Proposed changes on Medicare drugs create winners and losers

Henrietta Strickland
November 29, 2018

As part of the Trump administration's blueprint to lower drug prices and reduce out-of-pocket spending for patients, CMS this week issued a proposed rule aimed at reducing the cost of Part D drugs. As detailed in a study from researchers at Northwestern University and the University of Texas, "profit-maximizing" Part D plans are incentivized to limit benefits or increase costs for Medicare beneficiaries because they are not responsible for costs incurred by other parts of Medicare.

If a drug manufacturer raises the price of a protected drug beyond a certain threshold it risks being excluded from payers' formularies, according to the proposed rule. The proposal could save $692 million over a decade, she said.

Furthermore, the agency is thinking about a possible future proposal to require pharmacies to charge Part D beneficiaries a price that reflects the lowest-possible cost for their drugs, accounting for the deals struck between pharmacies and drug manufacturers. "If the medication isn't affordable, they aren't going to be able to access it". Additionally, the report correctly highlights the significance of the protected classes in ensuring patient access to medications, and concludes that "lack of adequate access to medications can in some circumstances increase costs to other Medicare programs through increased hospitalizations from complications or increased physician visits to manage medications". The proposal notes that plans would be allowed to exclude a new formulation of an older drug, even if the older version is no longer on the market. Insurers could also force patients to try a cheaper drug before using a more expensive one, a tactic known as step therapy.

"President Trump is following through on his promise to bring tougher negotiation to Medicare and bring down drug costs for patients", Health and Human Services Secretary Alex Azar said in a statement. Some proposals could create winners and losers among seniors, insurers, middlemen and drugmakers.

Currently, private Medicare health plans are required to cover all or "substantially all" drug in six "protected" classes, such as HIV treatments, antidepressants and cancer drugs, regardless of cost.

"As an essential patient safeguard in Part D, the protected classes stand as a guarantee that patients with the most complex conditions will have access to the full spectrum of medications under Part D", the group writes on its website. For example, Medicare spending on Latuda, a biopolar depression drug made by Sumitomo Dainippon Pharma Co., grew nearly 19 percent annually from 2013 to 2017, Verma and Azar said.

Under the proposal-which will be up for public comments for the next two months-plans would be required to keep a minimum of two drugs in their formularies for each of the six protected classes. Total Part D spending on drugs in 2015 was $137 billion, the Kaiser Family Foundation said.

"Under the proposal, step therapy requirements may only apply to new starts of medication, must be reviewed and approved by the plan's pharmacy and therapeutics committee, and coverage requests related to Part B drugs will be subject to shorter adjudication timeframes that mirror the current rules in Part D".

The move is another effort to give insurers a negotiating tool to gain discounts and rebates from drugmakers in exchange for not steering patients to rival treatments.

"We've had a lot of interest from plans", Verma said. "They're excited about this".

Other reports by Click Lancashire

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