According to a report released by the Assistant Secretary for Planning and Evaluation’s Office of Health Policy, about 3.5 million Americans aged ≥65 years and 1.8 million Medicare beneficiaries aged <65 years had difficulty affording their medications in 2019, with Black and Latino beneficiaries being the most likely to experience affordability problems.1 The Medicare and Medicaid beneficiary cost issues were exacerbated in 2020 and 2021 primarily due to the COVID-19 pandemic. These ongoing beneficiary medication affordability challenges have not been lost on the Centers for Medicare & Medicaid Services (CMS), which has been working on policies and actions to bend the cost curve for beneficiaries and the healthcare system over the last decade. Some of the actions CMS and the US Department of Health & Human Services have taken and are currently exploring to address beneficiary and systemwide prescription affordability include limitations on price increases over time, changing the Medicare Part D benefit to decrease patient cost-sharing and cap beneficiaries’ out-of-pocket spending, and applying Part D pharmacy price concessions at the point of sale.

Medicare Actions – Current and Proposed

Lowering Beneficiary Cost-Sharing at the Pharmacy Counter

Currently, more Part D plans have been entering into negotiation arrangements with pharmacies that may pay less money for dispensed drugs if pharmacies do not meet certain criteria. With the emergence of these payment arrangements, the negotiated price is frequently higher than the final payment to pharmacies, leading to higher cost-sharing and faster beneficiary advancement through the Part D benefit for Medicare beneficiaries. CMS is finalizing a policy that would require Part D plans (across all phases of the Part D benefit) to apply all price concessions they receive from network pharmacies to the negotiated price at the point of sale, so that the beneficiary can also share in the savings, effective January 1, 2024. The goals of this policy are to reduce beneficiary out-of-pocket costs, improve price transparency, and promote market competition in the Part D program.2

6 Protected Classes

Part D sponsors are increasingly using prior authorizations and step therapies to manage therapies in the 6 protected drug classes (antidepressants, antipsychotics, anticonvulsants, immunosuppressants for treatment of transplant rejection, antiretrovirals, and antineoplastics). While CMS has declined to finalize proposals to allow Part D sponsors to exclude a protected-class Part D drug from a formulary if the drug represents only a new formulation of an existing single-source drug or biological product, or exclude a protected class Part D drug from a formulary if the price of the drug increased beyond a certain threshold over a specified lookback period, the final rule codifies these PA and step therapy practices for 5 of the 6 classes (excluding antiretrovirals).3

Gag Clauses

In the past, pharmacy benefit managers and Part D insurers had gag clause provisions that prevented pharmacists from telling beneficiaries of the opportunities to pay less for their drugs by paying cash instead of using their insurance. This was seen as a cost-increasing practice for beneficiaries and went against Medicare policy, which requires Part D plans to ensure that enrollees pay the lowest price. While gag clause provisions have not necessarily reduced drug costs, they have increased beneficiaries’ awareness of choices to lower their out-of-pocket costs.4

Real-Time Benefit Tool

Starting in January 2023, CMS is requiring that Part D sponsors implement an electronic real-time benefit tool capable of integrating with at least one prescriber’s electronic prescribing system or electronic health record system. The goal of this Part D sponsor tool is to help improve medication adherence and lower drug costs by providing prescribers with lower-cost alternative drugs, when available.5,6

Step Therapy for Part B Drugs

CMS finalized the “step-therapy” regulations in 2018, which allowed Medicare Advantage (MA) plans to implement step therapy for Part B drugs. This regulation allowed MA plans to have their practitioners prescribe the lowest-cost drug first, before incrementally stepping up to more expensive alternatives if the less expensive options fail. Step therapy plans must be reviewed and approved by the plan’s pharmacy and therapeutics committee and only apply to new starts of medication.5,6

Second “Preferred” Specialty Tiers

As of January 2022, CMS has allowed Part D plans to have a second, “preferred” specialty tier with a lower cost-sharing level than their other specialty tiers. This change has given Part D plans additional tools to negotiate better deals with manufacturers on the highest-cost drugs to lower out-of-pocket costs for beneficiaries in exchange for placing these products on the “preferred” specialty tier.7

