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Medicare Drug Changes in Store

Medicare Drug Changes In Store

The Secretary of Health and Human Services (HHS), Alex Azar, indicated recently that major changes in how drugs are administered in Medicare may come soon. The Centers for Medicare and Medicaid Services (CMS) has been increasingly concerned about the high-cost of pharmaceuticals in the program. While drug inflation has tempered, both Part B and Part D drugs are viewed as a major threat to the sustainability of the program over time.

President Trump indicated during his election campaign and since taking office that he wants to see much lower drug costs for seniors. Congress already passed an acceleration of the Part D coverage gap phaseout. In his 2019 budget announcement, the President said he also wants to, among other things, pass-through at least one-third of all rebates at the point of sale.

Secretary Azar has announced that the administration may indeed propose a few other mega changes to the program including but not limited to the following:

  • CMS could move some or all of the Part B drugs to the Part D program.
    • These are the traditional medications covered since the birth of the program in the 1960s. Seniors pay major costs for these drugs because the customary 20% cost-sharing in fee-for-service applies and many Medicare Advantage plans adopt the same percentage in their benefit designs.
    • Shifting some or all of the drugs to Part D would drive cost reductions as the current Part B financing essentially pays a six percent (6%) add-on to the set Average Sales Price (ASP). There are essentially no cost controls for these drugs year over year.
    • The likelihood, though, is that CMS will start with migrating just the drugs that overlap in Parts B and D as well as other Part B only drugs that are customarily dispensed through retail establishments. Tackling cancer and other infusible and injectable drugs would take a great deal of planning.
  • Liberalizing how to furnish protected class drugs to member so that plans can acquire more generous rebates.
    • Currently, drug-makers provide little to no rebates on protected class drugs because drug-makers know that these drugs have to be covered. These drugs treat HIV and various other conditions that could generate enormous concern among advocacy groups.
  • Dispensing Part B drugs in the most cost-effective setting.
  • Accelerating the introduction of generic drugs by limiting the exhaustive challenges on drug safety.
  • This extends the work initiated under the administration of President George W. Bush.
  • Reinstating the competitive bid program to Part B fee-for-service.
  • Forcing pharmacy benefit managers (PBMs) to negotiate set prices and to earn money only from plans’ administrative fees. This proves to be the most far-reaching possibility and would likely take years to come about because rebates could go away altogether.

The major drug lobby, PhRMA, argues that these types of changes in one of the biggest healthcare programs for drug-makers, will stifle innovation. Secretary Azar, a former drug executive, seems to be disputing that talk, arguing that he knows otherwise from experience.

The direction the administration is taking could have been much more far-reaching. That was generally good news for drug stocks, but it is still among the most sweeping changes we have seen in a long time and should disrupt the industry just the same. And just maybe seniors could see some much-needed relief.

Marc Ryan

Marc S. Ryan serves as MedHOK’s Chief Strategy and Compliance Officer. During his career, Marc has served a number of health plans in executive-level regulatory, compliance, business development, and operations roles. He has launched and operated plans with Medicare, Medicaid, Commercial and Exchange lines of business. Marc was the Secretary of Policy and Management and State Budget Director of Connecticut, where he oversaw all aspects of state budgeting and management. In this role, Marc created the state’s Medicaid and SCHIP managed care programs and oversaw its state employee and retiree health plans. He also created the state’s long-term care continuum program. Marc was nominated by then HHS Secretary Tommy Thompson to serve on a panel of state program experts to advise CMS on aspects of Medicare Part D implementation. He also was nominated by Florida’s Medicaid Secretary to serve on the state’s Medicaid Reform advisory panel.

Marc graduated cum laude from the Edmund A. Walsh School of Foreign Service at Georgetown University with a Bachelor of Science in Foreign Service. He received a Master of Public Administration, specializing in local government management and managed healthcare, from the University of New Haven. He was inducted into Sigma Beta Delta, a national honor society for business, management, and administration.

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