Feds Allow Medicare Advantage Plans To Negotiate Drug Prices

August 7, 2018

The Centers for Medicare & Medicaid Services took a step toward negotiating better deals for Medicare patients and creating competition between drugs used to treat the same conditions, with more than half of the savings required to be passed on directly to patients. This action gives Medicare Advantage plans the option of applying step therapy for physician-administered and other Part B drugs and is an important step within the Administration’s larger agenda to provide patients with more choices when picking a Medicare Advantage plan that best meets their needs.

For the first time, CMS will provide Medicare Advantage plans — private health insurance plans that provide Medicare benefits to 20 million Medicare beneficiaries (a third of all beneficiaries in Medicare) — the option of negotiating for Part B drugs in a way that lowers costs and improves the quality of care. Medicare Advantage plans that also offer a Part D benefit will be able to cross-manage across Part B and Part D, so that patients receive the best medicine whether it is physician-administered or self-administered. CMS is also putting American Patients First by making sure that Medicare Advantage plans negotiate in a way that ensures patient choice and provides patient protections with guardrails, including that step therapy can only be applied to new prescriptions for patients who are not actively receiving a given medication.

“As soon as next year, drug prices can start coming down for many of the 20 million seniors on Medicare Advantage, with more than half of the savings going to patients," said HHS Secretary Alex Azar. "Consumers will always retain the power to choose the plan that works for them: If they don’t like their plan, they don’t have to keep it. We look forward to seeing the results of tougher negotiation within Medicare, and expanding successful negotiation tools throughout our programs.”

In a memo sent to Medicare Advantage plans, CMS is giving them the option – starting January 1, 2019 – of ensuring that patients receive the most preferred drug therapy first and progress to other therapies only if necessary, as part of broader part of care coordination activities. Ensuring that patients receive the most preferred drug therapy first is known as “step therapy.” For example, plans may now ensure that a beneficiary who is newly diagnosed with a condition begin treatment with a cost-effective biosimilar before progressing to a more costly drug therapy if the initial treatment is ineffective, while ensuring that patient receives over half of the savings generated through these approaches. This change will only apply to newly prescribed medications.

CMS is allowing Medicare Advantage plans to take advantage of step therapy for Part B drugs, which constitute around $12 billion per year in spending by plans. Medicare also pays for prescription drugs through Part D, which covers patient-administered drugs that beneficiaries usually pick up at a pharmacy. As part of the policy announced today, Medicare Advantage plans that also offer a Part D benefit will be allowed to manage within their Part B benefit as well as cross-manage across Part B and Part D.

As Administrator Verma said in a speech to the Pharmacy Quality Alliance on May 16 2018, “We often don’t see the full benefits of competition in Part B, because some drugs within a therapeutic class have a competitor in Part D.” As a result of the agency’s action today, the Medicare Advantage plans that choose to offer this option will be able to have medicines in Part B compete on a level playing field with those in Part D.  The agency will be closely following the impact of this policy as a model for further reform.

If a plan decides to offer this approach to enrollees in 2019, it must be explicitly communicated to beneficiaries through the Annual Notice of Change and Evidence of Coverage documents. Patients that do not wish to participate in a plan that takes advantage of this approach to lower costs will have the option to select a different plan. This new approach must be coupled with care coordination services to support a move towards paying for value. Care coordination must include discussing medication options with beneficiaries; providing beneficiaries with education and information about their medications; and implementing adherence strategies for beneficiaries on their medication regimen.

CMS recently released a Request for Information as part of the CY 2019 Medicare Hospital Outpatient Payment System proposed rule on how to develop a model test that leverages the authority provided to the agency under the Competitive Acquisition Program (CAP) to strengthen negotiations for Part B drugs.

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