CMS Proposes Updates to Medicare Advantage/Part D Policies for 2015

On January 6, 2014, CMS released a proposed rule that would revise the Medicare Advantage (MA) and Part D prescription drug program regulations to implement various statutory requirements, strengthen beneficiary protections, improve program efficiencies and payment accuracy; and clarify program requirements. CMS estimates that the proposed rule would reduce Medicare spending by $1.3 billion between 2015 and 2019. The sweeping proposed rule is summarized after the jump. 

Among many other things, the proposed rule would:

  • Revise the definition of “negotiated prices” to require that all price concessions from pharmacies are reflected in these prices. Under the proposed rule, negotiated prices would mean prices for covered Part D drugs that: (1) the Part D sponsor (or other intermediary contracting organization) and the network dispensing pharmacy or other network dispensing provider have negotiated as the amount such network entity will receive, in total, for a particular drug; and (2) are inclusive of all price concessions and any other fees charged to network pharmacies; and (3) include any dispensing fees; but (4) exclude additional contingent amounts, such as incentive fees, only if these amounts increase prices and cannot be predicted in advance; and (5) may not be rebated back to the Part D sponsor (or other intermediary contracting organization) in whole or in part.
  • Modify CMS’s interpretation of the Affordable Care Act’s (ACA) “drug categories or classes of clinical concern” requirement. Instead of mandating coverage of all drug products in a particular class on all Part D formularies, CMS generally would limit protected classes to those meeting criteria established under the regulation. The proposed criteria generally would result in formulary inclusion of all drugs within the antineoplastic, anticonvulsant, and antiretroviral drug classes (subject to proposed exceptions), but the rule would not require all drugs from the antidepressant and immunosuppressant drug classes to be included on all Part D formularies. While antipsychotics would not meet the criteria, CMS proposes that they remain protected at least through 2015 to ensure that CMS has “not overlooked a need for any transitional consideration.”
  • Modify rules for “preferred pharmacies” within Part D plans’ pharmacy networks, so as to allow Part D sponsors to reduce copayments or coinsurance at such pharmacies only if they offer consistently lower negotiated prices than are available from other pharmacies in the pharmacy network.
  • Modify the “any willing pharmacy” requirement to require plan sponsors to contract with any willing pharmacy able to meet one set of the terms and conditions offered by that plan for that type of pharmacy. CMS also would require that, in establishing its contracted pharmacy network, a Part D sponsor must offer and publicly post standard terms and conditions for network participation for each type of pharmacy in the network, and (1) may not require a pharmacy to accept insurance risk as a condition of participation in the PDP sponsor's contracted pharmacy network, and (2) must offer payment terms for every level of cost sharing offered under its plans (consistent with CMS limitations on the number and type of cost sharing levels) and for every type of similarly-situated pharmacy.
  • Limit prescription drug plans sponsors to offering no more than two Part D plans in the same service area.
  • Implement an ACA requirement that MA plans and Part D sponsors report and return identified Medicare overpayments.
  • Address prescription drug abuse by, among other things, authorizing CMS to revoke a physician’s or eligible professional’s Medicare enrollment if he or she has a pattern of prescribing Part D drugs that is abusive and represents a threat to beneficiary health and safety or otherwise fails to meet Medicare requirements, or if the prescriber’s Drug Enforcement Administration (DEA) certificate of registration or state license is suspended or revoked. The rule also would require that prescribers of Part D drugs enroll in Medicare as a condition of coverage for their prescriptions.
  • Establish U.S. citizenship and lawful presence as an eligibility requirement for enrollment in MA and Part D plans.

The official version of the rule will be published on January 10, 2014. CMS will accept comments on the proposed rule until March 7, 2014.

CMS Announces Plans to Finalize ACA Medicaid Drug Pricing Policy in July 2014

After more than two years of releasing draft average manufacturer price (AMP)-based federal upper payment limit (FUL) files and methodology documents, CMS now expects to finalize the ACA Medicaid FULs for multiple source drugs in July 2014. While CMS intends to provide additional guidance in the months to come, the agency is encouraging states to consider what changes may be needed to contracts with pharmacy claims processors and pricing compendia, as well as state plan amendments that need to be submitted to use the FUL data.  CMS also has posted final National Average Drug Acquisition Cost (NADAC) pricing files, which CMS points out could be used by states to meet the FULs aggregate upper limit if a state plan amendment is submitted. CMS suggests that as states revise their reimbursement for the ingredient cost of a drug to stay within the FUL aggregate, they should consider whether current dispensing fees continue to provide adequate reimbursement for the cost of dispensing prescriptions to a Medicaid beneficiary.

