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March 05, 2014

CMS: Uncommon Alliance of Stakeholders Push Back on Controversial Proposals to Change Medicare Part D

The Centers for Medicare and Medicaid Services (CMS) proposed rule, suggesting numerous technical and policy changes to key provisions of the Medicare Advantage (MA) and Medicare Prescription Drug Benefit (Part D) programs for 2015, continues to concern a variety of stakeholders, from patient advocacy groups to industry representatives. These concerns, particularly regarding the Part D changes, were front and center at a recent hearing on Capitol Hill entitled "Messing with Success: How CMS' Attack on the Part D Program Will Increase Costs and Reduce Choices for Seniors," hosted by the House Committee on Energy and Commerce, Subcommittee on Health.

When Policy and Medicine previously reported about the proposed rule, we focused on the proposed fraud and abuse measures, including new enrollment requirements for prescribers of Part D covered drugs and consequences for improper prescribing practices. There is also heightened concern about the rule provisions addressing protected drug classes, Part D tiered pharmacy networks, and limitations on standalone Part D plans in a region, among other issues.

Controversial Proposed Changes to Part D

Part D provides private insurance for prescription drugs to approximately 40 million elderly and disabled Medicare beneficiaries. Over the last 10 years, according to Reuters, "its costs of $346 billion have been 45 percent lower than initially projected. Ninety-five percent of Part D beneficiaries say they are satisfied with the program, and government officials note that it has saved $8.9 billion on prescription drug costs for Medicare recipients." In a fact sheet discussing the major provisions of the proposed rule, CMS proclaims that the proposed rule, if finalized, would save an additional $1.3 billion over five years, 2015 – 2019. The most controversial changes to Part D are outlined below:

Reduction of Protected Drug Classes. In the first year of the Medicare prescription drug benefit, CMS proposes to implement a policy that required all Part D plans to include on their formularies "all or substantially all" Part D drugs within six drug classes: antineoplastics, anticonvulsants, antiretrovirals, antipsychotics, antidepressants, and immunosuppressants. The New York Times noted that Medicare has traditionally required the broad coverage because patients with these conditions must often try several drugs before finding one that works. The Affordable Care Act later codified this policy, but allowed CMS to specify criteria for identifying protected classes through notice and comment rulemaking.

CMS proposes to reduce the protected classes of Part D drugs of clinical concern to help reduce the cost of drugs. CMS reasons that insurers have lost their leverage in negotiating with drug companies, because the drug companies know the insurers are required to cover their drug costs and are therefore less willing to offer lower prices. Under the proposed criteria, CMS would continue to require formulary inclusion of all drugs within the antineoplastic, anticonvulsant, and antiretroviral drug classes; however, it would no longer require all drugs from the antidepressant and immunosuppressant drug classes to be on all Part D formularies. Antipsychotics would remain protected at least through 2015 to allow for commentary, but CMS would evaluate possibly also eliminating antipsychotics as a protected class in subsequent years.

Elimination of Preferred Pharmacy Networks. In a stated effort to increase competition and combat tactics that have allegedly contributed to inconsistencies in bidding, payments, and market price signals for Medicare Part D plans, the rule proposes to revise the regulatory definition of negotiated prices to require all price concessions from pharmacies to be reflected in negotiated prices. The proposed rule would require greater cost savings for beneficiaries in return for offering preferred cost sharing, and sponsors would no longer be able to incentivize use of selected pharmacies, including the sponsors' own related-party pharmacies. The proposed "any willing provider" provision means plans would be required to accept any pharmacy into their network that is willing to meet the terms and conditions of the plan's contract.

Limiting Plan Options. Because the Affordable Care Act's closing of the "donut hole" has reduced the need for plans offering enhanced benefits, CMS proposes that Prescription Drug Plan Sponsors offer no more than two Part D plans in the same service area. CMS seeks comments on ways to ensure that a plan sponsor's basic Part D bid represents its lowest-premium plan offering. This provision would not be effective until 2016. The proposed rule would also prohibit MA plans from offering new plans that simply replace plans CMS has required to be terminated or consolidated due to low enrollment.

At the House committee hearing, CMS Principal Deputy Administrator, Jonathan Blum, stated that the changes were "improvements that will help protect taxpayer dollars and the integrity of the Medicare program while lowering costs, improving care quality, and enhancing protections for Medicare beneficiaries." A broad cross section of pharmaceutical manufacturers, insurers, healthcare providers, and patient advocates vehemently disagrees.

