In 2020, plans will have the option to exclude certain drugs for certain indications.
This article first appeared August 30, 2018 on Medpage Today.
By Shannon Firth
WASHINGTON -- Beginning in 2020, Medicare Part D plans will be allowed to cover prescription drugs for some indications but not others for which they're approved, the Centers for Medicare and Medicaid Services (CMS) announced on Wednesday.
Under current Part D rules, if a plan covers a drug it must cover that drug for all its FDA-approved indications. In the private sector, this isn't always the case -- plans are allowed to use indication-based formulary design, explained an agency press release.
"By allowing Medicare's prescription drug plans to cover the best drug for each patient condition, plans will have more negotiating power with drug companies, which will result in lower prices for Medicare beneficiaries," said CMS Administrator Seema Verma in the press statement.
The announcement comes as part of the Trump Administration's strategy for lowering drug prices announced in May.
Indeed, some drugs may not be the best choice or the most affordable option for certain indications, agreed John Rother, president and CEO of the National Coalition on Healthcare and chair of the Campaign for Sustainable Rx Pricing.
"The idea is that this will put a little more pressure on the pharmaceutical industry to lower costs and have more careful utilization that makes sure that only the most appropriate drugs are used when people need them," he said in a phone interview with MedPage Today.
CMS issued a memo to Part D sponsors explaining what it sees as the benefits of the new Part D formulary options. It noted that any sponsor that chooses to limit its formulary, and opt for an indication-based design, must include a "therapeutically similar drug" for any indication that has been excluded, or the plans will fail to meet certain anti-discrimination requirements.
The agency cited the example of a tumor necrosis factor (TNF) blocker that is FDA-approved for both Crohn's disease and plaque psoriasis. A Part D plan could include the TNF blocker on the formulary for plaque psoriasis only, but would then have to include another TNF blocker for Crohn's disease on its formulary.
Overall these new "flexibilities" would encourage plans to broaden their formularies, the agency said.
"Since this policy provides sponsors the flexibility to add a drug to their formularies for specific indications, as opposed to leaving the drug off of the formulary altogether, patients in need of the drug will have access to the negotiated price and will have to rely less on the appeals process," noted a CMS fact sheet.
"This formulary approach will help ensure Medicare beneficiaries receive individualized drug treatment that is targeted to meet their needs," the agency fact sheet continued.
The Right Approach
Rother described the change as "a fairly small step, but it's a step in the right direction."
More aggressive actions the administration could take include importing drugs from other countries, limiting year-to-year increases of drug prices (as is done in Medicaid), or reviewing the value of each new drug compared to existing therapies and pricing it based on whether it represents a significant advance over current therapies.
"Those would all be really important bigger steps that we could take towards more affordable pharmaceuticals," Rother said.
He believes action could be seen on each of these approaches in the near-future, though in some cases only at the state level, he said.
Others saw the value, in theory, of bringing commercial approaches into Medicare, but weren't as optimistic about their viability in practice.
"It makes a lot of sense to borrow some of the tools that are used in commercial plans," said Marsha Simon, PhD, president of Simon & Co., a firm specializing in health policy development.
But she warned that allowing plans to exclude certain drugs for certain indications could make formularies too complex and sow confusion for beneficiaries.
"We've all seen Medicare Part D beneficiaries get to the counter in the pharmacy and they're told, 'That will be $1,000,' and they just walk away," Simon said. Often, the reason they can't afford their medication is because it isn't on the formulary, she continued.
And the Annual Notice of Change (ANOC), a beneficiary document in which plans must explain any new indication limitation, has "serious deficiencies," she added.
Another stumbling block is that the Medicare Part D appeals process is next to impossible for beneficiaries to negotiate. And it lacks mechanisms found in other parts of the program -- such as an automatic review by an independent contractor.
"There's no question that adding this additional option for plans makes the program even more complex and even more difficult to understand and more likely to result in a doctor prescribing a drug that's not going to be on the formulary, if the doctor even has the information to parse it."
The American College of Rheumatology also expressed concern, saying in a press release that the change "takes clinical decision making out of the hands of providers and puts insurance companies in control of patient treatment plans."
"Furthermore, the proposed changes will exacerbate many of the access issues patients currently face with plan usage of existing utilization management practices, such as step therapy," the group said. "Unlike step therapy, which often delays effective treatments, this proposal would go even further and allow plans to remove therapies from the formulary altogether, leaving patients completely unable to access treatments that doctors and patients choose together."
Lance Grady, a vice president at Avalere Health, was more enthusiastic, saying these new options represents "another lever" for price negotiations with drug manufacturers.
While changes in formulary design may not affect the list price of the drug, they could alter net pricing.
"I think we could see a range of rebates or discounts," he said, depending on any one products range of indications.
In cases where one product is more effective for one indication than another, "that's where I think we could see differential net pricing," Grady said.
He noted, however the possibility of "operational challenges" and suggested that changes to pharmacy claims adjudication and to the granularity of the information that's collected relating to patient information or the clinical indications of use might be needed.
"If you're making coverage decisions based on an indication or clinically focused data ... [there's a] level of granularity that would need to be carried through the claims adjudication system" as well as through any prior authorization requests, he said.
'Fiddling Around the Edges'
Steve Knievel, the access to medicines advocate for the consumer advocacy group Public Citizen, said he expected only "a mild impact" on drug prices.
While distinguishing between different indications when a drug is more effective for one than another make sense from a policy perspective, "it's a far cry from what President Trump promised voters and what we actually need to provide relief to Americans that are struggling with high prescription drug prices."
"Rather than putting forth meaningful robust reforms that get to the root problem of the high drug prices that are set by the pharmaceutical corporations, the Trump administration is putting forward an approach that's fiddling around the edges."