CMS proposes Part D price concessions be applied at point-of-sale, new requirements for MA plans

A document that reads 'Medicare Part D'
The Centers for Medicare & Medicaid Services is worried that price concessions negotiated between the Part D plan and the drug maker are not benefitting consumers. (Getty/designer491)

The Biden administration wants Medicare Part D plans to apply any price concessions they get from drugmakers to the point-of-sale and require Medicare Advantage plans to be more transparent in how they spend money on supplemental benefits.

The Centers for Medicare & Medicaid Services (CMS) released a proposed rule late Thursday that outlined major regulatory changes for MA and Part D starting in 2023. The rule covers a swath of major areas that include new changes for dual-eligible special needs beneficiaries and updates to calculations of star ratings, which can affect quality bonuses delivered to plans.

“Today’s proposed actions follow our guiding principles by improving health equity and enhancing access to prescription medications,” said CMS Administrator Chiquita Brooks-LaSure in a statement.

The proposal takes a major aim at price concessions that Part D plans extract from drug makers, but does not affect rebates negotiated between drug makers and insurers. Under the concessions, the plan pays less money to a pharmacy if it doesn’t meet several metrics. CMS is concerned, however, that the end-user doesn’t know about the arrangement and the lower prices are not passed on at the point-of-sale.

The proposed rule also said that the negotiated prices “typically do not reflect any performance-based pharmacy price concessions that lower the price a sponsor ultimately pays for the drug.”

The proposed rule wants to require all Part D plans to apply the concessions at the pharmacy counter.

“CMS is proposing to redefine the negotiated price at the baseline, or lowest possible, payment to a pharmacy, effective January 1, 2023,” a fact sheet on the regulation said. “This policy would reduce beneficiary out-of-pocket costs and improve price transparency and market competition in the Part D program.”

Since the changes are coming next year, Part D plans should account for them in their bids for the coming contract year, the rule said.

But the changes drew a swift rebuke from the pharmacy benefit management industry. 

"We are currently reviewing the proposed rule. However, previous point-of-sale proposals in Medicare have not advanced because they would significantly increase Medicare spending," said JC Scott, president and CEO of the PBM advocacy group Pharmacy Care Management Association in a statement.

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CMS is also proposing several policies that affect how MA plans are evaluated.

The agency is proposing that plan applicants must show they have a sufficient network of contracted providers before the agency approves an application for any new or expanded MA plan. The agency also hopes to provide MA insurers with information on their network adequacy before they submit a bid, giving them time to make any changes.

But CMS said it recognizes that it may be hard for plans to meet the network adequacy requirements within one year in advance of a contract year. It is therefore proposing to allow a “10-percentage point credit toward the percentage of beneficiaries residing within published time and distance standards for new or expanding service area applicants,” the fact sheet said. “Once the coverage year start (Jan. 1), the 10-percentage point credit would no longer apply and plans would need to meet full compliance.”

The agency is also calling for greater transparency in the reporting of medical loss ratios (MLRs), which require insurers to spend a certain percentage of their premium dollars on medical claims and the rest on administrative costs.

Currently, MA and Part D plans must meet an MLR of 85% of a premium dollar going to medical claims.

“Our proposal would require MA organizations and Part D sponsors to report the underlying cost and revenue information needed to calculate and verify the MLR percentage and remittance amount, if any,” the fact sheet said.

MA plans must also report the amount spent on supplemental benefits that aren’t offered by traditional Medicare, such as dental or vision. These benefits are major marketing tools for plans to Medicare beneficiaries.

CMS also wants to tighten oversight of third-party marketing organizations to prevent any deceptive tactics in marketing to seniors.

Improving care for dual-eligibles

CMS included several policies aimed at dual-eligible beneficiaries in both Medicare and Medicaid, part of a greater shift by the agency and Biden administration to tackle health equity.

A major proposal aims to better reflect plan performance on dual eligibles in star ratings, which can help beneficiaries to comparison shop for plans and are used to calculate quality bonuses to insurers.

Most of the time a plan contract could contain dual-eligible beneficiary and non-special needs MA plans. This can make it hard to fully assesses how a plan performs care for a dual-eligible beneficiary, a fact sheet on the rule said.

“CMS is proposing a pathway to allow certain states with integrated care programs to require that MA organizations establish a contract that only includes one or more [dual-eligible special needs plans], which would allow for star ratings for that contract to reflect the [dual-eligible] local performance,” the fact sheet added.

The agency also is proposing that dual-eligible plans use new integrated materials that make it easier for such beneficiaries to understand the scope of the Medicare and Medicaid benefits available to them.