A report by the Kaiser Family Foundation states that increasing plans’ shares of costs in the coverage gap, reducing the manufacturer discount to something less than 70% for 2019 and beyond, and modifying the scheduled increase in the OOP spending threshold would result in higher Medicare spending, resulting in a substantial increase in beneficiary OOP cost and fewer Part D enrollees qualifying for catastrophic coverage.
Bipartisan efforts are indicating support for capping OOP spending and shifting more responsibility to insurers by increasing their share of costs in the catastrophic phase, and to manufacturers to lower drug prices.
Medicare Part B changes
At the beginning of 2019, CMS green lighted permission for Medicare Advantage plans to use step therapy for Part B drugs covered under Part C to reduce costs and provide more coordinated care.
“The ‘step therapy’ proposal, which was previously not allowed, enables negotiation by manufacturers for discounts related to step therapy for Part B covered under Part C,” says Andy Parece, vice president, life sciences practice, Charles River Associates in Boston. “Approved in 2018 and renewed in 2019, there was limited participation last year, but we expect more in 2019 for 2020 formularies.”
In addition, HHS will test a new payment model to substantially lower the cost of prescription drugs and biologics covered under Medicare Part B. The new model would, for the first time, base Medicare payment for Part B drugs on the typically lower prices paid in 14 other industrialized countries, known at the International Pricing Index.
Medicare’s current payment to physicians for Part B drugs, which is based on the average U.S. sales price for these drugs and biologics, is 47% higher on average than prices paid by these countries for the same products, according to the Administration.
Testing value-based benefit design
The administration is experimenting with value-based programs for drugs, including indication-based pricing and long-term financing. The Center for Medicare & Medicaid Innovation will test a value-based insurance design model for 2020, including a reduction in cost sharing or additional supplemental benefits for enrollees based on condition, socioeconomic status, or both; awards and incentives; use of telehealth services; and coordinated approaches to wellness and healthcare planning.
Related article: Value-Based Model Engages Provider Specialists
Under new guidelines, an indication-based formulary will be available in 2020, allowing Part D plans to choose a different drug for an indication by using step therapy and prior authorization to promote the most cost-effective option. CMS policy currently requires Part D plans to cover a drug for every one of its indications approved by the FDA even if a plan would otherwise have covered a different drug for a particular indication.
Joe Paduda, principal, Health Strategy Associates, a consulting firm in Skaneateles, New York, supports patient-specific formularies as the norm because patients might respond differently to the same therapy. He is concerned, however, that PBMs will use financial measures as a key component of formulary decision making.