Uncommon Alliances in Opposition to Proposed Part D Changes

Critics fear the proposed changes could leave some beneficiaries without coverage for needed drugs and generally with fewer choices overall. There is support for the proposed rule from independent pharmacies, represented in large part by the National Community Pharmacists Association (NCPA). Nevertheless, the opposition to portions of the rule, or to the rule as a whole, appears to strongly outweigh any support. It also appears that stakeholders are aligning in different ways for or against different provisions of the proposed rule. The arguments to keep the six protected classes of drugs, to maintain the preferred pharmacy networks, and to maintain plan choice are summarized below:

Keep the Six Protected Classes of Drugs. "The prescriber groups, patient advocacy groups, and pharmaceutical companies all align [in favor of keeping] the protected classes," according to the American Pharmacists Association. In a bipartisan letter signed by the full Senate Finance Committee on February 5th, the Committee asks CMS to retain the existing six protected classes as they currently exist, citing concerns about decreased access to medication without meaningful costs savings. CMS states that an appeals process would allow patients to continue to receive coverage for their specific medication if a doctor indicates that it is medically necessary; however, the Committee letter argues that the current proposed process of appeal is inadequate. The strongest outcry against this proposed rule is in response to the proposed changes in protected classes, and lawmakers have vowed to legislatively address keeping the six protected classes if the proposed rule is not changed.

Maintain the Preferred Pharmacy Networks. The NCPA sent a letter signed by 151 like-minded organizations, nearly all state pharmacist organizations and local businesses, in support of the proposed rule. The letter argues that the proposed rule levels the playing field for small community pharmacies that seniors often prefer and which are largely shut out of preferred pharmacy networks. Opponents of changes to preferred pharmacy networks and to changes in the definition of negotiated prices argue that the "non-interference clause" statutorily prohibits CMS from meddling in negotiations between drug manufacturers and pharmacies and sponsors of prescription drug plans.

Congress included a non-interference directive when it enacted the Medicare Part D prescription drug program in 2003. Part D was intended to harness competitive forces to deliver prescription drugs at the lowest cost to Medicare and to the beneficiaries. To date, this has benefitted large pharmacies and mail order operations. Regardless, to ensure effective private-sector competition, Dr. Edward Lawrence of notes that the Medicare Part D legislation prohibited the federal government from getting involved in the negotiations between any of these private-sector parties. Section 1860D-11 of the Part D law contains the following rule (the "Non-Interference Clause"):

(i) NONINTERFERENCE.—In order to promote competition under this part and in carrying out this part, the Secretary—

(1) may not interfere with the negotiations between drug manufacturers and pharmacies and PDP sponsors; and

(2) may not require a particular formulary or institute a price structure for the reimbursement of covered part D drugs.

The proposed rule represents a change in CMS's interpretation of the law, and could prompt lawsuits claiming the agency overreached in its attempt to dictate negotiation requirements.

In his testimony to the House Committee on Energy and Commerce, Douglas Holtz-Eakin, president of the American Action Forum, emphasized that "the loss of preferred pharmacy networks will increase costs for Part D through the removal of discounted membership rates, interfere with seniors' continuity of care, and decrease the quality of coverage. Seniors losing their current, preferred pharmacy network plan would no longer experience the savings associated with these networks. In 2014, the average premium for a basic PDP within a preferred network was 21 percent lower than the average premium for non-preferred network plans."

Maintain Plan Choice. "The intricate negotiations between Part D plan issuers and provider pharmacies have resulted in 1,169 plans in 2014, offering a variety of premium levels and benefits," according to Holtz-Eakin. The proposed rule would limit the number of plans per issuer that can be offered in each of the 34 Part D regions in 2016 to one basic and one enhanced plan per issuer. CMS, and proponents of this change, argue that currently the overabundance of plans are confusing to seniors and don't offer a meaningful benefit. Opponents who want to maintain a large variety of plan choice argue that issuers will combine their enhanced plans, leading to less choice and greater expense for beneficiaries. Opponents also argue that increased support and explanation of various plan options is the solution, not an elimination of choice.

Calls to Rescind the Entire Proposed Rule. Prominent examples of calls to rescind the entire rule include a February 18th letter to CMS from the Healthcare Leadership Council with more than 200 signatories representing a diverse cross section of stakeholders including patient advocacy groups like Easter Seals and the Human Rights Campaign, drug manufacturers like J&J and Pfizer, and insurers like Humana. The letter cites three main concerns:

  • significant reduction in beneficiaries' choice of plans and medicines, leading to disruptions in care;
  • fundamental transformation of the market-based competitive models that have made the Part D program highly successful; and
  • imposition of a large cost burden that will impede the ability of plan sponsors and other health sectors to continue offering affordable, quality care to patients.

A February 19th letter from Rep. Fred Upton (R-MI), Chair of the House Energy & Commerce Committee, Rep. Dave Camp (R-MI), Chair of the House Ways & Means Committee, and Sen. Orrin Hatch (R-UT), Ranking Member of the Senate Finance Committee cites similar concerns in opposing the entire proposed rule.


There is significant pressure for CMS to greatly alter the proposed rule, both from Congressional leaders and from a variety of companies and organizations across the health care spectrum. Comments to the proposed rule are due by 5:00 pm EST, March 7, 2014. You may submit electronic comments, or read any of the almost 3,000 existing comments, at In commenting, refer to file code CMS-4159-P. Follow the "Submit a Comment" instructions.

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