs. Currently, Part D formularies must include any drug in the six protected classes: antidepressants, antipsychotics, anticonvulsants, immunosuppressants for organ transplant rejection drugs, antiretrovirals, and antineoplastics. The intent of the current policy has been to ensure high-cost beneficiaries aren't discriminated against in seeking treatment. According to Vanderbilt's Manfred, access to a new biological drug as first-line therapy could possibly save a cancer patient's life. Such drugs, however, are typically more expensive than older options available.

"They picked these six categories because patients are very sensitive to individual medications. Take anti-psychotics, for example - sometimes only one drug works for a given individual," he explained of the currently protected classes. "However, in the commercial world, this is pretty normal. One would very rarely find every drug covered on the formulary, so it didn't surprise me," he added of the proposed change.

Regulators made a previous proposal to put a limiting construction on the six protected classes of drugs in 2014. "It was found that the proposal would have a negative effect on patients' access to medications, so the Obama administration decided not to move forward with it," said Cubanski of the Kaiser Family Foundation.

The current proposed rule includes three exceptions to automatic universal coverage of all drugs within the protected classes. To help control costs, the proposed rule calls for using measures like prior authorization or step therapy for Part D drugs; the ability to exclude a specific drug from its designated protected class if the current drug doesn't provide a unique route of administration and is instead a newer version of an already existing single-source drug or biologic; and the option to exclude a specific drug if certain price increase provisions are triggered.

In a letter sent to CMS Administrator Seema Verma, the American Hospital Association signified general agreement with this three-pronged approach, believing it will dissuade manufacturers from engaging in practices that falsely inflate pricing. However, the AHA cautioned it would require "rigorous oversight to ensure protection from abuse."

With all comments now filed, it remains to be seen what changes are made to the final rule and how it will impact providers and patients. To view remarks sent by a number of key stakeholders, go online to NashvilleMedicalNews.com.