Sweeping Changes Proposed for Medicare Part D

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Policymakers in Washington, DC, are exploring reforms to Medicare Part D that could mark the most significant changes to the popular program since its inception in 2006. After a long spell with no structural changes to the program, the Centers for Medicare & Medicaid Services (CMS) unveiled a massive proposed rule in late 2018 that would touch nearly every aspect of Medicare Part D.1 Stakeholders were afforded a 60-day public comment period that ended in January 2018 and, judging from the huge volume of over 1,700 comments, many of the proposed provisions have stoked interest from a wide range of organizations and individuals.

Significant developments of interest to pharmacists and pharmacies to watch include: opioids and pharmacy/prescriber lock-in; point-of-sale price concessions and manufacturer rebates; any willing pharmacy (AWP) provider; and transition supply. If finalized, the reforms are scheduled for implementation on January 1, 2019. However, given tight time constraints, it seems likely that many of the proposed changes, if finalized, would not go into effect until after 2019.

Opioids and Pharmacy/Prescriber Lock-In

Provisions in the proposed rule would implement requirements from the Comprehensive Addiction and Recovery Act (CARA) of 2016 that establish a regulatory framework for prescription drug plans (PDPs) to address the opioid crisis. As part of the framework, PDPs may establish a drug management program that “may limit at-risk beneficiaries’ access to coverage of controlled substances that CMS determines are ‘frequently abused drugs’ to a selected prescriber(s) and/or network pharmacy(ies),”2 known as lock-in programs. Under CARA, the lock-in does not apply to residents in long-term care facilities (LTCFs) or other facilities that contract with a single pharmacy because it would disrupt safeguards already in place for this population and would have unintended negative consequences for the ability of LTCFs to properly monitor and coordinate beneficiaries’ medications. CMS proposed the exemption for LTCF residents but declined to expand it to other facility settings for which frequently abused drugs are dispensed for residents through a contract with a single pharmacy, such as assisted living facilities (ALFs). In addition to the exemption for LTCF residents, CMS specifies two other conditions under which a beneficiary would be exempt from a drug management program: 1) if the beneficiary has elected to receive hospice care and 2) the beneficiary has a cancer diagnosis.

Point-of-Sale Price Concessions & Manufacturer Rebates

To the surprise of many, the proposal saw CMS address the contentious issues of point-of-sale price concessions and manufacturer rebates. Rather than provide specific policy remedies in these areas, CMS issued a “Request for Information” soliciting stakeholder comment on potential policy approaches for applying manufacturer rebates and pharmacy price concessions to the price of a drug at the point-of-sale. As a motivating factor to advance a policy change, CMS noted that between 2010 and 2015, the amount of all forms of price concessions received by Part D sponsors and their PBMs increased nearly 24 percent per year, which is about twice as fast as total Part D gross drug costs.3 The annual required reporting by Part D sponsors to CMS of direct and indirect remuneration (DIR) shows that manufacturer rebates account for a majority of this growth.

In response, CMS is considering requiring Part D sponsors to include in the negotiated price reported to CMS for a covered Part D drug a specified minimum percentage of the cost-weighted average of rebates provided by drug manufacturers for covered Part D drugs in the same therapeutic category or class. CMS says that mandating this type of disclosure of point-of-sale rebates would reduce patients’ out-of-pocket costs and decelerate their movement towards and through the Part D donut hole and catastrophic coverage phase. CMS also discusses the potential for requiring all price concessions from pharmacies be reflected in the negotiated price that is made available at the point-of-sale and reported to CMS, even when such concessions are contingent upon performance by the pharmacy. CMS is not expected to finalize any policy in these areas for the 2019 plan year; however, momentum is gathering in Congress and CMS to advance these types of reforms as a way to lower drug costs.

Any Willing Pharmacy

CMS makes several proposals to clarify the requirement that plans permit participation of AWP agreeing to standard terms and conditions. CMS is concerned that certain standard terms and conditions of AWP contracts result in the exclusion of some pharmacies from network participation. In response, CMS proposes that plan sponsors may tailor their standard terms and conditions to different types of pharmacies, but cannot exclude “unique or innovative” pharmacies from participating in their contracted pharmacy network on the basis of not fitting in the correct pharmacy type classification. CMS states in the proposal “it is not appropriate for Part D plan sponsors to offer standard terms and conditions for network participation that are specific to only one particular type of pharmacy, and then decline to permit a willing pharmacy to participate on the grounds that it does not squarely fit into that pharmacy type.”4

Transition Supply

The proposal also includes changes to the transition supply provided in LTC settings and outpatient settings to a one-month supply. Current rules for beneficiaries in LTC settings require PDPs cover a transitional supply of non-formulary drugs and drugs with utilization management requirements for the first 90 days of a transition. This policy was put in place to ensure that LTC beneficiaries have consistent access to medications upon enrolling in a new plan or as a result of changes in their current drug coverage. In their public comments, several stakeholders expressed concerns about the proposed supply reduction for residents in LTC settings, citing their more limited access to prescribers and need for extended transition time frames in order for prescribers to work with facilities and pharmacies on transitioning residents to formulary drugs.

The Road Ahead

Through reforms to Medicare Part D, CMS is seeking to generate drug cost savings for enrollees while improving the program. The proposed rule reaches nearly every aspect of Part D; however, a key concept with potentially major implications for the program is CMS’ focus on addressing pharmacy price concessions and manufacturer rebates. CMS stops short of advancing specific remedies in these areas but clearly identifies the problem that they have rapidly escalated in recent years, and there is no apparent savings passed along to beneficiaries. Stakeholders will be watching closely as both CMS and Congress evaluate options to lower drug costs, which include structural changes to manufacturer rebates and pharmacy price concessions.

Brad Kile is president of Dumbarton Group & Associates, an advocacy and policy firm.


1-4 Medicare Program; Contract Year 2019 Policy and Technical Changes to the Medicare Advantage, Medicare Cost Plan, Medicare Fee-for-Service, the Medicare Prescription Drug Benefit Programs, and the PACE Program. Federal Register. Nov. 28, 2017. Web. 28 Feb. 2018. www.federalregister.gov/documents/2017/11/28/2017-25068/medicare-program-contract-year-2019-policy-and-technical-changes-to-the-medicare-advantage-medicare

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