CMS Submits Part D and Medicare Advantage Drug Pricing Proposal to Office of Management and Budget

We previously wrote about the proposed rule released by the United States Centers for Medicare and Medicaid Services (CMS) for Contract Year (CY) 2020, regarding general Medicare Advantage and Part D services. In that article, we mentioned that the proposed rule did not make much mention of President Trump’s plan for lower drug prices, and that a secondary proposal will be introduced in the coming days. That time is now – as CMS submitted a proposed rule to the White House’s Office of Management and Budget (OMB) that would address prescription drug pricing policies in Medicare Advantage and Part D plans.

The proposed rule, “Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce Out of Pocket Costs,” is likely to implement at least some of policies that we have seen in the Trump Administration’s drug pricing Blueprint.

While CMS has not specifically indicated what policies will be included in the rule, one can look to public comments from agency officials, the White House’s FY 2019 Budget, and the Administration’s drug pricing blueprint for an idea of which policies may be addressed in the rule. It’s also possible that the Administration will use this rule as an opportunity to encourage Congress to act on this subject.

Thorn Run Partners recently released some policy ideas that may be included in the proposed rule, based on some of the buzz around Washington. Some of those policies may include the following:

Changes to Six Protected Classes 

HHS Secretary Alex Azar and CMS Administrator Seema Verma have both cited the ‘six protected classes’ policy as limiting negotiating power for Part D plans. Administrator Verma said recently that commercial plans are able to achieve 20 to 30 percent discounts on drugs in the protected classes, while part D plans are only able to achieve six percent discounts. The administration’s blueprint floated the idea of removing ‘protected classes’ status for drugs where manufacturers have increased prices or not provided rebates to Part D plans.

One Drug Per Class 

The administration’s FY 2019 budget proposed changing Part D plan formulary standards to require a minimum of one drug per category or class rather than two. But CMS may not actually have the authority to make this change without congressional intervention, and the policy has not been raised by administration officials in recent months.

Mid-Year Formulary Changes 

The administration has already finalized regulations that allow Part D plans to make some mid-year formulary changes without prior CMS approval. Plans can immediately remove brand name drugs (or change the tiers) when the plan replaces the removed drugs with newly approved, therapeutically equivalent generics (excluding biosimilars). Administrator Verma recently indicated that the administration may pursue additional action around mid-year formulary changes.

Indication-Based Formulary Design 

CMS announced in August that Part D plans will soon be allowed to negotiate Part D formulary coverage based on specific indications. The agency could seek to further reinforce this policy through the formal comment and rulemaking process by including provisions in their forthcoming proposed rule.

Once the proposed rule is released, we will be sure to update all interested parties as to which policy proposals are actually included, and the impact they may have on Part D and drug prices.