CMS Releases Final Rule on Lowering Drug Prices and Out-of-Pocket Spending

May 30, 2019
Health Policy

Recently the Centers for Medicare & Medicaid Services (CMS) released its final rule on Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce Out-of-Pocket Expenses. These changes will ensure that patients have greater transparency into the cost of prescription drugs in Part D and will also enable Medicare Advantage plans to negotiate better prices for physician-administered medicines in Part C.

Part D Protected Classes

Current Part D policy requires sponsors to include on their formularies all drugs in six categories or classes: 1) antidepressants; 2) antipsychotics; 3) anticonvulsants; 4) immunosuppressants for treatment of transplant rejection; 5) antiretrovirals; and 6) antineoplastics, except in limited circumstances. Under current policy, Part D sponsors are only permitted to impose prior authorization and step therapy requirements for beneficiaries initiating therapy (i.e., new starts) for 5 of the 6 protected classes, with no prior authorization or step therapy allowed for antiretrovirals. The final regulatory provision codifies this existing policy, which has been in effect since 2006.

CMS did not finalize the proposed exceptions that would have allowed Part D sponsors to: 1) exclude a protected class drug from a formulary if the price of the drug increased beyond a certain threshold over a specified look-back period, or 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.

E-Prescribing and the Part D Prescription Drug Program

In order to accelerate the use of electronic Real Time Benefit Tools (RTBT) in the Part D program, CMS is requiring that each Part D plan adopt one or more RTBTs that are capable of integrating with at least one prescriber’s ePrescribing system or electronic health record (EHR), no later than January 1, 2021. RTBTs have the capability to inform prescribers when lower-cost alternative therapies are available under the beneficiary’s prescription drug benefit, which can improve medication adherence, lower prescription drug costs, and minimize beneficiary out-of-pocket costs.

Medicare Advantage and Step Therapy for Part B Drugs

CMS is finalizing regulations similar to the policy implemented for 2019, under which MA plans could implement step therapy for Part B drugs as a recognized utilization management tool. CMS believes that use of step therapy as a utilization management tool will better enable MA organizations to ensure that Medicare beneficiaries pay less overall or per unit for Part B drugs. The Part B step therapy regulations include a number of safeguards that protect beneficiaries and ensure timely access to medically necessary Part B drugs. Under the policy being finalized, step therapy may only apply to new starts of medication, must be reviewed and approved by the plan’s pharmacy and therapeutics committee, and when patients request coverage of or appeal a denial of a Part B drug, a plan’s decision-making timeframe will be shorter and mirror current Part D rules.

Part D Explanation of Benefits

Effective January 1, 2021, CMS will require the Part D Explanation of Benefits that Part D plans send members to include drug price increases and lower cost therapeutic alternatives. This information will inform Medicare beneficiaries about possible ways to lower their out-of-pocket costs by considering a lower cost medication.

Prohibition Against Gag Clauses in Pharmacy Contracts

This provision implements the statutory requirement that restricts Part D sponsors from prohibiting or penalizing a pharmacy from disclosing a lower cash price to an enrollee. This provision supports the president’s initiative to help lower out-of-pocket costs of prescription drugs for Medicare beneficiaries by helping inform them about lower cost alternatives.

Pharmacy Price Concessions in the Negotiated Price

CMS solicited comment on a policy that would redefine negotiated price as the baseline, or lowest possible, payment to a pharmacy. The negotiated price for a drug is the price reported to CMS at the point of sale, which is used to calculate beneficiary cost-sharing and generally adjudicate the Part D benefit. Although CMS is not implementing this policy for 2020, the agency appreciates the over 4,000 comments that were received on this potential policy approach. CMS will continue to carefully review these comments as they continue to consider policies that would lower prescription drug costs, address challenges that independent pharmacies face, and improve the quality of pharmacy care.