New Value-Based Payment Models

One of the strategic objectives of the Center for Medicare & Medicaid Innovation (CMMI) is to “improve access by addressing affordability” and reducing the percentage of beneficiaries forgoing necessary care due to costs by 2030. Some opportunities to achieve this objective include decreasing out-of-pocket costs for Medicare and Medicaid beneficiaries and finding new ways to decrease program and individual spending on prescription drugs, particularly in Medicare Parts B and D. CMMI is looking to engage payers, purchasers, providers, states, and beneficiaries to improve quality, achieve equitable outcomes, and reduce healthcare costs. Projects involving “value-based insurance design” that decrease cost sharing for high-value services will be specifically welcomed.8

Build Back Better Act Proposal

In the Build Back Better Act, the following steps have been proposed to reduce drug costs, minimize beneficiaries’ out-of-pocket costs, and improve health equity:

  • Allow Medicare to negotiate drug prices
  • Restructure the Part D benefit to create a maximum out-of-pocket cost for beneficiaries, including capping beneficiary out-of-pocket costs at $2,000 a year and limiting insulin cost-sharing to $35 per month
  • Address price increases above inflation
  • Ensure Part D plans are incentivized to promote drugs with the most value at the lowest cost1

While it is estimated by the Congressional Budget Office that the Build Back Better Act provisions will reduce the federal deficit by $297 billion over 10 years (2022–2031), the slim majority and lack of unity for this proposal in the House and Senate give it little chance of succeeding in its current form.9

Medicaid/State Actions – Current and Proposed

Preferred Drug List, Alternative Payment Methods, and Others

As of July 2019, 46 of 50 reporting states have a preferred drug list in place for fee-for-service prescriptions. States set policies on dispensing fees paid to pharmacies, and the final cost to Medicaid is offset by a rebate received under the federal Medicaid Drug Rebate Program. In addition, states or managed care plans may negotiate with manufacturers for supplemental rebates. In response to high-cost therapies, few states have employed alternative payment methods to increase supplement rebates through a value-based arrangement negotiated with individual pharmaceutical manufacturers. Lastly, states use strategies like Medicaid exclusion files, prohibiting contract pharmacies, and using claims indicators to avoid duplicate discounts.10

Value-Based Purchasing (VBP) Arrangement

VBP agreements are undergoing some regulatory changes in the Medicaid program in response to criticism that Medicaid Best Price requirements have hindered their use. These changes are intended to improve prescription drug purchasing by providing states, private payers, and manufacturers more flexibility to enter VBP arrangements for prescription drugs as a means to propel payment innovation. CMS released the Medicare Best Price Guidance in March 2022, which will most likely go into effect on July 1, 2022, allowing manufacturers to report multiple best prices for VBP arrangements as long as the manufacturer offers the VBP arrangement to state Medicaid programs. The goal is for these VBP arrangements to bring increased value to beneficiaries by linking price and payments to an observed or expected therapeutic or clinical outcome in a select population.11

Drug Transparency Laws

Several states have enacted drug pricing transparency laws requiring manufacturers, pharmacy benefit managers, and other entities to report information explaining high price increases and high prices of new drugs. California, Nevada, Maine, Oregon, and Vermont have published reports identifying specific high-cost drugs for which costs are rising fastest and/or that are most frequently prescribed. The reports have been made public, and states share concerns about the affordability of many of the same drugs. With this report, transparency laws can help a state develop a fair approach to ensuring that prescription drugs are affordable.12

What’s Next?

It is evident with these and many other programs (ie, the long-standing Medication Therapy Management program established in 2003) that CMS is working with healthcare stakeholders across the healthcare system to find ways to address drug and medical care costs on behalf of its beneficiaries and all Americans. But of all these proposals and efforts, which ones—working in tandem—will begin to make a palpable difference in drug and medical costs in the quest for value-based, affordable, and equitable care? This has become a key focus area for us. As we identify palpable opportunities and possibilities, we will bring these to you, leveraging our omnichannel system, to keep you updated!

