CMS scales back plan to allow step therapy for Part D protected classes

Woman paying for a prescription at a pharmacy
The Centers for Medicare & Medicaid Services finalized a rule on Part D and Medicare Advantage on Thursday. (Getty/Tom Merton)

The Centers for Medicare & Medicaid Services finalized a scaled-back version of a proposed rule that will allow Medicare Part D plan sponsors greater leeway to use prior authorization and step therapy for drugs in protected classes. 

The final rule (PDF) will allow Part D plans to use these utilization management tools for members starting new therapies and in all classes except antiretroviral drugs, codifying existing policy.  

CMS had initially proposed to allow prior authorization and step therapy in the protected classes without distinguishing between new starts and patients on existing therapies. It also nixed proposals that would have allowed plan sponsors to exclude a protected class drug from its formulary if it exceeded a certain threshold or it was a new formulation of an existing single-source drug or biologic. 

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RELATED: Part D sponsors need stronger incentives to negotiate lower drug costs, MedPAC executive director says 

CMS also decided to spike a plan that would change its definition of “negotiated price,” or the price at the point of sale, to the baseline payment from a Part D plan to a pharmacy. Negotiated price is used by the agency to calculate cost-sharing for beneficiaries and adjudicate the program. 

This would have passed price concessions negotiated by pharmacies onto patients. CMS received more than 4,000 comments on the calculation and decided to hold off on implementing such a change for the 2020 plan year, though it’s still weighing policy changes in this area. 

The changes included in the rule, according to the agency, will improve plans’ negotiating power, leading to lower costs, officials said. 

“The improvements we are making to Medicare Advantage and Medicare Part D deliver on the promises in the president’s blueprint to provide more negotiating tools and more transparency for patients,” Department of Health and Human Services Secretary Alex Azar said in a statement.  

“They are significant steps toward a Medicare program, a drug pricing marketplace and a healthcare system where the patient is at the center and in control,” Azar added. 

RELATED: HHS’ rebate rule would boost federal spending by $177B, lead to higher Part D premiums, CBO finds 

Part D plans will also be required to build a tool that can be integrated into provider electronic health records or electronic prescribing to arm them with data on drug pricing. Plan sponsors will have until Jan. 1, 2021, to roll out a tool that’s compatible with at least one provider’s systems, CMS said

Part D plan sponsors will also have until that date to update their explanation of benefits for members to include pricing information and offer potential alternatives for pricey therapies under the rule. 

CMS Administrator Seema Verma said these programs build on the work the agency has already done around increased price transparency, such as requiring hospitals to post chargemaster price lists online

“By empowering patients with information on the cost of their prescription drugs, today’s rule will ensure that pharmaceutical companies have to compete on basis of price,” Verma said. 

RELATED: CMS allows Medicare Advantage to negotiate Part B prices, implement step therapy 

In addition, CMS finalized a plan for the 2020 plan year that would allow Medicare Advantage (MA) plans to use step therapy in Part B. It made a similar move for 2019, drawing ire from providers and cheers from MA insurers

UnitedHealthcare and Humana, two insurers that together account for nearly half of the MA market, both came out in favor of the proposal, saying it would offer greater leverage to push drug companies to lower their prices and to manage drug costs. 

“Without such tools, pharmaceutical companies had nearly unlimited pricing power, as evidenced by the ever-increasing cost of Part B drugs,” Humana wrote in a comment letter.  

Provider groups warn that in either Part B or D such policies can create access issues. Specialty physicians, particularly those in oncology, are especially concerned about steps that could weaken the protected classes. 

The rule also formally implements a law signed by the president earlier this year that blocks pharmacy “gag clauses,” where pharmacists are prohibited by Part D insurers from informing customers if they could save money by paying out-of-pocket instead of through their health plan.

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