CMS Issues Final Rule on Managing Conflicts of Interests in Medicare Prescription Drug Decisions

In March 2013, the Department of Health and Human Services Office of Inspector General released a report entitled Gaps in Oversight of Conflicts Of Interest in Medicare Prescription Drug Decisions. In that document, OIG was critical of the Center for Medicare and Medicaid Services’ (CMS) lack of oversight of Medicare Part D drug plan pharmacy and therapeutics (P&T) committee conflicts of interest. This week, CMS responded with a Final Rule that implements new standards mostly in accordance with OIG’s recommendations. 

View CMS’s Medicare Program; Contract Year 2016 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs (p.147 for conflicts of interest provision, Managing Disclosure and Recusal in P&T Conflicts of Interest: Formulary Development and Revision by a Pharmacy and Therapeutics Committee under Part D (§ 423.120(b)(1))).

In OIG’s 2013 report, they were critical of a number of aspects of P&T committees. They stated:

Federal law and regulations require Medicare Part D P&T committees to make prescription drug formulary decisions based on scientific evidence and standards of practice. Our findings reveal that both sponsors and CMS conduct limited oversight of P&T committee conflicts of interest, compromising their ability to ensure that financial interests do not influence formulary decisions. Specifically, we found that without direction and oversight from CMS, many sponsors’ P&T committees have limited oversight of members’ conflicts of interest. Additionally, we found that CMS does not adequately oversee compliance with the Federal requirement that at least one physician and at least one pharmacist on each committee be free of conflict.

To minimize the possibility that conflicts of interest might influence formulary decisions, OIG recommended that CMS improve its oversight of P&T Committee conflicts and set minimum standards for sponsor oversight.  OIG recommended that CMS:

• Specify that P&T Committee conflict of interest requirements extend to PBMs;
• Require sponsors to maintain policies and safeguards applicable to P&T Committee members who are employed by the entity that maintains the Committee;
• Require sponsors to use objective processes to determine if P&T Committee members’ disclosed financial interests do in fact constitute a conflict of interest;
• Require sponsors to use objective processes to manage disclosed  P&T Committee members’ conflicts of interest, including specifying when the member must be recused from discussion and/or voting; and
• Oversee compliance with P&T conflict of interest procedures, including auditing both plan sponsor P&T Committee conflict of interest determinations and management policies.  

In OIG’s 2015 work plan, they stated that they planned to follow-up on the steps CMS has taken to improve its oversight of Part D sponsors’ P&T committee conflict-of-interest procedures following OIG’s critical 2013 Report.

CMS responded to OIG’s study this week. CMS stated:

Section 1860D-4(b)(3)(A)(ii) of the [Affordable Care] Act requires Part D sponsors who use formularies to include on their P&T committees at least one practicing physician and at least one practicing pharmacist, each of whom is independent and free of conflict with respect to the sponsor and the plan and who has expertise in the care of elderly or disabled persons…

…

[T]he OIG report recommended that we establish minimum standards to ensure that these committees have clearly articulated and objective processes to determine whether disclosed financial interests are conflicts and to manage recusals due to conflicts of interests. The OIG report also suggested that we tell sponsors that they need to designate an objective party, such as a compliance officer, to flag and enforce the necessary recusals…We concurred that P&T committees should have clearly articulated and objective processes to determine whether disclosed financial interests are conflicts, and to manage recusals arising from any such conflicts.

Therefore, we proposed to revise our regulations at § 423.120(b)(1) to renumber the existing provisions and add a new paragraph (b)(1)(iv) to require that the sponsor’s P&T committee clearly articulates and documents processes to determine that the requirements under paragraphs (b)(1)(i) through (iii) have been met, including the determination by an objective party of whether disclosed financial interests are conflicts of interest and the management of any recusals due to such conflicts.

CMS also solicited comment on the pros and cons of defining pharmacy benefit managers (PMS) as entities that could benefit from formulary decisions from which one practicing physician and one practicing pharmacist on the P&T committee must be free of conflict of interest.

CMS received the following comments:

Comment: A commenter noted that the current CMS formulary review process provides the necessary protections to beneficiaries and ensures that formularies are developed and managed in accordance with best practices. This commenter also pointed out that since the P&T committee members do not generally provide their services for free, it is standard practice that the PBM compensates the committee members for their committee-related activities; thereby, providing a financial conflict of interest. The commenter believes that without this financial compensation it would be difficult to engage qualified clinicians for the committee.

Response: While the compensation that P & T committee members receive from PBMs for performing committee-related activities could be seen as a potential conflict of interest, this practice is widely known and generally accepted as necessary to engage the most qualified clinicians. Moreover, we agree with the commenter that the current CMS formulary review process provides the necessary protections to beneficiaries and ensures that formularies are developed and managed in accordance with best practices. We have devoted extensive resources to the oversight of plan formularies and the audit of P&T committee proceedings to ensure that they comply with industry best practices and ensure beneficiaries’ access to clinically appropriate therapies.

As discussed more fully in the January 10, 2014 proposed rule (79 FR 2019), we believe that our current formulary review process confers appropriate protections to beneficiaries from any potential adverse effects of conflicts of interest. The OIG report recommended that the P & T committee should have clearly articulated and objective processes to determine if disclosed financial interests are conflicts, and to manage any recusals if conflicts are found. We concur with this recommendation and proposed to revise our formulary requirements pertaining to the development and revision by a P & T committee at §423.120(b)(1) to make it clear that the Part D sponsor must establish these processes….

Comment: Several commenters supported CMS’ proposal that P&T committee processes must be clearly articulated, documented, and enforced by an objective party. However, a commenter requested that CMS better define the term “objective party” to include a knowledgeable and accountable person at the PBM.

Response: We agree with the commenter and clarify that the objective party may be a representative of the PBM, as long as that representative is not also a member of the sponsor’s P&T committee. The objective party should be someone not on the P & T committee, and may include a representative from the PBM that is not on the P & T committee.

Comment: A commenter pointed out that while the proposed recusal process is logical, it is duplicative and the current P&T policy is sufficient for dealing with conflicts of interest.

Response: We disagree with the commenter and concurred with the OIG report’s recommendation (as discussed in the January 2014 proposed rule) that P&T committees should have clearly articulated and objective processes to determine conflicts of interest and manage any recusals. We are implementing these requirements on the recommendation of OIG. These requirements are supplemental to the beneficiary protections outlined in existing P&T policy, which does not address recusal and only provides that committee members should sign a conflict of interest statement revealing economic or other relationships with entities affected by drug coverage decisions that could influence committee decisions. After review of the comments received, we are finalizing this provision without modification.