CMS will allow Medicare Advantage plans to negotiate drug prices

For the first time, CMS will allow Medicare Advantage (MA) plans to negotiate drug prices regarding step therapy in Medicare Part B. MA plans that also provide Part D benefits will be able to cross-manage across Parts B and D, the agency announced.

The move comes amid a wave of proposals and blueprints by CMS to tackle rising drug prices.

Starting Jan. 1, 2019, MA plans will have the option to offer step therapy, a type of prior authorization for drugs that begins with the most preferred drug therapy and progresses to other therapies if necessary, according to CMS. With more generics on the market, step therapy can arguably help bring down drug prices as plans steer patients toward cheaper alternative care solutions.

Critics of step therapy call it a cost-cutting measure that will limit patient choices by forcing patients to try cheaper treatments first that may not work.

Over the past few years, a few states have taken steps to reform step therapy as the policy has risen in popularity among insurance companies, pharmacy benefit managers and Medicaid and Medicare. Most of these laws allow exceptions for patients under certain conditions.  

“President Trump promised better Medicare negotiation and lower drug prices for the American people. Today, we are taking an important step in delivering on that promise,” HHS Secretary Alex Azar, JD, said in a statement. “As soon as next year, drug prices can start coming down for many of the 20 million seniors on Medicare Advantage, with more than half of the savings going to patients. Consumers will always retain the power to choose the plan that works for them: If they don’t like their plan, they don’t have to keep it. We look forward to seeing the results of tougher negotiation within Medicare, and expanding successful negotiation tools throughout our programs.”

Currently, Medicare pays clinicians a percentage above the average sales price for drugs and biologicals administered in a physician’s office, with little negotiation to reduce prices overall. CMS also previously discouraged prior authorization and step therapy for MA plans. Rescinding that guidance could help MA and taxpayers “get a better deal,” the agency stated, as plans will be able to negotiate on behalf of beneficiaries to get a better value for Part B therapies.

MA plans will be required to pass on the savings equivalent to more than half the amount save on average per participant to beneficiaries through rewards as part of the drug management care coordination program. Plans that choose to offer Part B step therapy must also provide new patient-centered care coordination services for beneficiaries.

Plans that don’t spend at least 85 percent of revenue on healthcare services and quality improving activities will also be subject to penalties.