For the first time in three years, CMS has proposed a formal regulation concerning the Medicare Advantage (MA) and Medicare Part D prescription drug benefit programs. Typically, the agency has managed both benefits via the annual Call Letter process, which is subregulatory guidance. The proposed rule garnered a lot of speculation while it was under review by the Office of Management and Budget (OMB), since few stakeholders knew what to expect.

The agency has kept the focus on a host of issues familiar to stakeholders working within Part D: opioid utilization management; formulary management, especially with respect to generic substitutions and tiering exceptions; and treatment of follow-on biologics.

Comments on the proposal are due January 16, 2018.

Lock-In Programs Proposed for Part D, LIS Loophole to Close

Under authority established by the Comprehensive Addiction and Recovery Act of 2016 (CARA), CMS is proposing to allow Part D plan sponsors to establish drug management programs for beneficiaries considered at risk for abuse of drugs identified as “frequently abused drugs.” The programs could include “lock-in” restrictions that limit beneficiaries from receiving prescriptions for certain products from certain provider(s) or pharmacy(ies).

CMS is also looking to close a loophole that allowed beneficiaries receiving a low-income subsidy (LIS) from changing plans to avoid lock-in restrictions. Under current rules, LIS recipients can change Part D plans one per month, regardless of reason. This allows beneficiaries that are placed under restrictions with one plan to simply change to another plan the following month.

Part D’s existing Opioid Drug Utilization Review Policy (DUR) and Overutilization Monitoring Systems, which require Part D plans to regularly review drug utilization and engage in case management with prescribers, would also be formalized. CMS cites statistics showing a 61% decrease in the number of beneficiaries identified as “potential very high risk” overutilizers of opioids during the program’s five years of operation in proposing to codify the program, which had been managed via the Call Letter thus far.

Plans May No Longer Exclude Non-Preferred Generic Tiers from Tiering Exceptions

Part D plans are required by law to establish a structure through which beneficiaries may request an exception to the plan’s tiered cost-sharing structure. These exceptions allow beneficiaries to obtain drugs on a higher cost-sharing tier at the lower copay rate available on lower cost-sharing tiers.

Currently, these exceptions are granted when the non-preferred drug is medically necessary based on a statement by the prescriber. However, as the price of drugs has grown since the introduction of the Part D program, the complexity of formularies has grown as well, leading to expanded tiers that in some cases mix brands and generics, and even multiple tiers for generic drugs.

CMS is proposing to base eligibility for tiering exceptions on the tier that contains the preferred alternative drug to the higher-cost requested drug, rather than based on tier labels established by the plan. This would remove an existing loophole whereby plans could exclude generic tiers, including non-preferred generic tiers, from the tiering exception system. Specialty tiers will still be excluded from the exception system.

Brand-Name Drugs with Newly-Approved Generics Could be Removed from Formularies Faster

Plans must currently provide 60-day notice to beneficiaries and to CMS before removing a drug from a formulary or making any modification to its cost-sharing tier, including when a generic alternative to a branded drug is released.

In addition, plans may not make any modifications to their formulary between the end of open enrollment and March 1 of the plan year. Under the proposal, plans would be able to drop a branded drug from formulary, or move it to a higher cost-sharing tier immediately, without advanced notice, and at any time during the plan year, so long as the plan replaces the drug with a therapeutically-equivalent newly-approved generic drug on the same or lower cost tier.

Plans would be required to provide a general notice to beneficiaries and potential beneficiaries that they have made these changes. CMS solicits comments on whether these changes should be allowed mid-month, or take effect at the beginning of the following month. In addition, the agency would like to know whether this policy should be expanded, in a limited fashion, to non-newly-approved drugs as well.

Proposal to Add Follow-On Biologics to Generics Definition for LIS Cost Sharing Policies Aims to Save $60 Million Over 5 Years

Historically, CMS has grappled with how broadly or narrowly to classify follow-on biological products. Under their current regulatory definition, follow-on biologics (also called biosimilars) are not interchangeable which means a pharmacist cannot substitute them for another reference biological product without prescriber approval.

CMS is proposing changes to the definition of a generic drug to include follow-on biologicals with respect to LIS cost sharing and non-LIS catastrophic cost sharing policies. By including follow-on biologicals in the definition of generics, the follow-on biologics would then be treated at the lower cost sharing level and Part D enrollees are expected to be incentivized to use follow-on biologics instead of reference biological products. CMS estimates that this proposed policy change could result in a minor 5% shift to follow-on biological products, saving $60 million over 5 calendar years (2019-2023). However, there is currently only one follow-on biological product in the market (Zarxio ®) to reference for potential effects on utilization and cost savings.

If you have questions about how this proposal could impact you or your company, reach out to Melissa Andel, Director of Health Policy, at melissa@appliedpolicy.com or 202-558-5272.