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Issue Brief: CMS Final Rule – “Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce Out-of-Pocket Expenses”

May 17, 2019


On May 16, 2019, CMS finalized changes to Medicare Part D and Medicare Advantage designed to lower drug prices and reduce patient out-of-pocket costs. The final rule focuses on methods to strengthen plans’ ability to negotiate prices and to increase competition in the drug marketplace. CMS received over 7,250 comments on the rule.

Changes to Part D and Medicare Advantage

The rule revises requirements for Part D protected drug classes, e-prescribing, step therapy for Part B drugs provided to Medicare Advantage (MA) enrollees, and Part D explanation of benefit documents.

  • Protected Drug Classes: Currently, plans formularies must cover certain classes of drugs (known as protected classes) – antidepressants, antipsychotics, anticonvulsants, immunosuppressants for transplant rejection, antiretrovirals, and antineoplastics. The rule does not significantly alter the protected drug class formulary requirements. Rather, it allows plans to introduce broader prior authorization (PA) and step therapy (ST) policies for all classes except antiretrovirals. CMS notes that the rule only codifies existing policy and should not impact patient access. PA and ST can only be applied to patients initiating treatment with a drug and PA and ST can be used to determine whether the drug is being used for one of the protected class indications (e.g., instead of being used off-label). The change takes effect January 1, 2020.

  • Part D E-Prescribing: To improve out-of-pocket cost transparency, plan sponsors must implement a real-time benefit tool showing lower-cost alternatives for beneficiaries. CMS does not require that all prescribers integrate the tool, instead plans merely need to ensure that the tool integrates with at least one prescriber’s electronic prescribing system or EHR. The change takes effect January 1, 2021.

  • Step Therapy for Part B Drugs: CMS reaffirms that Medicare Advantage plans can require ST for the purposes of utilization management, but sets out shorter adjudication timeframes. Step therapy can only be applied when a patient initiates treatment and it must be approved by the plan’s P & T Committee. Although CMS acknowledges concerns that ST can delay treatment and create administrative burden, it states that the policy will increase MA plan negotiation leverage. The change takes effect January 1, 2021.

  • Pharmacy Gag Clause and Part D Explanation of Benefit (EOB): To increase transparency for beneficiaries, the rule implements the removal of the pharmacy gag clauses, which prevents pharmacists from disclosing lower cash prices for drugs, and requires Part D plans to include negotiated price increase and lower-price therapeutic alternatives in their EOBs. Regarding the EOB changes, commenters raised concerns that because changes may occur mid-year and patients may not know which drugs they will need when they choose a plan, the practical applications of these disclosures may be limited. The pharmacy gag clause provision takes effect January 1, 2020, while the EOB changes kick in on January 1, 2021.

What’s Next

CMS is still considering a proposal to redefine “negotiated price” to include all pharmacy price concessions and reflect the lowest possible price a pharmacy would receive for a drug. CMS received over 4,000 comments on this provision and notes that because of “performance-based pharmacy payment arrangements, the negotiated price is increasingly higher than the final payment to pharmacies unless it incorporates the large price concessions that result from these arrangements.” Because cost-sharing is also largely premised on negotiated price, including pharmacy price concessions would lower out-of-pocket costs for beneficiaries. ASHP supports implementation of this provision to improve price transparency and reduce out-of-pocket costs for patients.