CMS proposes demonstration to reduce Part D plan risk from safe harbor changes

Plans expected to bid under current rebate rules

The Centers for Medicare and Medicaid Services (CMS) on April 5, 2019, issued a memorandum directing Medicare Part D plan sponsors to submit bids for calendar year 2020 “in a form and manner that is consistent with the Anti-Kickback Statute law and regulations in effect as of the bid submission deadline, including, for the purposes of bid development, the treatment of manufacturer rebates per our existing rules and guidance.” Part D bids for 2020 are due June 3, 2019.

April 17, 2019 | Health care

The guidance comes in response to a proposed rule that the Office of the Inspector General (OIG) for the Department of Health and Human Services (HHS) released on February 6, 2019. The proposed rule would remove safe harbor protection for certain rebates from drug manufacturers to Part D sponsors and other public insurance programs.

Recognizing the timing constraints and the breadth of the policies included in the proposed rule, the CMS memorandum states that if there is a change in safe harbor rules in effect for 2020, CMS will conduct a two-year demonstration project "that would test an efficient transition for beneficiaries and plans to such a change in the Part D program."

Under the demonstration project, CMS would narrow the risk corridors for participating plan sponsors to limit any losses or potential gains that might arise out of a change in law. For 2020, the government would cover or keep 95 percent of the difference between the target amount of the bid and the actual incurred costs beyond the first 0.5 percent. Participants in the demonstration would be required to participate for both 2020 and 2021, but CMS has not determined the risk corridors for the second year.

Any move to narrow the risk corridors would be intended to mitigate premium increases by plans as a result of the proposed elimination of prescription drug rebates.

On a call for Part D plan sponsors, CMS stated that details on the demonstration, such as participation for plans such as the Program of All-Inclusive Care for the Elderly (PACE) or Employer Group Waiver Plans (EGWPs), would be issued in future guidance. The enrollment period for the demonstration is targeted for late summer or early fall, after the release of a final rule on the safe harbor for prescription drug rebates.

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