Hospital Outpatient Payment (HOP) Advisory Panel Meeting - March 10-11, 2014

CMS has scheduled a meeting of the HOP Advisory Panel on March 10-11, 2014. Among other things, the panel will address: whether procedures within an APC group are similar both clinically and in terms of resource use; APC group weights; packaging of hospital outpatient prospective payment system services and costs; and the appropriate supervision level (general, direct, or personal) for individual hospital outpatient therapeutic services. Registration is required.

GAO Releases Data on Pharmacy Services Administrative Organizations

In response to a request from Rep. Henry Waxman, Ranking Member of the House Committee on Energy and Commerce, the GAO has issued a report examining Pharmacy Services Administrative Organizations (PSAOs), which are used primarily by independent pharmacies to interact with drug wholesalers, third-party payers, and other entities. The report includes data from 2011 and 2012 regarding:

  1. the number of PSAOs (at least 22) and the number of pharmacies that contract with PSAOs (between 20,275 and 28,343);
  2. the services PSAOs offer (including contract negotiation, communication, and help-desk services, among others) and how they are paid for these services (usually a monthly fee for a bundle of services paid by a member pharmacy); and 
  3. the entities that own PSAOs (the majority are owned by drug wholesalers and independent pharmacy cooperatives) and the relationships between owners and the pharmacies they represent (which vary).

Upcoming FDA Public Meeting: Framework for Pharmacy Compounding/State and Federal Roles (Dec. 19)

On December 19, 2012, the FDA is hosting a public meeting entitled “Framework for Pharmacy Compounding: State and Federal Roles” (the meeting also will be webcast). While the FDA acknowledges that “the States play a critical role in the oversight of traditional pharmacy compounding,” the FDA observes that “a category of “non-traditional” compounding has evolved in the last decade that FDA believes requires additional oversight.” According to the notice, the FDA is working with Congress to consider new authorities regarding these “non-traditional” compounding pharmacies. In addition to holding the public meeting, the FDA is soliciting comments on several specific questions related to federal and state roles in the regulation of pharmacy compounding, such as (1) whether the states currently are able to provide oversight of pharmacy compounding and consumer protection; (2) what the federal role should be in regulating higher risk pharmacy compounding such as compounding high-volumes of drugs for interstate distribution; and (3) whether or not there is a role for the states in enforcing a federal standard for "nontraditional" compounding. Comments are due by January 18, 2013.

OIG Calls on CMS to Implement Medicaid Drug AMP-Based FUL Payments

The OIG has issued a report on Medicaid pharmacy reimbursement that compares FUL amounts based on published prices to FUL amounts based on AMP and pharmacy acquisition costs. According to the OIG, FUL amounts based on published prices (from the fourth-quarter 2011 Redbook file) were more than four times greater than sampled pharmacy acquisition costs. Moreover, FUL amounts based on AMPs were 61 percent lower than FUL amounts based on published prices, at the median, but still exceeded sampled pharmacy acquisition costs by 43 percent in the aggregate. Notably, however, the study was subject to a number of limitations, including use of AMP-based FULs that have not been published by CMS (data for November 2010 was used, whereas CMS began releasing draft FULs in September 2011). While CMS has been issuing draft AMP-based FUL amounts for review and comment, the OIG recommends that CMS complete implementation of AMP-based FUL amounts, in conformance with the ACA. CMS concurred, and stated that it plans to implement FUL amounts based on AMPs “in the near future.”

OIG Examines Retail Pharmacy Billing for Part D Drugs

On May 10, 2012, the HHS Office of Inspector General (OIG) issued a report entitled “Retail Pharmacies with Questionable Part D Billing.”  The OIG identified more than 2,600 retail pharmacies in 2009 that had what the OIG characterizes as “questionable billing” for Part D drugs (e.g., extremely high dollar amounts or numbers of prescriptions per beneficiary or per prescriber, or high percentage of prescriptions for Schedule II or III drugs, brand-name drugs, or refills). While the OIG acknowledges that “some of this billing may be legitimate,” the OIG believes that these pharmacies warrant further scrutiny. The OIG also observes that the Miami, Los Angeles, and Detroit areas were the most likely to have pharmacies with questionable billing. The OIG makes a number of recommendations to CMS, including strengthening the Medicare Drug Integrity Contractor’s monitoring of pharmacies, requiring Part D plan sponsors to refer potential fraud and abuse incidents that may warrant further investigation, developing risk scores for pharmacies, strengthening CMS compliance plan audits, and following up on pharmacies identified by the OIG as having questionable billing.

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