CMS warns insurers to knock off 'gag clauses,' but is it enough to lower drug costs?

A pharmacist consulting with a patient holding medication
The Trump administration's push to end "gag clauses" is an effort to put such contracts in the public spotlight, according to one healthcare expert. (Getty/Steve Debenport)

The Trump administration is putting its foot down on so-called gag clauses used by insurers and PBMs that can lead to higher costs for consumers.

But the written warning isn't likely to have a substantial impact on its own.

In a letter (PDF) to Medicare Part D plan providers, the Centers for Medicare & Medicaid Services (CMS) called such contracts "unacceptable" and said that participants in such arrangements could face agency enforcement.

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Gag clause provisions between Part D insurers and pharmacy benefit managers prevent pharmacists from telling beneficiaries that they could pay less for a drug by paying cash instead of using insurance. Gag clauses have received widespread criticism for unnecessarily increasing drug costs for patients, and also go against Medicare policy, which requires Part D plans to ensure that enrollees pay the lowest price. 

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"We want to make it clear that CMS finds any form of 'gag clauses' unacceptable and contrary to our efforts to promote drug price transparency and lower drug prices," CMS Administrator Seema Verma said in the May 17 letter, which is part of the Trump administration's drug pricing "blueprint."

However, the letter is likely only a steppingstone and might not do much to lower costs on its own.

"Will this letter on its own save the healthcare world? No," David Friend, chief transformation officer of the BDO Center for Healthcare Excellence & Innovation, told FierceHealthcare. "This is the opening pitch of the game, and it's about informing consumers what their options are at the pharmacy counter."

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He added that "gag clauses" are relatively unknown to most consumers, and that the letter is CMS' way of warning that it will shame and name those who use them. 

"Most people think that if they have insurance they will always pay the lesser amount; that's not true," Friend said. "This is the Trump administration putting pressure on the system by opening consumers' eyes that these contracts exist in the first place." 

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