On Nov. 8, 2023, the Senate Finance Committee voted 26-0 to approve the Better Mental Health, Lower Cost Drugs, and Extenders Act. Among its other provisions, the bill, for which final legislative text has not yet been released, would, for the first time, mandate minimum prices that Medicare Part D plans, and the pharmacy
As the September 1, 2023 deadline for Centers for Medicare & Medicaid Services (CMS) to publish the first 10 “selected drugs” subject to negotiation of “maximum fair prices” under Medicare Parts B and D fast approaches, CMS has recently specified information that manufacturers must submit in order for their drugs to qualify for the “Small Biotech Exception” to being included on the list. The information is to be submitted during the summer of 2023; the specific deadline has not yet been announced.
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (IRA). Among other provisions, the IRA provides for the CMS to negotiate “maximum fair prices” with manufacturers of “selected drugs” covered under Medicare Parts B and D. The price negotiation process begins on September 1, 2023, when CMS is required to publish the list of the first 10 selected drugs subject to negotiation, for maximum fair prices which will take effect beginning January 1, 2026.
The IRA provides that the selected drugs will be the 10 “negotiation-eligible drugs” having the highest total expenditures under Medicare Part D during the period June 1, 2022 through May 31, 2023. Negotiation-eligible drugs generally consist of “qualifying single-source drugs”, which are generally defined as branded drugs and biologicals approved by the Food and Drug Administration (FDA) at least 7 years (with respect to drugs) or 11 years (with respect to biologicals) before the date the list is published, and which do not have a marketed generic equivalent or biosimilar. However, for 2026 through 2028, the IRA provides that negotiation-eligible drugs exclude certain drugs under what CMS refers to as the “Small Biotech Exception”.Continue Reading CMS Specifies Info Needed for Small Biotech Exception to Medicare Drug Price Negotiation
On December 28, 2022, the Department of Health and Human Services’ Office of Inspector General (OIG) issued a favorable advisory opinion on a proposal by a drug manufacturer to enter into an arrangement with certain hospitals to provide up to a specified number of free samples of a long-acting antipsychotic drug for inpatient use.
The OIG indicated it would not impose administrative sanctions, despite the fact that there is no safe harbor available under the federal Anti-Kickback Statute (AKS) to protect the proposed arrangement.Continue Reading OIG approves arrangement involving free drug samples for inpatient hospital use
The Inflation Reduction Act included some very significant changes to the ways in which the Medicare program handles drug pricing.
Among the changes are a redesign of the Medicare Part D (prescription drug benefit) program, as well as requirements that certain drug prices be negotiated with the Centers for Medicare & Medicaid Services and a provision that drug manufacturers pay inflation rebates to on utilization of drugs covered by Medicare Part B and Part D in certain circumstances.
To address these changes to the law, Reed Smith has put together a series of alerts and webinars on the topics.Continue Reading Analysis of Medicare Prescription Drug Pricing Changes in Inflation Reduction Act
The Centers for Medicare and Medicaid Services has published a final rule that governed the way that Medicare Advantage and Medicare Part D plans interact with third-party marketing organizations. The rule, which goes into effect on June 28, 2022, will have a wide ranging impact on the insurers who run these plans.
In November 2020, four months after the Trump Administration issued a series of Executive Orders reiterating its policy goals on reducing the costs to consumers for prescription drugs and directing the Department of Health and Human Services, Office of Inspector General (“HHS-OIG”) to implement those policy objectives, HHS-OIG issued a Final Rule to amend certain provisions in the safe harbor regulations under the Federal Anti-Kickback Statute (“AKS”). The Final Rule included three key provisions:
- Elimination of discount safe harbor protection for manufacturer rebates paid directly, or indirectly through a pharmacy benefit manager (“PBM”) to Medicare Part D or Medicare Advantage plans (the “Rebate Rule”);
- Creation of a new safe harbor to protect point-of-sale (“POS”) price reductions paid by manufacturers to Medicare Part D plans, Medicare Advantage plans, and Medicaid managed care organizations (“MCOs”); and
- Creation of a new safe harbor to protect fair-market-value (FMV) service fees paid to PBMs by manufacturers.
