neuron medicaid


CMS continues push to address drug pricing

Proposed changes to Medicare Advantage and Part D

The proposed rule would give Medicare Advantage (MA) and Part D plans greater room to negotiate with drug manufacturers through formulary placement and step therapy arrangements, and increase price transparency for patients and providers to make price-informed care decisions in real time.

November 27, 2018 | Health care

On November 26, 2018, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule titled, Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce Out of Pocket Expenses.

The rule is the latest in a series of initiatives undertaken by the Trump Administration to reduce drug costs, and follows many of the precepts initially outlined in the May 2018 policy document, “American Patients First Trump Administration Blueprint to Lower Drug Prices and Reduce Out of Pocket Costs.”

The proposed rule will be published in the Federal Register on November 30, 2018, with comments due no later than January 25, 2019.

Below are highlights from the proposed rule:

Changes to Part D protected drug classes

Under current rules, Part D plans must include all drugs from six protected classes on their formularies. Those classes are:

  1. Antidepressants;
  2. Antipsychotics;
  3. Anticonvulsants;
  4. Immunosuppressants for treatment of transplant rejection;
  5. Antiretrovirals; and
  6. Antineoplastics.

The proposed rule would allow Part D sponsors to:

  1. Implement broader use of prior authorization (PA) and step therapy (ST) for protected class drugs, including to determine use for protected class indications. The proposal would also allow indication-based formulary design and utilization management for protected class drugs.
  2. Exclude a protected class drug from a formulary if the drug represents only a new formulation of an existing single-source drug or biological product, regardless of whether the older formulation remains on the market.
  3. Exclude a protected class drug from a formulary if the price of the drug increases beyond the Consumer Price Index for all Urban Consumers (CPI-U) in comparison to a baseline month and year.

The proposed rule estimates that the Medicare trust fund would save $1.85 billion over 10 years, while Part D enrollees would save $692 million due to reduced cost sharing requirements.

Bringing prices to e-prescribing

The proposed rule would require Part D plans to deploy an electronic real-time benefit tool (RTBT) capable of integrating with prescribers’ e-Prescribing (eRx) and electronic medical record (EMR) systems. Under the proposed rule, Part D plans would need to provide its beneficiaries’ prescribers comprehensive, real-time, and patient-specific formulary and benefit (F&B) information. F&B information would include a drug’s cost, alternatives within the plan formulary, and any requirements related to utilization management. The requirement would take effect on January 1, 2020.

Transparency in Part D explanations of benefits

Current regulation requires Part D plans to provide beneficiaries with an explanation of benefits (EOB) that includes the cumulative, year-to-date total amount of benefits provided (including the deductible, initial coverage limit, and the annual out-of-pocket threshold for the current benefit year), among other items.

The proposed rule would require Part D plans to include require additional information on EOBs related to negotiated price changes and lower-cost therapeutic alternatives. Negotiated prices would include an accounting of any price increases for a particular drug that have occurred over the course of the calendar year.

Lower-cost therapeutic alternatives (meaning drugs with lower cost-sharing or lower negotiated prices) could include a generic option the original prescription fill was for a brand drug, or a drug that falls outside the same category or class, but that has a medically-accepted indication to treat the same condition.

MA step therapy for Part B drugs continues

In keeping with prior guidance effective in 2019, MA plans in 2020 would continue to be allowed to implement step therapy and other drug utilization management protocols, but with added consumer safeguards. Under the proposal, step therapy requirements would only apply to newly prescribed medications, with a look-back period of 108 days to count towards present usage of a drug, similar to Part D requirements. Any utilization management would also be required to undergo a review and approval process by the plan’s pharmacy and therapeutics committee.

In alignment with current Part D rules, adjudication of expedited coverage requests (i.e., appeals) for Part B drugs would occur within a 24-hour timeframe, while standard coverage requests would be adjudicated within 72 hours. Independent review entity timeframes are also shortened to 72 hours.

Discounts and rebates reflected at point of sale

An exception to pricing requirements under current rules allows for the price of a Part D drug at the point of sale to be higher than what the plan sponsor initially negotiated with the drug manufacturer on the basis of a drug’s performance. The proposed rule would revise the definition of negotiated prices to mean the lowest amount a pharmacy could receive as reimbursement for a covered Part D drug under its contract with the Part D plan.

CMS also proposes to define “price concession” under Part D expansively as a means of consolidating pricing rules around a single principle, as opposed to treating concessions such as rebates or other subsidies granted to Part D plans as discrete categories.

In its discussion of the proposal, CMS cites current practices wherein price concessions are not reflected at point-of-sale, thus increasing a beneficiary’s out-of-pocket contributions, and moving them into the catastrophic phase of their Part D coverage. In the catastrophic phase, 80 percent of drug spending is Medicare’s responsibility, and only 15 percent the manufacturers’.

CMS states that the point of sale provisions are still proposals for consideration in a future year, but may be implemented as soon as January 1, 2020. The proposed rule solicits public comment on industry readiness for deploying appropriate technology within this timeframe, and states that it is open to a later effective date of January 1, 2021.

As proposed, beneficiaries would save $7.1 to $9.2 billion over 10 years as a result of reduced cost-sharing, though offset by slightly higher premiums.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

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Deloitte Risk and Financial Advisory
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Deloitte & Touche LLP


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Deloitte Risk and Financial Advisory
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Deloitte Risk and Financial Advisory
Deloitte & Touche LLP

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