Life Science Compliance Update

March 14, 2017

CMS Releases Report on Drug Rebates

CMS

The Centers for Medicare and Medicaid Services (CMS) has released a new report highlighting the growth in rebates from drug manufacturers to pharmacy benefit managers (PBMs) and insurers. However, the report notes that these rebates don’t necessarily amount to savings for beneficiaries and Medicare. Rebates paid by manufactures are referred to as “Direct and Indirect Remuneration” (DIR) by CMS, and such rebates are allegedly increasingly allowing for private Part D insurers to keep costs down, but are less impactful for keeping beneficiary cost sharing low and for holding down Medicare spending in the catastrophic phase of the benefit.

The report highlights the problem of a pricing scheme where manufacturers introduce drugs at a high list price (“point-of-sale”), with the expectation that the initial price will somehow be negotiated downward, “the cost of rebates and other price concessions received after the point-of-sale, is built into the list price charged at the point-of-sale.” Since beneficiary cost sharing is based on the list price, and because Medicare absorbs most costs in the catastrophic benefit, high list prices contribute to high spending for both beneficiaries and the program.

CMS notes that between 2010 and 2015, total DIR grew roughly twenty-two percent per year, while per-member per-month (PMPM) DIR grew about fourteen percent per year. During the same time period, total Part D gross drug costs grew about twelve percent per year and PMPM Part D gross drug costs grew slightly less than five percent per year.

The report details how the combination of higher drug prices and higher DIR can impact the benefit in the following ways:

Beneficiary Cost-Sharing

CMS believes that DIR may hold down total program expenses (and beneficiary premiums), but it does not reduce the cost of drugs for beneficiaries at the point-of-sale. Generally, this results in higher beneficiary cost-sharing obligations as cost-sharing is often assessed as a percentage of the list price;

Medicare Subsidy Payments

Medicare pays the Part D cost-sharing obligations on behalf of low income beneficiaries that are also eligible for Medicaid, roughly twelve million beneficiaries in 2015. As the burden on beneficiary cost-sharing grows, Medicare’s costs for these beneficiaries also grow. Additionally, CMS states that, “higher beneficiary cost-sharing also results in the quicker progression of Part D enrollees through the Part D drug benefit phases and potentially leads to higher costs in the catastrophic phase, where Medicare liability is generally around eighty percent;”

 

Plan Liability

As illustrated by Figure 3 in the report, higher levels of DIR also have the impact of moderating the financial liability of Part D plans, which counteracts the overall growth of Part D drug spending. High cost-high DIR arrangements ease the financial burden created by Part D plans by essentially shifting costs to the catastrophic phase of the benefit, where plan liability is limited.

Conclusion

The report more or less implies that rebates contribute to Part D spending growth because the current structure of the Part D benefit incentivizes plans to negotiate high rebates to keep their costs down, which in turn leaves Medicare and its beneficiaries on the hook for high spending due to high drug prices.

February 21, 2017

CMS Releases Report to Congress on CMMI

Patrick-Conway-MD

The Centers for Medicare and Medicaid Services (CMS) released a new report to Congress prepared by the CMS Innovation Center (CMMI) highlighting its achievements since its start in 2010 and laying out plans for implementation of future models. In conjunction with the report to Congress, Dr. Patrick Conway, Acting CMS Principal Deputy Administrator, published a blog post on the CMS website, highlighting the CMMI.

According to both the report and the blog post:

  • Over 30 new payment models have been launched over the past six years;
  • Investments in electronic medical records and a data and analytics infrastructure are sparking a new set of innovative companies;
  • The CMS Innovation Center’s portfolio of models has attracted participation from a broad array of health care providers, states, payers, and other partners. An estimated 18 million individuals, including CMS beneficiaries and individuals with private insurance included in multi-payer models, have been impacted by, have received care, or will soon be receiving care furnished by more than 207,000 health care providers participating in CMS Innovation Center payment and service delivery models and initiatives. These models are delivering care to people in every state across the nation;
  • Medicare exceeded – earlier than predicted – the goal to tie more than 30 percent of fee-for-service payments by the end of 2016 through alternative payment models to quality and cost metrics. Medicare is on pace to reach 50 percent by the end of 2018.

The future is also bright for CMMI, as there are several initiatives on the horizon, including:

  • The Medicare Diabetes Prevention Program expanded model, set to begin in 2018, will pay for services to prevent the onset of diabetes to all eligible Medicare beneficiaries, improving their health and that of the Medicare program both now and in the future. It is estimated that Medicare spent $42 billion in 2016 on fee-for-service, non-dual eligible, over age 65 beneficiaries with diabetes.
  • Three new payment models—the Acute Myocardial Infarction Model, the Coronary Artery Bypass Graft Model, and the Cardiac Rehabilitation Incentive Payment Model—will support clinicians in providing care to patients who receive treatment for heart attacks, heart surgery to bypass blocked coronary arteries, or cardiac rehabilitation.
  • Through the Comprehensive Primary Care Plus Model, primary care doctors can care for their patients the way they think will deliver the best outcomes, and they’ll get paid for achieving results and improving care.
  • One new payment model—the Surgical Hip and Femur Fracture Treatment Model—will support clinicians in providing care to patients who undergo surgery after a hip or femur fracture beyond hip replacement. In addition, updates have been finalized to the Comprehensive Care for Joint Replacement Model, which began in April 2016.
  • The Accountable Health Communities Model, beginning in 2017, will test whether increased awareness of and access to services addressing health-related social needs will impact total health care costs and improve health and quality of care for Medicare and Medicaid beneficiaries in selected communities.
  • Thirty-eight states and territories are engaged in the State Innovation Models initiative where they are testing their own best ideas to improve health, quality of care, and lower costs. Additionally, Vermont and Maryland have entered into global payment arrangements to improve care for the whole state’s population.

