Opposition Demands Protection for Part D “Protected Classes”

December 3, 2018

A look at Medicare Part D drug plans and drug pricing and the plans of the current administration.

Trump administration proposals to revamp drug coverage and reimbursement policies governing Medicare Part D drug plans has generated loud objections from both manufacturers and patient advocates. The debate reflects ongoing controversy over the requirement that Medicare plans cover “substantially all” approved therapies in six protected drug classes, established as part of the Medicare drug coverage program started 12 years ago. The original intent was to prevent plans from limiting coverage of high-cost medicines needed by sicker patients so that insurers could not skew enrollment to healthier, less expensive beneficiaries. Pharma companies supported the policy because it expanded coverage of innovative therapies and limited the ability of plans to negotiate discounts.

The proposal from the Centers for Medicare and Medicaid Services (CMS) proposes to give plans more flexibility to limit coverage of certain drugs for treating depression, mental illness, immune disease, HIV/AIDS and cancer (see: https://www.cms.gov/newsroom/fact-sheets/contract-year-cy-2020-medicare-advantage-and-part-d-drug-pricing-proposed-rule-cms-4180-p). The stated aim is to enhance the ability of plans to negotiate lower prices and bigger rebates and discounts with manufacturers seeking favorable formulary placement.

Specifically, plans would be able to exclude from formularies certain drugs in protected classes where price increases are greater than inflation and where a new formulation is not a significant improvement over existing products. In addition, insurers could set “utilization management” requirements that require patients to obtain prior authorization and try step therapy to gain reimbursement for certain more expensive products. Plans would still have to cover at least two drugs in every therapeutic class, as for all Part D treatment classes.

CMS also proposes that drug plans consider pharmacy price concessions and dispensing fees in patient cost-sharing. And drug pricing data would be disclosed more visibly through electronic health record systems.

The rhetoric is heating up fast. AIDS activists are particularly vocal in calling for coverage of a broad range of drugs needed to address diverse patient needs. Oncologists voice concerns about limiting options for treating cancer patients. And industry strongly objects that the changes to protected class coverage will reduce coverage protections for individuals with serious conditions. Jim Greenwood, president of the Biotechnology Innovation Organization (BIO), predicted that the proposed rule would “financially benefit insurance plans and other middlemen in the drug supply chain at the expense of patients.” The Partnership for Part D Access, which includes pharma companies and disease groups, issued a report documenting that less costly generic drugs currently account for a good portion of prescriptions for drugs in protected classes and that policies already allow plans to drop coverage of certain products and use formularies and coinsurance fees to mange drug benefits (see: http://www.partdpartnership.org/uploads/8/4/2/1/8421729/partnership_for_part_d_report_2018.pdf). CMS officials maintain that the reforms are modest and will reduce costs for federal health programs and for patients, notably by encouraging companies to avoid sharp price increases.

While HHS proposes to make these changes administratively, Congress may move to intervene. Liberal Democrats say the reforms could harm patients and don’t go far enough to curb high drug prices. Conservative Republicans oppose increased government interference in market-based health coverage. Four years ago, CMS sought to drop two of the six protected classes in Part D, but industry opposition blocked the move. The feds may be able to require step therapy and more price transparency, but not the broader Part D reforms.