The Trump administration will permit private insurance plans sold through the federal government's Medicare Advantage program to require seniors and the disabled to use cheaper medicines before they can try more expensive drugs administered in doctors' offices or outpatient facilities — an approach known as step therapy.
The move, however, was immediately criticized by the biopharmaceutical industry, whose lobbying group said it had "serious concerns" about the action.
The Obama administration had prohibited Medicare Advantage plans from imposing mandatory step therapy on the injectable and infused medicines covered under the government's so-called Part B program.
But on Aug. 7, Centers for Medicare and Medicaid Services Administrator Seema Verma rescinded the September 2012 ban.
During a briefing with reporters, Verma said the action would give the Medicare Advantage plans the ability to negotiate discounts with drug manufacturers, which may result in biopharmaceutical makers lowering their prices.
The plans, however, will only be allowed to apply the step-therapy approach to new prescriptions or those where the patient is not actively receiving the affected medication.
Patients can seek an exception from the step-therapy requirement, though there is no guarantee such a request would be approved.
Trump administration officials said their new action would give Medicare Advantage plans the negotiating tools private-sector insurers have to drive down the prices of prescription drugs and force competition.
The administration, however, has continued to shun the idea of giving the Medicare program the authority to directly negotiate with drugmakers — failing to keep President Donald Trump's campaign trail promise to pursue the matter.
Dan Best, senior adviser for drug pricing reform at Health and Human Services, said the change may mean savings of 15% to 20% for the Medicare Advantage plans, which he said spend about $11.9 billion annually on prescription medicines for their 20 million enrollees.
CMS' new action, which goes into effect in January 2019, is part of the Trump administration's strategy to lower Americans' costs for prescription medicines, Verma told reporters.
The CMS chief said the Medicare Advantage plans would be required to pass along more than half of the savings they garner to patients.
Officials said the savings could be passed to plan participants through lower coinsurance amounts and rewards programs, like gift cards, in 2019.
The savings may also be passed on to patients through lower premiums — an option not available for next year since premiums for 2019 have already been set, officials noted.
Verma said the Medicare Advantage plans would also be able to "cross-manage" between the Part B drugs or the medicines patients obtain at the pharmacy under Part D. In other words, requiring the use of a cheaper Part D drug ahead of a more expensive Part B medicine.
"This might yield D drug price concessions but current rebate structure make this uncertain," health policy analyst Peter Bach, director of Memorial Sloan Kettering's Center for Health Policy and Outcomes, said on Twitter.
Medicare Advantage beneficiaries will also have the option to switch to a fee-for-service, though they must take that action by March 31.
"If they don't like their plan, they don't have to keep it," HHS Secretary Alex Azar said in a statement — inverting the often Republican-condemned remark by former President Obama that if patients liked their plans under the Affordable Care Act, they could keep them.
The administration said the Medicare Advantage plans will be required to couple the Part B step therapy with patient-centered care coordination services for beneficiaries as part of a drug management care coordination program.
The care coordination programs must include discussing medication options with beneficiaries, providing beneficiaries with educational material and information about their medications, and implementing adherence strategies to their medication regimen, according to HHS.
Verma suggested the new actions by CMS 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.
There are 12 biosimilars approved by the U.S. Food and Drug Administration, but only three of them are on the American market. The others are caught up in ongoing patent disputes or their entrance was delayed under agreements with innovators.
The FDA last month unveiled a new plan aimed at speeding biosimilars to the market, including efforts to stop brand-name drugmakers from using gaming tactics to thwart competition from their cheaper rivals.
While the CMS' action may have important implications for biosimilars and their uptake, it may make the complex decision about what Medicare plan to join for drug coverage even more complicated for beneficiaries, Walid Gellad, an associate professor of medicine and director the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh, tweeted.
More pharmacy benefit managers power
But the move to step therapy — like HHS' emphasis on negotiation in general — doubles down on the use of pharmacy benefit managers, Rachel Sachs, an associate professor of law at Washington University in St. Louis, remarked on Twitter.
PBMs, often called middlemen, is a sector Trump has vowed to eliminate.
The administration currently is looking at removing the safe harbor protections that allow PBMs and health plans to secure rebates from drugmakers.
The PBMs extract rebates from drugmakers in exchange for putting the manufacturers' medicines on the insurance or Medicare plan's formulary.
Drug plans and PBMs take a portion of the rebates they have negotiated with the biopharmaceutical manufacturers and keep it as profit. The drug plans typically use the remainder of the rebates to reduce consumers' premiums.
Azar has repeatedly said the administration wants to move away from the rebate system and toward a fixed-price discount model — most recently promoting the idea during a June 26 Senate Finance Committee hearing.
The Pharmaceutical Care Management Association, the lobbying group representing PBMs, praised the Trump administration's step-therapy plan.
The drug company trade group the Pharmaceutical Research and Manufacturers of America, however, said permitting step therapy in Medicare Advantage would delay many beneficiaries' access to the medicines they need, interfere with the patient-physician relationship and increase burdens on doctors to comply with new, more complicated requirements.
"The bottom line is this guidance prioritizes the interests of middlemen while increasing out-of-pocket costs for some patients," the group told S&P Global Market Intelligence in a statement.