The Final Rule imposed a January 1, 2022, effective date for the Rebate Rule. However, in January 2021, two months after issuance of the Final Rule and in connection to a lawsuit brought by the Pharmaceutical Care Management Association challenging the Rebate Rule, the Biden Administration agreed to delay the Rebate Rule’s effective date to January 1, 2023, as reflected in an Order by the United States District Court for the District of Columbia.
In the intervening time though, Congress passed the Infrastructure Investment and Jobs Act (the “Infrastructure Act”). That law, signed by President Biden on November 15, 2021, further delayed implementation of the Rebate Rule to January 2026. Thus the rule, which many thought would be eliminated as part of paying for the cost of the infrastructure bill, was still alive, if only delayed until the middle of the next presidential term.Continue Reading Future of discount safe harbor for prescription drugs remains uncertain
The Centers for Medicare and Medicaid Services (CMS) has announced a new voluntary Part D Senior Savings Model (the Model) intended to reduce Medicare beneficiary cost sharing for insulin. Under the Model, participating insulin manufacturers and participating sponsors of Medicare Part D prescription drug plans (PDPs) and Medicare Advantage Part D plans (MA-PDs) will make available 30-day supplies of insulin to beneficiaries of certain “enhanced benefit” PDPs and MA-PDs, with cost-sharing capped at no more than $35 during all phases of the Part D benefit, other than the catastrophic benefit.
The Model appears to reflect a balancing of plan and manufacturer concerns. If there is significant participation by Part D sponsors, the Model could provide meaningful relief to beneficiaries facing high out-of-pocket costs for insulin under Part D. As of the writing of this post, three of the largest insulin manufacturers – Eli Lilly, Novo Nordisk and Sanofi Aventis –have announced their intention to participate.
The Model, which was announced March 11, 2019, will be a five-year program, beginning in plan year 2021. CMS is offering the Model through the Center for Medicare and Medicaid Innovation (CMMI) pursuant to authority under section 1115A of the Social Security Act (added by the Affordable Care Act). The following is a summary of the new Model, along with our initial observations regarding some of its implications.Continue Reading CMS Rolls Out New Medicare Part D “Senior Savings Model” Designed to Drive Down Insulin Copayments
CMS has put on display a proposed rule that would update Medicare Advantage (MA) and Medicare Part D prescription drug benefit policies for contract year 2021 and 2022. CMS projects that its proposed policies would decrease federal spending by $4.4 billion over 10 years, primarily as a result of a proposal to remove outliers prior…
The House of Representatives has approved — without objection — a series of bills intended to promote prescription drug pricing transparency and invest in the health care workforce.
With regard to drug pricing transparency, the House approved HR 2115, the Public Disclosure of Drug Discounts Act, as amended to include HR 3415, the Real-Time Beneficiary Drug Cost Bill. The legislation would require the Secretary of Health and Human Services to make public certain aggregate information regarding rebates, discounts, and price concessions that pharmacy benefit managers (PBMs) negotiate with prescription drug manufacturers, beginning January 1, 2020. The stated purpose of the provision is “to allow the comparison of PBMs’ ability to negotiate rebates, discounts, direct and indirect remuneration fees, administrative fees, and price concessions and the amount of such rebates, discounts, direct and indirect remuneration fees, administrative fees, and price concessions that are passed through to plan sponsors.” The information must be displayed in a manner (i.e., by drug class) that prevents the disclosure of proprietary or confidential information on rebates, discounts, direct and indirect remuneration fees, administrative fees, and price concessions with respect to an individual drug or an individual plan.
Furthermore, HR 2115 as approved would require the Medicare Part D program to implement by January 1, 2021 electronic, real-time benefit tools capable of integrating with prescribers’ electronic prescribing or electronic health record system and that transmit enrollee-specific, point-of-prescribing information. Such information must include a list of any clinically-appropriate drug alternatives in the plan formulary; cost-sharing information for a drug and such alternatives; and formulary status, including any prior authorization or other utilization management requirements. Additionally, the legislation expresses the “sense of Congress” that commercially available drug pricing comparison platforms that help patients find the lowest price for their medications at their local pharmacy “should be integrated, to the maximum extent possible, in the health care delivery ecosystem.” Likewise, PBMs “should work to disclose generic and brand name drug prices to such platforms” so patients can benefit from the lowest available prices and “overall drug prices can be reduced as more educated purchasing decisions are made based on price transparency.” The House approved the legislation by a vote of 403 – 0.
