Trump administration proposal would allow Part D plans to negotiate prices of drugs in 'protected' classes

The Trump Administration's latest proposed rule aimed at curbing prescription drug prices would allow Medicare Part D plans to negotiate better prices in "protected" classes.

“Certain CMS regulations constrain these plans’ full negotiating power and the changes that we’re proposing would remove barriers that prevent MA and Part D plans from taking advantage of approaches to lowering prescription drug costs that are widely used by private plans,” Centers for Medicare & Medicaid Services Administrator Seema Verma said in a call with reporters after announcing the proposed rule on Monday evening.

Verma said the proposals would create certain exceptions to current constraints on protected drugs, allowing Part D sponsors broader use of prior authorization and step therapy—a flashpoint between insurers and providers. It would also allow plans to exclude from their formularies protected class drugs that have price increases that are greater than the rate of inflation or certain drug formulations that are not a significant innovation over the original product. 

Verma said her agency is also eyeing a future policy that would require pharmacy rebates to be passed on to seniors at the pharmacy counter, a previously floated idea that is sure to draw opposition from the insurance industry. The proposed rule (PDF) indicates that policy shift could come as early as plan year 2020.

RELATED: Trump unveils 'American Patients First' plan to bring down drug costs

Other elements in the proposal that could take effect as early as 2020 include: 

  • A proposal that each Part D plan adopt an electronic health record-integrated, real-time benefit tool by 2020 that can tell prescribers when lower-cost alternative drugs are available under a patient’s prescription drug benefits.
  • A proposal for Medicare Advantage plans to implement step therapy for Part B drugs. It was announced in August.
  • A proposal to require the Part D Explanation of Benefits sent to members to include drug pricing information and lower cost therapeutic alternatives.
  • A proposal to ban so-called gag clauses by Part D sponsors which prohibit or penalize pharmacies from disclosing lower cash prices to enrollees. 

CMS is seeking public comment on the proposals by January 25.

Focusing on the "protected class" policy, Verma said Part D plans are required to cover all available products of drugs that are considered "protected" with few exceptions despite a 63% increase in the number of drugs that fall within that class than when the policy was created 12 years ago.

Seema Verma
Seema Verma (

"As a result, beneficiaries taking these drugs have not seen these discounts that beneficiaries taking other drugs experience. This is not fair," Verma said.

The policy, put in place when the Part D program first began, was meant to address concerns about patient access to certain drugs under what was a then-unclear expedited appeals process. But it was not intended to be permanent, she said.

"The lack of any ability for Part D plans to manage drugs in protected classes has allowed the pharmaceutical industry to command high prices," Verma said. "Insurance companies in the private market do not face the same constraints."

The impact, she said, is that typical discounts for those drugs are between 20% and 30%. But the average discount among protected classes of drugs under Medicare Part D plans is 6%. Proposed flexibilities could save the government $1.85 billion and save Medicare enrollees $692 million in cost sharing over the next decade.

RELATED: Trump administration unveils plan to lower Medicare Part B prices by basing costs on other countries' pricing

It's the latest iteration of the Administration's policy aimed at tackling high prescription drug prices under a blueprint first announced in May.

Last month, CMS said it was looking for ways to change the Medicare Part D drug program that would shift more risk to plan sponsors when members reach the final catastrophic coverage stage. Last month, Trump announced a new payment model that would more closely align the cost of Medicare Part B drugs with the prices paid for the same drugs in other countries called the "International Pricing Index."