Broad Stakeholder Agreement that CMS’ Proposed Changes to Medicare Part D Plans Would Increase Costs for Seniors
On November 16, 2017, the Centers for Medicare & Medicaid Services (CMS) released the Contract Year 2019 Policy and Technical Changes to the Medicare Advantage and Medicare Part D Proposed Rule – including two meaningful proposed changes to Any Willing Pharmacy requirements and a Request for Information (RFI) to mandate manufacturer rebates at the point of sale – which would increase costs for over 42 million seniors and undermine the demonstrated success of the Part D program.
In the Proposed Rule and Request for Information (RFI), CMS proposed changes that will increase beneficiary premiums, increase taxpayer cost and undermine popular preferred pharmacy network plans. More specifically, CMS included a RFI on a potential change to require plans to provide manufacturer rebates at the point of sale. CMS’ own estimates conclude that this proposal will increase beneficiary premiums by as much as $28 billion and government costs by up to $82 billion over the next ten years. In addition, CMS proposes burdensome new constraints related to the Any Willing Pharmacy requirements that will put at risk the choice and affordability of preferred pharmacy plans which are a popular choice among seniors in Medicare Part D.
CMS’ Proposed Rule generated nearly 1,800 comments from a diverse cross-section of stakeholders including consumer and patient advocates, providers, employers, taxpayer advocates, health plans and pharmacy benefit managers. Specifically, key stakeholders concluded that these proposed changes would increase costs for all Part D beneficiaries and fail to address the root cause of the growing costs of prescription drugs.
- To the extent that there are rebates associated with expensive medications, some of the rebate amount could be used to reduce beneficiary cost sharing. However, we are concerned that CMS’s proposed approach would be complex to implement, administratively burdensome and, for drug classes with few competing therapies, would risk disclosure of confidential rebate information. Further, the policy would not help beneficiaries who take expensive drugs with no post-sale rebates or discounts. We strongly encourage CMS to search for alternative policies that are less complex but could help to achieve similar aims. ” [Page 15]
- AARP is concerned that requiring rebates to be passed through at the point-of-sale would remove this option and, as CMS already acknowledges, lead to higher premiums for most beneficiaries. In addition, it is unclear how many beneficiaries would see their out of-pocket costs substantially decrease if rebates were required to be passed to the beneficiary at the point of sale, as many of the drugs included in protected classes rarely see sizable rebates.”
- Moreover, AARP is concerned that requiring rebates and price concessions to be passed along at the point of sale could increase Medicare spending by disincentivizing manufacturers from providing higher rebates on brand-name drugs included in the Medicare Part D Coverage Gap Discount Program. In fact, CMS’ analysis estimates that manufacturer rebates would be reduced over ten years by approximately $10 billion to $29 billion from point of sale rebates and by $5 billion from point of sale pharmacy price concessions. Moreover, CMS also estimates that point of sale rebates and point of sale pharmacy price concessions would reduce funding for Medicare by approximately $27 billion to $82 billion and nearly $17 billion, respectively, over ten years.”
- Finally, we note that this proposal does not address the root of Medicare Part D spending growth: high and growing prescription drug prices.” [Page 13]
- CMS states in the RFI that the “main benefit to a Part D beneficiary of price concessions applied as DIR [direct and indirect remuneration] at the end of the coverage year (and not to the negotiated price at the point of sale) comes in the form of a lower plan premium” and “the rebates and other price concessions that Part D sponsors and their PBMs negotiate, but do not include in the negotiated price at the point of sale, put downward pressure on plan premiums, as well as the government’s subsidies of those premiums.” However, if a future rule change should require that a certain percentage of rebates must be passed through at the POS, CMS’s own analysis shows that premium increases would occur as a result, costing taxpayers billions of dollars, since they pay for 74.5 percent the Medicare Part D program.”
- According to tables 10A and 10C on page 56425 of the November 28, 2017 Federal Register (FR), requiring 33 percent of manufacturer rebates to be applied at the POS for 2019 through 2028 would result in a 2 percent increase to taxpayers or $27.3 billion; requiring 66 percent of manufacturer rebates to be applied at the POS would result in an increase of 4 percent or $55.1 billion to taxpayers; requiring 90 percent of manufacturer rebates to be applied at the POS would result in a 5 percent increase to taxpayers or $75.5 billion; and, requiring 100 percent of manufacturer rebates to be applied at the POS would result in an increase of 6 percent to taxpayers or $82.1 billion.” [Page 2]
- While we welcome the intent of the proposed rule and support its objectives, we are very concerned that certain policies – particularly the Part D point-of-sale rebate proposal in the Request for Information (RFI)- has the potential to increase the cost of prescription drug coverage (i.e., Part D premiums) for all Part D enrollees. Moreover, and most importantly, the proposed rule does nothing to address the root cause of the core problem: brand name drug manufacturers are setting list prices too high-and manufacturers alone have total control over list prices. Compounding the problem, brand name drug manufacturers consistently raise their already-high list prices, even for older products that have been on the market for many years. This unnecessarily increases costs for Medicare beneficiaries and their families and jeopardizes beneficiary access to the medications they need.”