CMMI has recently announced more than five new or re-opened opportunities for clinicians to join Advanced Alternative Payment Models. CMS expects 125,000 to 250,000 clinicians to be participating in Advanced Alternative Payment Models by 2018. CMMI and CMS will continue to develop new payment models, guided by the following core principles: Supporting innovative payment and service delivery models with strong potential to improve health care quality and lower costs; engaging with and listening to consumers, providers, and other stakeholders allowing for open and transparent dialogue, including through the appropriate use of notice-and-comment rulemaking and ombudsmen; and evaluating results based on appropriately scoped and sized demonstrations and advancing best practices based on their impact on quality and cost.

February 17, 2017

MedPAC Reviews Part D Spending Trends

Medicare-Part-D

On January 12, 2017, during the second session of Medicare Payment Advisory Commission’s (MedPAC’s) January meeting, MedPAC Commissioners evaluated current data concerning trends in Medicare Part D spending and discussed future direction for studies regarding updating the program to reflect current markets. The Commissioners reviewed information about the numbers of stand-alone and Medicare Advantage (MA) prescription drug plans participating in Part D for 2017 and the types of benefit designs they offer, including the number of plans with no premium available to individuals receiving the low-income subsidy (LIS).

While no formal vote was held, the Commission endorsed the recommendations for spring discussion topics and advised that the overall Part D program be reviewed for modern relevance and efficiency. Several Commissioners raised concerns that the program details, created in 2003, were no longer relevant to the current market.

Staff Presentation

Several analysts presented key trends in Part D program spending, drug prices, and strategies plan sponsors use to manage spending. According to staff analysts, in 2016, seventy-two percent (41 million of 57 million Medicare beneficiaries), were enrolled in Part D plans, and another three percent received retiree drug subsidies. The analysts also noted that sixty percent of all Part D enrollees had Prescription Drug Plans (PDPs) in 2016, compared to the forty percent that had Medicare Advantage Prescription Drug (MA-PD) Plans. While there will be sixteen percent fewer PDPs offered in 2017, the analysts assured everyone that broad choice will still exist for beneficiaries – there will be eighteen to twenty-four plan choices in each region.

The analysts also noted that Part D is seeing consistent growth. While premiums have remained stable between $29 and $31 from 2009 to 2016, enrollment has grown at an average of six percent each year, rising from 24 billion beneficiaries in 2007 to 41 million in 2016. The rate of growth has been higher among non-LIS enrollees than among LIS enrollees.

The analysts identified manufacturer rebates and specialty pharmacies as two essential strategies to manage Part D premiums. Specialty drugs are accounting for greater shares of drug spending, and manufacturers are using limited networks of specialty pharmacies that do not fall under covered plan pharmacy networks.

Direct and indirect remuneration (DIR) was also discussed, and how it has grown, doubling in drug classes with competing therapies since the start of the program. The increase in brand prices more than offsets the effects of generic use. Incentives for plans to put higher-price, high-rebate drugs on formularies is growing due to the generous eighty percent reinsurance rate set by CMS’s formula. In June, the Commission recommended that this rate be lowered to twenty percent, due to reinsurance growing faster than any other category of Medicare spending.

Commissioner Discussion

The Commissioners expressed an “urgent” need to reevaluate the Part D program’s applicability to the modern healthcare system. Commissioner Amy Bricker introduced the notion that the current program does not allow plans to be competitive with the commercial market, thereby crippling their ability to manage rising drug costs. She suggested the ability to make mid-year changes to plan formularies as one example of additional flexibility for plans. She also suggested that more plans would embrace taking on the risk of investing in sole source products if they had more flexibility to manage their benefits, similar to commercial markets.

Commissioner Jack Hoadley, suggested that more transparency between plans and beneficiaries would make extra flexibility for plans viable. He noted that if beneficiaries understand why the changes are being made to their plans, and how they can appeal to retain their old structures, there is likely to be more trust. He proposed that the Commission work together to come up with ideas as to how to better engage plans and beneficiaries, because the current system does not do much to encourage communication. He also asked that the star ratings tool be reworked to better reflect beneficiary experience with specific plans.

Commission Chairman Jay Crosson summed up the discussion with two themes, both of which most Commissioners felt need “urgent action”: (1) is the Part D program pharmaceutically “appropriate”? and (2) is there a need for the program to be updated to better reflect the challenges of the current marketplace. Lastly, Chairman Crosson recommended that the Commission explore incorporating value-based payment methodologies in future discussions.

Newsletter


Preview | Powered by FeedBlitz

Search


 
Sponsors
May 2017
Sun Mon Tue Wed Thu Fri Sat
1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31