The Prescription Drug Pricing Reduction Act (PDPRA) of 2019
proposes changes to the Medicare Part D program that could impact all
stakeholders beginning as early as 2021. The Senate Finance Committee approved
a draft of this Act on July 25, 2019. The key provisions affecting Part D
1. Redesigning the Part D benefit, including eliminating the
current coverage gap phase, establishing an out-of-pocket maximum for
beneficiary cost sharing, and splitting the cost of catastrophic phase claims
between plan sponsors, the federal government, and drug manufacturers.
2. Requiring drug manufacturers to pay a rebate directly to
the federal government if prices for certain Part D drugs increase faster than
3. Mandating public disclosure of aggregate rebates,
discounts, and other pharmacy benefit manager (PBM) contract provisions.
In this article, Milliman consultants provide an overview of these provisions and the potential effects on Part D stakeholders. The PDPRA also proposes changes to the Medicare Part B and Medicaid programs. However, the authors only focus on the proposed changes relating to Medicare Part D.
On November 26, 2018, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule (CMS-4180-P) that targets the key strategies in President Trump’s “Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs,” released in May 2018. The primary provisions include:
Pharmacy price concessions to drug prices at the point of sale (POS): This provision would redefine the negotiated price of a drug and require incentive-based pharmacy price concessions paid from pharmacies to plans to be reflected at the POS beginning as early as 2020.
- The negotiated price would reflect the “lowest amount a pharmacy could receive as reimbursement for a covered Part D drug under its contract with the Part D plan sponsor or the sponsor’s intermediary” (p. 7).
- This arrangement allows for one-directional post-POS incentive-based pharmacy price concessions from plan sponsors to pharmacies (p. 94).
- Reported 10-year (2020-2029) estimated impacts (p. 10):
- Beneficiaries: Savings of $7.1 billion to $9.2 billion
- Federal government: Cost of $13.6 billion to $16.6 billion
- Pharmaceutical manufacturers: Savings of $4.9 billion to $5.8 billion
Providing plan flexibility to manage protected classes: This provision outlines three exceptions to the protected class policy. In the current Medicare Part D program, plan sponsors are required to include all drugs in six protected classes on their formularies. The three proposed exceptions to this mandate include (p. 13):
- Implement broader use of prior authorization (PA) and step therapy (ST) for protected class drugs, including to determine use for protected class indications.
- Exclude a protected class drug from a formulary if the drug represents only a new formulation of an existing single-source drug or biological product, regardless of whether the older formulation remains on the market.
- Exclude a protected class drug from a formulary if the price of the drug increased beyond a certain threshold over a specified look-back period.
E-prescribing and the Part D Prescription Drug Program: This provision would require plan sponsors to make one or more electronic real-time benefit tools (RTBTs) available to prescribers by January 1, 2020 (p. 8). RTBTs interact with prescribers’ e-prescribing (eRx) and electronic medical record (EMR) systems. Through this tool, prescribers would be able to see beneficiary-specific drug coverage and cost information at the point of prescribing, and suggest “clinically appropriate formulary alternatives, including any utilization management requirements, such as step therapy, quantity limits and prior authorization, and indications-based restrictions, for each specific alternative presented” (p. 52).
Medicare Advantage and step therapy for Part B drugs: This provision would allow Medicare Advantage (MA) plans to implement step therapy for Part B drugs with designated safeguards in place, consistent with the August 7, 2018, Health Plan Management System (HPMS) memo “Prior Authorization and Step Therapy for Part B Drugs in Medicare Advantage” (p. 62).
Additional Proposed Provisions:
- Require Part D plan sponsors to include information on price changes and lower-cost therapeutic alternatives for drugs the member is taking in the Explanation of Benefits (EOB) (p. 59).
- Prohibit “gag clauses” from pharmacy contracts for consistency with the “Know the Lowest Price Act of 2018” passed in October (p. 46).
More information on the proposed rule is available in CMS’s fact sheet “Contract Year (CY) 2020 Medicare Advantage and Part D Drug Pricing Proposed Rule (CMS-4180-P).” If implemented, many of these provisions could have a large impact on the 2020 Part D market. Part D plan sponsors that currently receive post-POS incentive-based pharmacy price concessions could see increases to their filed bids if these price concessions are reflected at the POS. Flexibility around protected classes could reduce filed bids if plan sponsors take a proactive approach to managing utilization in these classes. Comments on these provisions are due to CMS by January 25, 2019.