The Trump administration wants to give private insurance companies that sell drug plans under Medicare the power to restrict coverage of certain medicines in an attempt to save money.
The idea is to give the plans leverage to negotiate cheaper prices with biopharmaceutical companies and drive more competition to lower out-of-pocket costs for program beneficiaries, Centers for Medicare and Medicaid Services Administrator Seema Verma told reporters.
The proposal, unveiled Nov. 26, would apply to the so-called six classes of protected drugs under the Medicare Part D program, which covers prescription medicines sold at the pharmacy counter for seniors and disabled Americans.
Currently, Medicare Part D plans are required under the 2003 Medicare Modernization Act to cover at least two drugs in each therapeutic class — medicines that treat the same disease or condition.
But when the CMS set up the Part D program in 2006, the agency acknowledged that for some diseases and conditions, beneficiaries may need access to more than two different medicines within a class.
So the George W. Bush administration created and Congress later codified the six protected classes — anticonvulsants, antidepressants, antineoplastics, antipsychotics, antiretrovirals and immunosuppressants — and required Part D plans to cover "all or substantially all" of the drugs in those classes.
But starting in 2020, the Trump administration wants to let Part D plans use three exceptions to that requirement to exclude certain drugs from their formularies — the list of medicines an insurer covers.
Verma said Medicare Part D beneficiaries could save as much as $692 million in out-of-pocket costs over 10 years.
The first proposed exception would allow Part D plans to use so-called prior authorizations — a requirement that the doctor obtain insurance approval before prescribing a medicine — and step therapy, meaning the patient must try cheaper drugs before they can use the more expensive products.
Under that exception, the CMS would also allow Part D plans to impose indication-based formulary designs and utilization management for the protected classes of drugs, meaning the insurers may pay for only certain uses of a medicine rather than all indications approved by the U.S. Food and Drug Administration.
CMS told Part D plans in a memo in late August that the agency planned to make such a change, though it now is seeking to go through the rulemaking process.
The administration's second proposed exception would permit Part D plans to exclude new formulations of drugs in the protected classes if they do not provide a unique route of administration, even if the older version is no longer sold on the U.S. market.
The third proposed exception would allow plans to exclude drugs in the protected classes from the insurers' formularies if the price of a medicine had increased beyond the rate of inflation.
Verma noted, however, that Part D plans must ensure that two drugs from the protected classes remain on their formularies.
Cowen & Co. analyst Rick Weissenstein said the proposal to eliminate drugs from Part D formularies was an "aggressive move" likely to be challenged in court.
"We do not believe this part of the proposal will be implemented," Weissenstein said in a Nov. 26 research note.
He also questioned how aggressive Part D plans would be in using the new authority to exclude certain drugs.
"All-in-all, we do not think this part of the draft [regulation], even if implemented in its current form, is likely to have a material impact on drug pricing, although it could make some difference in discrete classes," Weissenstein said.
Other elements
The administration's draft rule also included several other elements, such as a provision that would formalize a policy the CMS plans to put in place in January 2019 to let Medicare Advantage plans require step therapy for its participants for injectable drugs administered in doctors' offices or outpatient facilities — Part B therapies.
The policy would allow Medicare Advantage plans to offer beneficiaries Part B drugs that are the "most cost-effective before progressing to other options," Verma and Health and Human Services Secretary Alex Azar said in a Nov. 26 statement.
They suggested the policy could help drive greater use of biosimilars — medicines intended to be lower-cost versions of biologics therapies, which are drugs derived from natural sources such as microorganisms or plant or animal cells.
"A beneficiary could start on a low-cost biosimilar before moving to a more costly biologic," they said. "The resulting savings would lead to a decrease in [Medicare Advantage] premiums."
Another provision would implement legislation Congress passed in September to prohibit gag clauses, which are statements insurers and pharmacy benefit managers use in their contracts to prevent pharmacists from telling customers when they can pay less in out-of-pocket costs for their prescription medicines by not using their insurance plans.
Industry objects
While Azar and Verma insisted that the draft rule, if implemented, would ensure patients are "in the driver's seat" and could continue to choose plans that best suit them, industry lobbyists raised concerns that the administration's proposal would negatively impact the sickest and most vulnerable Medicare beneficiaries.
"Letting plans restrict access to the medicines that patients rely on, particularly for those with serious and complex health conditions like HIV/AIDS, cancer and mental illness, reduces adherence to those medicines, jeopardizing their health, increasing their need for inpatient care and resulting in poorer health outcomes for seniors and higher costs for taxpayers," the Pharmaceutical Research and Manufacturers of America told S&P Global Market Intelligence in a statement.
Jim Greenwood, president and CEO of the Biotechnology Innovation Organization, said the proposal would not only roll back the Part D protections Congress intended for the most vulnerable Medicare beneficiaries, but it would financially benefit insurers and supply chain middlemen "at the expense of patients."
It is "vital" that patients who need the drugs in the six protected classes and their physicians continue to have the ability to choose the therapies based on the clinical circumstances, "rather than the decisions of insurance company bureaucrats," Greenwood said in a statement.