The impact of Medicare Part D proposals on drug pricing


Find out how healthcare organizations and analysts feel about new Medicare Part D proposals and drug pricing.

dollar bills growing
headshot Jeremy Schafer


The Centers for Medicare & Medicaid Services (CMS) recently proposed polices for 2020 that “would ensure that Medicare Advantage and Part D plans have more tools to negotiate lower drug prices,” CMS said in a statement.

Healthcare organizations and analysts are cautiously optimistic that new Medicare Part D proposals will help lower overall drug pricing.

In addition, the agency is considering a policy that would require pharmacy rebates to be passed on to seniors to lower their drug costs at the pharmacy counter.

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“By bringing the latest tools from the private sector to Medicare Part D, we can save money for taxpayers and seniors, improve access to expensive drugs many seniors need, and expand their choice of plans,” said HHS Secretary Alex Azar in the CMS statement.

“While we are reviewing the proposed rule, we are encouraged the Administration supports greater use of competitive pharmacy benefit manager (PBM) tools that strengthen Medicare Part D for beneficiaries and taxpayers,” said Pharmaceutical Care Management Association (PCMA) in a statement.

“Specifically, the proposed rule increases formulary flexibility in the so-called ‘protected classes’ allowing for Part D plans to negotiate bigger discounts,” PCMA added.

Overall, Medicare Part D drug pricing probably won’t change that much, but the increased management controls that plans will be allowed to deploy means savings will be gained, Jeremy Schafer, senior vice president of Precision for Value, told FormularyWatch.

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“Pharmaceutical manufacturers will need to be more cautious when considering price increases that outpace inflation due to the potential for exclusion. For drugs in less competitive categories, or where the medication has significant utilization, the concern is lower, as outright exclusion would cause significant member disruption and may not be realistic for plans in the member-centric and competitive Part D space. Brand medications with generic competitors would be at risk as well,” Schafer added.

CMS’s proposed changes include:

  • Implementing a statutory requirement, recently signed by President Trump, prohibiting pharmacy gag clauses in Part D.

  • Providing Part D plans with greater flexibility to negotiate discounts for drugs in “protected” therapeutic classes.

  • Requiring Part D plans to increase transparency and provide enrollees and their doctors with a patient’s out-of-pocket cost obligations for prescription drugs when a prescription is written.

  • Codifying a policy similar to the one implemented for 2019 to allow “step therapy” in Medicare Advantage for Part B drugs, encouraging access to high-value products, including biosimilars.

Meanwhile, CMS is considering changing how price concessions negotiated between pharmacies and PBMs are reflected in beneficiary cost sharing. “These competitive negotiations generate significant savings for the federal government and beneficiaries, while also encouraging pharmacies to meet contractual ‘pay-for-performance’ standards based on quality measures such as generic dispensing rates,” PCMA said.

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