The Trump administration is giving private plans more power to negotiate to lower drug prices for seniors for physician-administered drugs.
The Centers for Medicare & Medicaid Services said that the new policy is part of a greater effort by the Trump administration to lower drug prices. The agency’s new policy applies to Medicare Advantage, a program that lets seniors use their Medicare benefits to buy a private plan.
“By allowing Medicare Advantage plans to negotiate for physician-administered drugs like private-sector insurers already do, we can drive down prices for some of the most expensive drugs seniors use,” said Health and Human Services Secretary Alex Azar in a statement Tuesday.
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The new policy focuses on drugs covered under Medicare Part B, which reimburses doctors for drugs administered in an office setting like a vaccine or chemotherapy.
Currently private plans do not negotiate the price for these drugs on behalf of Medicare. Instead, Medicare reimburses a doctor based on the average list price for a product.
This is different from Medicare Part D, the program’s prescription drug plan. Under Part D, a private plan can negotiate for a lower price from a drugmaker.
Medicare Advantage plans can cover drugs that are reimbursed under Part B and Part D. Starting on Jan. 1, 2019, Medicare Advantage plans can implement a cost-saving tool called step therapy, which prescribes a patient a more cost-effective drug therapy first and then moves them to a pricier drug if the cheaper one isn’t effective.
CMS gave an example of a Medicare beneficiary with a newly diagnosed condition beginning treatment on a biosimilar, which is a cheaper version of a costly specialty drug called a biologic. The patient would only move on to a more expensive biologic drug if the biosimilar is not effective.
Step therapy is a practice used commonly in private plans, but Medicare Advantage has not been able to use it for Part B plans. The new policy allows Medicare Advantage plans to start using step therapy, but only for new prescriptions.
If a Medicare Advantage plan decides to use this new tool, it must clearly tell the patient.
CMS administrator Seema Verma told reporters on Tuesday that the addition of step therapy gives Medicare Advantage plans greater negotiating power with manufacturers. She said that sometimes a drug available on Part B has a competitor that is available on Part D for a cheaper price.
A Medicare Advantage plan that offers coverage on Part B and Part D could use the cheaper drug on Part D rather than the pricier one on Part B under step therapy, Verma said.
“Essentially if the drug is offered in Part B and Part D now the plans have the ability gives them a negotiating tool to put those two drugs together,” she said. “Before they were separated and they couldn’t have that crossover.”
CMS said that Medicare Advantage plans spent nearly $12 billion on Part B drugs per year. Currently there are 20 million Medicare beneficiaries who have Medicare Advantage, about a third of all beneficiaries on the program.
CMS officials told reporters that step therapy in private sector plans usually generates 15 to 20 percent in savings.
This new policy is different from one commonly proposed by Democrats that would give Medicare, and not private plans, the power to directly negotiate with drugmakers to lower costs.