Continue Reading House Clears Prescription Drug Price Transparency, Health Workforce Legislation
Three House committees have approved drug pricing legislation that is a high priority of the House Democratic leadership. Specifically, HR 3, the Lower Drug Costs Now Act of 2019, has been approved by the Energy and Commerce Committee, the Ways and Means Committee, and the Education and Labor Committee. While the…
The Trump Administration has decided against finalizing a controversial proposed Office of Inspector General (OIG) regulation that would have modified Federal Anti-Kickback Statute safe harbor protection for certain prescription drug rebates to health plans and pharmacy benefit managers (PBMs). As we previously reported, the proposed rule would have (i) removed safe harbor protection for …
Reducing prescription drug prices is a major theme in the Trump Administration’s fiscal year (FY) 2020 budget proposal, with policies intended to increase competition, encourage better negotiation, incentivize lower list prices, and cut out-of-pocket costs for beneficiaries. The Administration’s projected savings from its designated prescription drug budget proposals top $69 billion over 10 years, although that does not include savings for provisions for which the budget impact was not available or that were included in other sections of the budget (e.g., a Medicaid State Drug Utilization Review provision within the Medicaid budget section).
We summarize below the major prescription drug pricing and related proposals in the President’s proposed budget, covering Medicare Parts B and D, Medicaid, and the 340B discount drug program. All budget savings reflect the 10-year period of FYs 2020-2029. Note that while most of these provisions would require legislative approval, Congressional committees have already held several hearings this year on prescription drug pricing. Stay tuned for more action in this area.
Major Medicare Part B Proposals
The proposed Trump budget would:
Continue Reading Trump Administrations’ Proposed FY 2020 Budget Targets Prescription Drug Prices
On February 14, 2019, CMS is hosting an educational call on new opioid policies for Medicare drug plans. The call will focus on improved safety alerts when opioid prescriptions are dispensed at the pharmacy, and drug management programs for individuals at-risk for misusing or abusing “frequently abused drugs” (opioids and benzodiazepines). The target audience for…
The Centers for Medicare & Medicaid Services (CMS) has announced a new Medicare Part D Payment Modernization Model (Part D Model), which will be tested by the CMS Center for Medicare and Medicaid Innovation. CMS unveiled the Part D Model on January 18, 2019, at the same time the agency released details on extensive revisions to its current Medicare Advantage Value-Based Insurance Design (VBID) model. On January 31, 2019, CMS provided additional detail on the new Part D Model during a webinar (the webinar will be repeated on February 6, 2019).
The Part D Model is a voluntary, five-year (CY 2020-2024) model open to standalone prescription drug plans (PDPs) and Medicare Advantage Prescription Drug Plans (MA-PDs), on a nationwide basis. As discussed below, the model is intended to decrease Part D program spending by: (i) introducing two-sided risk to participating plans for spending in the catastrophic portion of the Part D benefit, and (2) enhancing plan flexibilities to propose clinically-based drug utilization management techniques, including through rewards and incentives programs for plan beneficiaries.
Two-sided risk for the catastrophic portion of the Part D benefit.
For plans accepted into the program, CMS will retrospectively (after the plan year has been completed) establish a target benchmark representing the federal catastrophic reinsurance subsidy amount (80% of Part D catastrophic phase costs after manufacturer rebates and other Direct and Indirect Remuneration) that would have been paid to participating organizations if they were not participating in the model. The benchmark will be calculated after adjustment for certain factors, such as enrollee health and low-income subsidy status, and separate benchmarks will be calculated for participating PDPs and MA-PDs. If the reinsurance subsidy amount (after adjustment) for the organization’s participating PDPs or MA-PDs (as applicable), calculated at the parent organization level, is lower than the applicable target benchmark, the organization will receive a portion of the difference (referred to by CMS as “savings”), and if it is higher than the benchmark, the organization must pay to CMS a portion of the difference (referred to by CMS as “losses”). Specifically:
Continue Reading CMS Launches New Medicare Part D Payment Modernization Model
President Trump has just signed into law HR 6, the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act. The bipartisan legislation includes almost 200 provisions intended to strengthen opioid prevention and treatment efforts and bolster law enforcement tools.
