CMS rule gives Part D plans, PBMs new negotiation tools with drug companies

Drugs and money sign
A proposed rule from the Centers for Medicare & Medicaid Services would give Part D plans and pharmacy benefit managers new tools to negotiate with drug companies for larger rebates. (Getty/ADragan)

The Trump administration gave Part D plans a new weapon to negotiate with drugmakers to get larger rebates, but with several caveats, experts say.

The Centers for Medicare & Medicaid Services (CMS) released a proposed payment rule for Medicare Advantage and Part D plans last week. The rule included a proposal to create a new preferred tier for Part D plans for specialty drugs in a bid to eventually lead to lower prices for seniors.

“CMS is hoping if plans have more flexibility and two potential tiers if it is deemed a specialty drug that will drive more competition and more rebates,” said Matt Kazan, a principal at consulting firm Avalere Health.

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Currently, Part D plans put all specialty drugs, which often have the highest cost, into their own tier that has the same level of cost-sharing. The proposed second “preferred” tier would allow for a lower percentage of beneficiary cost-sharing for such specialty drugs.

CMS is proposing that the maximum amount of cost-sharing for either specialty tier is 25% or 33% depending on whether the plan has a deductible.

Manufacturers would prefer a lower cost-sharing percentage for their drug in order to facilitate greater access. These manufacturers may be more willing to offer plans a higher rebate in order to get lower cost-sharing, Kazan said.

But the question is, how low do Part D plans need to go to get those larger rebates?

“If they only go from 33 to 25% [cost-sharing] is that enough?” Kazan asked. “Both plans and manufacturers need to dig into the issue to figure out the specific changes they need to make in their formulary designs to see what type of impact this will have.”

Another question is whether consumers would benefit from the new tier.

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“There is so little transparency in the negotiations between plan sponsors, pharmacy benefit managers [PBMs] and manufacturers,” said Michael Abrams, managing partner with consulting firm Numerof & Associates.

The new preferred tier doesn’t have to just be composed of cheaper generic or biosimilar drugs. The agency wants to give Part D sponsors “maximum flexibility” to get a brand-name drug that could cost less after a rebate than a generic or biosimilar.

Generics and biosimilars that “meet the specialty tier threshold may not always be the lowest-priced product,” the proposed rule said. The agency also proposed that a drug would be considered specialty if the costs for a 30-day supply reach a certain limit.

Another provision of the rule that could help Part D plans and PBMs save money is a requirement for plans to disclose pharmacy performance measurements such as generic drug utilization.

There isn’t a core set of performance metrics across plans, so a pharmacy could face a separate set of metrics from one plan to the other. Disclosure of these metrics is the first step toward agreeing on a common set, Abrams said.

“If everybody can agree on one set of metrics that makes it cheaper to administer,” he said.

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