References:

  1. Tarazi W, Finegold K, Sheingold S, De Lew N, Sommers BD. Prescription drug affordability among Medicare beneficiaries. ASPE Office of Health Policy. January 19, 2022. Accessed May 15, 2022. https://aspe.hhs.gov/sites/default/files/documents/1e2879846aa54939c56efeec9c6f96f0/prescription-drug-affordability.pdf
  2. CY 2023 Medicare Advantage and Part D final rule (CMS-4192-F). CMS.gov. April 29, 2022. Accessed May 15, 2022. https://www.cms.gov/newsroom/fact-sheets/cy-2023-medicare-advantage-and-part-d-final-rule-cms-4192-f
  3. Sullivan T. CMS announces Medicare Part D final rule maintaining current policy on six protected classes. Policymed. June 3, 2019. Accessed May 15, 2022. https://www.policymed.com/2019/06/cms-announces-medicare-part-d-final-rule-maintaining-current-policy-on-six-protected-classes.html#:~:text=The%20six%20classes%20are%3A%20anticonvulsants,policy%20changes%20for%20some%20time
  4. Stankiewicz M. CMS warns insurers to knock off ‘gag clauses,’ but is it enough to lower drug costs? Fierce Healthcare. May 21, 2018. Accessed May 15, 2022. https://www.fiercehealthcare.com/payer/hhs-wags-finger-at-pbms-asks-them-to-knock-off-gag-clauses#:~:text=Gag%20clause%20provisions%20between%20Part,cash%20instead%20of%20using%20insurance
  5. King R. Study finds CMS’ nixed change to Part D could have hindered drug accessibility. Fierce Healthcare. July 16, 2019. Accessed May 15, 2022. https://www.fiercehealthcare.com/payer/study-finds-cms-nixed-change-to-part-d-would-have-enabled
  6. Contract year 2022 Medicare Advantage and Part D final rule (CMS-4190-F2) fact sheet. CMS.gov. January 15, 2021. Accessed May 15, 2022. https://www.cms.gov/newsroom/fact-sheets/contract-year-2022-medicare-advantage-and-part-d-final-rule-cms-4190-f2-fact-sheet#:~:text=Beneficiary%20Real%20Time%20Benefit%20Tool%20(RTBT)&text=Enrollees%20would%20be%20able%20to,drugs%20for%20their%20health%20needs
  7. Changes to Medicare Advantage and Part D will provide better coverage, more access and improved transparency for Medicare beneficiaries. CMS.gov. January 15, 2021. Accessed May 15, 2022. https://www.cms.gov/newsroom/press-releases/changes-medicare-advantage-and-part-d-will-provide-better-coverage-more-access-and-improved
  8. McDonough JE, Adashi EY. The Center for Medicare and Medicaid Innovation—toward value-based care. JAMA Network. May 9, 2022. Accessed May 15, 2022. https://jamanetwork.com/journals/jama/fullarticle/2792275
  9. Cubanski J, Neuman T, Freed M. Explaining the prescription drug provisions in the Build Back Better Act. KFF.org. November 23, 2021. Accessed May 15, 2022. https://www.kff.org/medicare/issue-brief/explaining-the-prescription-drug-provisions-in-the-build-back-better-act/
  10. Gifford K, Winter A, Wiant L, Dolan R, Tian M, Garfield R. How state Medicaid programs are managing prescription drug costs: results from a state Medicaid pharmacy survey for state fiscal years 2019 and 2020. KFF.org. April 2020. Accessed May 15, 2020. https://files.kff.org/attachment/How-State-Medicaid-Programs-are-Managing-Prescription-Drug-Costs.pdf
  11. Medicaid Best Price 101: a review of Medicaid Best Price policy and new CMS guidance on Medicaid Best Price reporting for value based purchasing arrangements. Natl Law Review. 2022;8(139). Accessed May 15, 2022. https://www.natlawreview.com/article/medicaid-best-price-101-review-medicaid-best-price-policy-and-new-cms-guidance
  12. Butler J, Reck J. Drug price transparency laws position states to impact drug prices. NASHP.org. January 10, 2022. Accessed May 15, 2022. https://www.nashp.org/drug-price-transparency-laws-position-states-to-impact-drug-prices/