Among many other things, the new law:
- Seeks to
The House of Representatives has overwhelmingly approved bipartisan legislation, HR 6, the SUPPORT for Patients and Communities Act, intended to bolster opioid prevention and treatment programs and strengthen law enforcement efforts. Among many other things, the wide-ranging legislation would:
Continue Reading House Approves Sweeping Opioid Prevention/Treatment Legislation
The Trump Administration has launched a high-profile initiative aimed at reducing prescription drug prices, including release of a blueprint containing a series of short- and long-term policy proposals and a request for public comments on additional reforms.
First, on May 11, 2018 the Department of Health and Human Services released its “Blueprint to Lower…
CMS has announced final Medicare Advantage (MA) and Part D plan policies and rates for 2019. The final 2019 rule, published on April 16, 2018, implements a Comprehensive Addiction and Recovery Act (CARA) provision that allows Part D plan sponsors to establish drug management programs. Under this policy, plan sponsors may limit at-risk beneficiaries’ access to coverage of “frequently abused drugs” (opioids and benzodiazepines) to selected prescribers and/or network pharmacies, and they may use of point-of-sale claim edits, subject to various conditions.
Other policies adopted in the final rule include the following:
Continue Reading 2019 Medicare Advantage/Part D Policies Finalized, Including Comprehensive Addition and Recovery Act Drug Management Requirements
The Medicare Payment Advisory Commission (MedPAC) has issued its annual recommendations to Congress on updates to Medicare fee-for-service payment system rates, many of which overlap recommendations made in previous years. For instance, MedPAC continues to call for implementation of a unified prospective payment system (PPS) for post-acute care (PAC) providers, including skilled nursing facilities (SNFs), home health agencies (HHAs), inpatient rehabilitation facilities (IRFs), and long-term care hospitals (LTCHs), to be implemented beginning in 2021. In the latest report, MedPAC recommends that Congress direct the Secretary of Health and Human Services to begin blending the relative weights of the setting-specific payment systems and the unified PAC PPS in 2019. At the same time, MedPAC recommends that Congress modify the updates for the individual PAC systems by:
- Reducing home health payment rates by 5% in 2019, rebasing payments beginning in 2020, and eliminating the use of the number of HHA therapy visits as a factor in payment determinations.
- Reducing Medicare IRF PPS rates by 5% for FY 2019.
- Eliminating the LTCH PPS update for FY 2019.
- Eliminating SNF PPS market basket increases for fiscal years (FYs) 2019 and 2020, and implementing previous recommendations to reform SNF PPS payments in a way that shifts payments to medically-complex stays. MedPAC notes that it has endorsed SNF PPS reforms since 2008, and it “has grown increasingly frustrated with the lack of statutory and regulatory actions to lower the level of payments and implement a revised payment system.”
MedPAC also includes detailed discussions of Medicare payment for physician and other health professional services. MedPAC recommends increasing physician fee schedule rates in 2019 by the amount specified in current law (0.25%). MedPAC also offers extensive recommendations for revising the framework for updating Medicare physician payments established by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Most notably, MedPAC recommends eliminating the Merit-based Incentive Payment System (MIPS) and adopting a new voluntary value program under which: (1) clinicians can elect to be measured as part of a voluntary group; and (2) clinicians in voluntary groups can qualify for a value payment based on their group’s performance on a set of population-based measures. Additionally, MedPAC presents the findings of its Congressionally-mandated report on coverage of telehealth services.
With regard to other Medicare fee-for-service payment systems, MedPAC recommends:
Continue Reading MedPAC Calls for Medicare Post-Acute Care and Physician Payment Reforms, Recommends Medicare Payment Updates
CMS is seeking comments on its proposed updates to the methodologies used to pay Medicare Advantage (MA) and Part D plan sponsors for 2019. This year CMS released its 2019 Advance Notice and Draft Call Letter in two parts. In late 2017, CMS released proposed changes to the Part C risk adjustment model (Part I of the Advance Notice) to comply with new 21st Century Cures Act requirements. Part II of the Advance Notice and Call Letter, released earlier this month, includes proposed rate updates and various policy provisions. According to a CMS fact sheet, the update would increase plan payments by 1.84% relative to 2018, without taking into account an adjustment for underlying coding trend, which CMS expects to increase risk scores by 3.1% on average.
Continue Reading CMS Releases Proposed 2019 Medicare Advantage/Part D Reimbursement Methodologies and Policies