- CSRxP recognizes that POS rebates and pharmacy price concessions could provide meaningful assistance to a limited number of beneficiaries with high out-of-pocket prescription drug costs and thus appreciates CMS’s interest in this approach. However, as CMS acknowledges in the RFI, implementation of these policies would likely lower costs for a small number of beneficiaries at the expense of significant premium increases for all Part D enrollees. Such an outcome in particular would negatively impact the many Medicare beneficiaries who live on fixed incomes and simply cannot afford unnecessary increases to their monthly Part D premiums. Prescription drug coverage should become more affordable-not less affordable-for all Part D enrollees.” [Page 3]
- ACHP appreciates the discussion that CMS has initiated on drug rebates and beneficiary costs at the point of sale. The proposed policies fail to address the real problem, which is the prices set by manufacturers for their drugs. We suggest this problem should be addressed more directly and effectively – for example, by requiring transparent justification for rebates – than by requiring Part D plans (and their PBMs) to pass along manufacturer rebates at the point of sale. The potential financial impact with administrative complexities, operational burdens on our member plans and other potential consequences of the point-of-sale approach lead us to urge CMS not to move forward with these proposals.” [Page 2]
- CMS is addressing concerns that the terms and conditions that Part D plan sponsors use to establish their preferred pharmacy networks are in some cases circumventing the AWP requirements and inappropriately excluding pharmacies from network participation. We understand the concerns, but recommend that CMS not limit the ability of sponsors to exclude, when necessary, a pharmacy that may have questionable motives or a unique business model that does not fit a commercially or community acceptable practice.” [Page 10]
- Manufacturer rebates are used by Part D sponsors (just as they are used by employers in the commercial market) to reduce costs for everyone. The CMS proposal would lower drug costs for Part D beneficiaries who utilize rebate-generating brand drugs, while providing no benefit for Part D beneficiaries who do not. But saving money for the few would have far greater consequences – to compensate for the financial loss of manufacturer rebates, Part D sponsors would be required to raise premiums and out-of-pocket costs for all Part D beneficiaries.” [Page 3]
- In our view, the CMS proposal represents a serious threat to the Part D program – higher premiums for Part D beneficiaries and increased government costs to taxpayers. Adding to this maelstrom are the disruptive effects for ERIC members and their covered retirees.” [Page 4]
- Preferred pharmacy networks have become an integral part of Part D plans. These networks help Part D sponsors negotiate deeper discounts with selected pharmacies in exchange for providing those pharmacies with the opportunity to expand prescription volume. In addition, plan sponsors use preferred pharmacy networks as a key element of their plans’ health management strategies, such as engaging with diabetics and COPD patients. Despite the anecdotal evidence of “abuses” mentioned by CMS, the reality is that preferred pharmacy networks developed by Part D sponsors have saved significant taxpayer dollars without any sacrifice of quality or member satisfaction.” [Page 4]
- CMS’ own analysis shows that reduced beneficiary burden at the point of sale would generate increased costs elsewhere. Specifically, Table 10A indicates that point of sale manufacturer rebates would yield between $9.2 billion and $28.3 billion (a 4-11% increase) in beneficiary premium costs, and $27.3 and $82.1 billion in added cost to federal taxpayers (a 2-6% increase). …the added cost to beneficiaries and taxpayers combined exceed the reduction in out-of-pocket expenditures. This is not a cost-saving policy, it is a cost-shifting policy – with negative consequences for premium affordability and the Federal Treasury.” [Page 6]
- The root cause of the increasing unaffordability of prescription drugs lies in the underlying price of the drugs themselves, as reflected in unsustainable launch prices and ongoing price inflation of drugs already on the market. This proposal does not directly address the underlying lack of transparency, competition, and value in prescription drug market itself.” [Page 7]
- The changes proposed by CMS therefore present a conundrum – lower the cost of drugs at the point of sale, therefore lessening the burden of co-pays on frequent purchasers of drugs; or leave the current system in place to preserve downward pressure on premiums that DIR creates. In either case, Medicare beneficiaries face more money out of pocket. In an ideal scenario, beneficiaries would not be presented with either option. The route of the growing out of pocket costs are the growing costs of prescription drugs. Whatever the cause of that increase may be – those costs are being felt by Medicare beneficiaries across the country.” [Page 5]
- If drug manufacturers did not increase their unit costs at rates far greater than inflation, we would not need to rely on rebates to offset at least some of those cost increases. We are also concerned about the high cost of new drugs that have been introduced to the market, a trend we expect will continue, and whether these proposed changes will have a negative impact on our ability to negotiate rebates or other methods to reduce costs to our members.” [Page 2]
- If the proposed changes in how rebates are handled result in a reduction in the level of rebates, reinsurance, or gap discounts received by a PDP, other revenue streams received by that PDP will have to increase to offset those reductions. While CMS projects that direct subsidies would increase if these proposed changes were enacted, if the direct subsidy increases did not fully offset the losses experienced elsewhere, such plans would likely have to increase beneficiary costs, either through higher copayments (if fixed copayments are used, rather than percentage coinsurance) or higher premiums, or both.” [Page 2]
- This proposal directly conflicts with the Part D spirit and intent by adding new challenges and barriers to the establishment of preferred pharmacy networks. Overall, preferred pharmacy networks allow for more streamlined management of networks by working to reduce fraud, waste, and abuse, lowering the cost of the benefit for all Medicare beneficiaries and promoting the delivery of high quality pharmacy services. Most beneficiaries today choose to enroll in Part D plans with preferred pharmacies and this proposal would disrupt their coverage without producing a benefit. Higher premiums would likely result because critical efficiencies would be lost.” [Pages 1-2]