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CMS Seeks to Lower Costs and Increase Competition with Step Therapy for Medicare Part B Drugs

As a continuation of the recent drug pricing developments tied the Trump Administration’s American Patients First Blueprint, beginning January 1, 2019, Medicare Advantage plans will be able to apply step therapy for physician-administered and other Part B drugs in an effort that CMS hopes will lower drug costs and improve the quality of care for Medicare beneficiaries. In addition, Medicare Advantage plans will be able to “cross-manage” across Medicare Part B and Part D, which CMS believes will allow Part B drugs to “compete on a level playing field” with Part D drugs.

Introducing Step Therapy.  On August 7, 2018, the CMS sent a memo to Medicare Advantage organizations notifying them that guidance from September 2012, which precluded plans from imposing additional requirements for access to certain Part B drugs, such as step therapy requirements, had been rescinded. Step therapy is a type of prior authorization for drugs which requires patients to start treatment on low-cost regimens, often biosimilars. Patients can only progress to more costly drug therapies if the initial treatment is determined to be ineffective. CMS anticipates that Part B step therapy requirements may reduce costs for beneficiaries as well as Medicare Advantage plans. Plans are required to pass over half of their savings to patients through rewards furnished as part of the drug management care coordination program, as discussed below.

Cross Management.  CMS expects that cross management between Part B and Part D will increase competition. A Part B drug may be under a plan’s medical benefit while its competitor is under a separate Part D benefit. As a result, that Part B drug may have a higher cost. Moving forward, Medicare Advantage plans that also offer a Part D benefit can now not only require one Part B drug be used before a different Part B drug, they may also use step therapy to require that a Part D drug therapy to be used prior to allowing a Part B drug therapy. Due to cross management, these medications will now be able to compete with each other, which may reduce costs.

Beneficiary Protections.  A number of features will be implemented in an effort to protect beneficiaries participating in plans that apply step therapy. CMS has stressed that Medicare Advantage plans must continue to comply with the statutory requirement to provide access to all Part A and Part B benefits that would be available under original Medicare. As such, step therapy may not be used as a means to deny coverage for medically necessary services or to eliminate access to Part B covered benefits. Further, no beneficiary currently receiving medication under Part B will be required to change their current medication. Step therapy can only be applied to newly prescribed medications so that the new policy does not disrupt ongoing Part B drug therapies for beneficiaries.

Medicare Advantage plans opting to apply step therapy will be required to offer beneficiaries an opportunity to participate in drug management care coordination activities. At a minimum, care coordination activities must include consultations with beneficiaries to discuss medication options, providing educational materials and information to enrollees about their medications, and implementing medication adherence strategies to assist enrollees with their medication regimen. Moreover, in order to encourage beneficiaries to participate in the drug management care coordination program, plans may offer rewards in exchange for enrollee participation. Plan rewards cannot be cash or monetary rebates, but may be gift cards or other items of value.

Rollout of Step Therapy.  Beneficiaries will be able to select a Medicare Advantage plan that offers step therapy during the upcoming annual Medicare Open Enrollment period that begins on October 15, 2018. Medicare Advantage plans that choose to adopt step therapy for Part B drugs must disclose that Part B drugs may be subject to step therapy requirements in the plan’s Annual Notice of Change and Evidence of Coverage documents, which are provided to enrollees prior to the Medicare Open Enrollment period to assist them in selecting a plan. If an enrollee is not satisfied with their Medicare Advantage plan, they will have an opportunity to select another plan or Original Medicare from January 1 through March 31. In addition, Medicare Advantage plans must allow enrollees to request an exception from the plan’s step therapy requirement in order to access a Part B covered drug. CMS strongly encourages plans to adjudicate requests for such exceptions within a 72-hour timeframe.

A Mixed Response.  The response from the industry and advocacy groups has been mixed so far. The Pharmaceutical Care Management Association called the shift in policy “an important step toward reducing costs for the [Medicare] program and beneficiaries.” However, the American Cancer Society Cancer Action Network stated that step therapy “can create an extra hurdle for cancer patients to go through before getting the appropriate drug they need” and that “cancer patients should not be forced to ‘fail first’ on a drug that is known not to work for them before they are allowed to take the recommended treatment.” Moreover, in a statement to Politico, PhRMA expressed “serious concerns with the new CMS guidance regarding Medicare Advantage coverage of Part B medicines and the implications for patients suffering from complex conditions.”

We will continue to watch for any further changes related to drug pricing and report any new developments.

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Author

Matthew S. Mora

Associate

Matt S. Mora advises health care clients on regulatory and transactional matters, including fraud and abuse, HIPAA privacy and security, and general contracting. Earlier he worked as in-house counsel at an independent hospital and outpatient facility, where he provided guidance on fraud and abuse.