CMS Proposes Drug Reimbursement Changes Under Medicare Part C and Part D

November 27, 2018

The Centers for Medicare & Medicaid Services (CMS) released a proposed rule pertaining to Medicare Part C and Part D—two areas of the Medicare program where reforms are being considered as part of the Administration’s “blueprint to lower drug prices and reduce out-of-pocket costs.” Provisions in the proposal most likely to impact the cancer care community include:

  • Direct and Indirect Remuneration (DIR)—Price Concessions: CMS proposes “negotiated price” as the lowest possible payment pharmacies can receive. This would remove the risk of reimbursement “claw backs” related to provider performance and shifts fees associated with quality metrics to a bonus structure. This change would go into effect Jan. 1, 2020.
  • Protected Class Drugs: Cancer drugs are currently one of the six protected classes of drugs under Part D. As such, plans are required to “substantially” cover all drugs within the class. The proposed rule would maintain all six protected drug classes but suggests three exceptions that would allow Part D sponsors greater ability to negotiate with manufacturers:
    1. The proposed rule would permit Part D plans to implement broader use of utilization management tools like prior authorization and step therapy for protected class drugs. Plans could also exclude protected class drugs from the formulary for non-protected class indications.
    2. Part D plans would be permitted to exclude from their formularies a protected class drug or biologic that is a new formulation and does not provide a unique route of administration—regardless of whether the older formulation remains on the market.
    3. Part D plans could exclude a protected class drug from a formulary if the price of the drug increased beyond a certain threshold relative to the price in a baseline month and year, beyond the rate of inflation. The rate of inflation would be calculated based on the Consumer Price Index for all Urban Consumers (CPI-U).

CMS also proposes to evaluate protections for beneficiary access to currently protected class drugs through its review of Part D plan formularies, implement an expedited appeals process, and require plans to cover two drugs in every therapeutic class.

  • Gag Clauses: The proposed rule would restrict Part D plans from prohibiting or penalizing a pharmacy from disclosing a lower cash price to a beneficiary. In October, President Trump signed two bills into law, barring so-called "gag clauses."

The proposal would also reaffirm the authority of Medicare Advantage plans to implement utilization management programs for managing Part B drugs, including step therapy. In response to the policy change earlier this year, ASCO reiterated the society’s position that step therapy is never clinically appropriate in cancer care and outlined specific concerns with the decision to allow Medicare Advantage plans to use step therapy.

The proposed rule also includes provisions related to Real-Time Pharmacy Benefit Checks, aiming to promote the use of electronic “Real Time Benefit Tools” in the Part D program, and requiring the inclusion of drug pricing information and lower cost therapeutic alternatives in Explanation of Benefits statements for beneficiaries. 

ASCO will submit comments to CMS on the proposal during the open comment period. Watch ASCO in Action for updates on this and other cancer policy priorities.