This evening, the Centers for Medicare and Medicaid Services (CMS) released a final rule entitled “Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce Out-of-Pocket Expenses.” In total, the agency estimates that beneficiaries will save $62 million over 10 years in out-of-pocket spending, and Medicare program costs will be reduced by an additional $1.9 billion over 10 years, mostly due to the implementation of step therapy for physician-administered drugs covered under Part B and administered by Medicare Advantage Plans.

Agency Receives Over 4,000 Comments on Potential Changes to ‘Negotiated Price’ Definition

• The final rule does not include any proposals or changes to the definition of “negotiated price,” but notes that the agency received over 4,000 comments in response to a solicitation included in the proposed rule.
• “Negotiated price” is the benchmark price used to determine beneficiary cost-sharing, as well as the beneficiary’s progression through the different benefit stages, and is supposed to represent the price the plan sponsor ultimately pays for a drug. CMS has historically excluded concessions negotiated with network pharmacies and based on pharmacy performance.
• In the proposed rule, CMS solicited comments on a potential future update to the definition of “negotiated price” to be the lowest price that the plan sponsor could pay for the prescription, including the maximum amount of price concessions and rebates negotiated. If the actual price paid to the pharmacy ended up being higher than the reported negotiated price, the plan sponsor would report the difference at the end of the year as negative direct and indirect remuneration (DIR).
• Additionally, CMS solicited comments on adding a definition of “price concession” into Part D regulations. Currently, there is no regulatory definition of price concession; the definition under consideration by CMS would be broad and intended to include all rebates, discounts, and price concessions indirect and direct, negotiated between a plan sponsor and pharmacy.

CMS Backtracks, Does Not Finalize Changes to Protected Classes, Only Codifies Existing Utilization Management Policy

• Currently, Part D plans must include all drugs in the following six classes (referred to as the protected classes) on their formularies: antidepressants, antipsychotics, anticonvulsants, immunosuppressants, antiretrovirals, and antineoplastics.
• In the proposed rule, CMS proposed the following three exceptions to this policy:
  • Wider use of prior authorization and step therapy for drugs in these classes;
  • Excluding a drug in one of these classes from a formulary if the drug is a new formulation of an existing single-source product; and
  • Excluding a drug in one of these classes from a formulary if the wholesale acquisition cost (WAC) increases beyond the rate of inflation, relative to the price in a baseline month and year.
• Many public comments were not supportive of CMS’ proposal with some saying that access to would be compromised and others noting that plan sponsors have tools, such as PA on new starts, formulary tiering, and generic utilization to manage these classes.
• Instead of the three exceptions, CMS is codifying existing policy that permits prior authorization and step therapy for new starts only for all of the protected classes except antiretroviral medications.
• These exceptions and formulary edits will still be subject to CMS review and approval as part of the agency’s annual formulary review process.
• In their response to the public comments, CMS said the agency has plans to implement a protected class-specific Complaints Tracking Module (CTM) monitoring project in 2020 in order to track access to these classes.

Step Therapy for Part B Expected to Save Beneficiaries at Least $5 Million Annually

• CMS is finalizing previous notification and policy to allow Medicare Advantage (MA) plans to use step therapy with physician-administered drugs covered under the Part B benefit.
• Beneficiaries are expected to experience between $5 million and $8 million in annual savings from reduced out-of-pocket expenses due to the new policy; the new policy is expected to reduce Medicare program spending by between $145 million to $240 million annually, offset by a marginal additional cost (~$1 million annually) due to increased use of the beneficiary appeals process.
• MA plans must use the same adjudication timelines as Part D for exception requests: review within 24 hours for expedited determination requests and review within 72 hours for standard determination requests; plans may, but are not required, to work with network providers to establish a process that eliminates the need for a beneficiary to file an exception request when the lower or earlier steps are not clinically appropriate for the beneficiary.
• Step therapy may only be applied to new prescriptions for enrollees not currently taking the impacted medication.
• Plans must to use a Pharmacy and Therapeutics (P&T) Committee to approve step therapy programs, consistent with Part D requirements.
• MA plans will have to disclose that a Part B drug is subject to step therapy in the plan’s Annual Notice of Change and Evidence of Coverage documents.

Part D Plans Will Have to Use Real-Time Benefit Tools, Include Negotiated Price Information in Explanation of Benefits

• Beginning January 1, 2021, Part D plan sponsors will have to implement an electronic real-time benefit tool (RTBT).
• CMS had initially proposed implementation in 2020, but in response to comments expressing concern over feasibility of that deadline, CMS pushed it back to 2021. The agency, however, is encouraging plans to start implementing these tools prior to 2021.
• Since there are currently no industry-wide electronic standards for RTBTs, CMS is requiring that the RTBT implemented be capable of integrating with at least one prescriber’s electronic prescribing system or EHR.
• CMS is finalizing their proposal that plan sponsors include increases in negotiated price and lower cost therapeutic alternatives in their written explanation of benefits (EOB).
  • CMS believes this will cost $6 million in total for Part D plans to implement.
• The rule also finalizes CMS’ proposal to codify a statutory requirement banning pharmacy gag clauses.