CMS allows Medicare Advantage plans to negotiate Part B drug prices, implement step therapy

Like traditional Medicare and private plans, Medicare Advantage plans will be able to negotiate drug prices and implement "step therapy." (Getty Images/svengine)

The Centers for Medicare & Medicaid Services (CMS) is giving Medicare Advantage (MA) plans more power in how they pay for Part B drugs.

The agency will allow MA plans to negotiate Part B drug prices with manufacturers, as well as to implement step therapy for Part B drugs. Plans will be required to pass half of the savings generated through negotiation to patients.

Negotiating Part B drug prices will foster competition and allow MA plans to get a better deal for their enrollees, according to CMS. These negotiations may also lead to price decreases in traditional Medicare.

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The move represents perhaps the most significant step in the administration's push to reduce drug prices, offering a new lever to combat ever-increasing costs.

Step therapy is a form of prior authorization that requires patients to try a "preferred" drug—that is, a less-expensive biosimilar— before the plan will cover a different, more expensive one. CMS says this will reduce costs for plans and beneficiaries alike.

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Under the Affordable Care Act, at least 85% of plans' savings must go toward healthcare services and quality improvement activities.

Further, the new policy requires "more than half of the savings required to be passed on directly to patients," CMS said in a press release. A memo (PDF) from the agency says the savings may come in the form of "gift cards or other items of value."

It is "unique that Medicare Advantage has not done this," said CMS administrator Seema Verma in a press call on Tuesday evening, noting that traditional Medicare and private insurance plans have long been allowed to implement a step therapy policy.

MA plans will not be required to implement step therapy. Those that decide to do so must inform beneficiaries before the next enrollment period in October.

Verma added that patients and doctors can appeal the step therapy requirement through the existing appeals process.

The Pharmaceutical Care Management Association (PCMA), a trade association representing pharmacy benefit managers (PBMs), called the move "an important step toward reducing costs for the program and beneficiaries," adding that "some of the highest priced drugs are found in Medicare Part B."

Opponents of step therapy, who sometimes call it "fail first," say limiting medication options can have negative consequences for consumers.

Step therapy policies "dangerously intrude on patient safety" and "weaken the doctor/patient relationship by negating the healthcare plan that they created together," according to patient advocacy organization Fail First Hurts.

Part B drugs are either generally administered by a physician, administered via durable medical equipment, or otherwise specified by statute.