Senate Finance Committee Issues Report on Prescription Drug Pricing Reduction Act (Part 1 of 3)
I. LEGISLATIVE BACKGROUND
Background on Medicare and Medicaid prescription drug coverage
Medicare is a federal program that provides health insurance coverage for individuals aged 65 and older, certain individuals under the age of 65 who have disabilities, and those with end-stage renal disease (ESRD). Medicare also pays for certain services for individuals dually eligible for both Medicare and Medicaid. Medicare consists of four parts: Part A covers inpatient hospital and other facility-based services; Part B covers physician visits and other outpatient-based care, including physician-administered prescription drugs; Part C, or Medicare Advantage, covers the same Part A and Part B services (and some supplemental services) through private insurance companies; and Part D covers prescription drugs through private prescription drug plan sponsors. Medicare pays for health care services and items that are "reasonable and necessary."
Medicare pays for medically necessary prescription drugs (and biologicals and biosimilar products) that are prescribed and administered by a physician to a beneficiary in an outpatient setting through Medicare Part B. These physician- administered drugs are paid based on an average sales price (ASP) methodology. Drug manufacturers are required by the Medicaid Drug Rebate Program (MDRP) to report the average price (minus rebates, discounts, and other price concessions) at which they sold their drugs to physicians, hospitals, and wholesalers. Medicare also provides an "add-on" payment, equal to six percent of the ASP for a drug. This ASP plus six percent amount is paid to the physician or hospital administering the drug to cover both the cost of the drug purchase and associated expenses. An across-the-board Medicare payment reduction of two percent established through the Budget Control Act of 2011 effectively reduced the payment to ASP plus 4.3 percent. In 2017, Medicare spent approximately
Medicare provides a voluntary prescription drug benefit, known as the Part D program, in which beneficiaries can enroll to receive covered, medically necessary outpatient drugs prescribed by a physician or other qualified clinician. The Part D program uses private insurers offering prescription drug plans (PDPs) to provide prescription drug benefits to Medicare beneficiaries. Insurers compete for enrollees based on premiums, benefit structure, covered drugs, drug cost sharing, pharmacy networks, and quality of services. Over 3,000 individual plans across 34 geographic areas were available in 2019. Insurers bear risk for enrollees' drug spending and, in general, the federal government subsidizes about 75 percent of total premium costs, with a higher subsidy for the nearly 13 million individuals who receive a Low-Income Subsidy (LIS). Insurers manage costs, typically through contracts with pharmacy benefit managers (PBMs), by using formularies to negotiate the amount paid for drugs with drug manufacturers and developing networks of preferred pharmacies to dispense drugs. In 2018, 43.9 million beneficiaries were enrolled in a Part D plan. In 2016, Medicare spent
Medicaid is a joint federal-state program that finances the delivery of primary and acute medical services, as well as long-term services and supports, for a diverse low-income population. Each state has a Medicaid state plan that describes how the state will administer its program. The benefits covered under Medicaid include both mandatory and optional services. Mandatory services include inpatient hospital services, outpatient hospital services, and a range of services for infants and children under the early and periodic screening, diagnostic, and treatment services benefit. Optional services include certain non-mandatory categories of services, which may include certain types of residential treatment, therapy, and counseling services as well as other services such as prescription drugs.
Every state Medicaid program offers a prescription drug benefit. In 2017, net prescription drug spending totaled approximately
Background on rising prescription drug prices
Prices for prescription drugs continue to rise, imposing significant hardship on millions of Americans and straining federal health care programs. Rising costs are due to new, expensive drugs but also in large part to price inflation for older drugs that have long been on the market. For example, the price of insulin doubled between 2012 and 2016,1 and some manufacturers have recently increased their insulin prices more than 500 percent.2 Prices for drugs with no competition from other products nearly doubled from 2007 to 2017,3 and prices for cancer drugs rose over five times faster than inflation from 2012 to 2017.
1 Spending on Individuals with Type 1 Diabetes and the Role of Rapidly Increasing Insulin Prices, Jean Fugleston Biniek and
2 Grassley, Wyden Launch Bipartisan Investigation into Insulin Prices,
3 Report to the
Prescription drug prices have risen faster than wages and
4 One-quarter of people with diabetes in the
The Medicare Part D program as structured has been successful in expanding beneficiary access to prescription drug coverage and enabling patients to get needed medications. Part D spending has been lower than projected since the benefit was implemented in 2006. Nearly 90 percent of Part D drugs dispensed are generic.5 The average Part D premium has stayed stable over a number of years.6 Enrollees have a wide choice of plans options.7 More than 80 percent of enrollees have a high-level of satisfaction.8
5 "Report to the
6 Id.
7 Id.
8 Id.
Despite these successes, Medicare Part D faces a number of challenges for beneficiaries and taxpayers that provide opportunity for improvement. Many Part D beneficiaries are spending thousands of dollars out-of-pocket for their prescriptions. Unlike the private market, Part D does not have an out-of-pocket cap that limits how much a patient spends on their prescriptions annually. Seniors with autoimmune diseases and certain types of cancer can spend over
9 How Many Medicare Part D Enrollees Had High Out-of-Pocket Drug Costs in 2017,
10 KFF Health Tracking Poll--
Escalating costs from new, expensive therapies and cost increases for existing medications are also placing pressure on federal health care programs. Medicare and Medicaid together accounted for 40 percent of retail prescription drug spending in
11 10 Essential Facts About Medicare and Prescription Drug Spending,
12 2019 Annual Report of the Boards of Trustees of the
13 High-Cost Hepatitis C Drugs in Medicaid, Medicaid and
Moreover, the prescription drug supply chain, which is a complex network of financial relationships, lacks transparency in drug prices. Middlemen like pharmacy benefit managers, or PBMs, negotiate discounts on behalf of payers, like the federal government, states, and health plans, as well as on behalf of patients, but PBM discounts are not always passed on to payers or patients at the pharmacy counter. In Medicare, seniors' cost-sharing is based on the list price, not the PBM's negotiated price that includes discounts. Several state Medicaid programs found some PBMs mark up the price of drugs paid by Medicaid--costing one state more than
14
Over the past four years, the
In 2019, the
On
II. EXPLANATION OF THE BILL
TITLE I--MEDICARE
SUBTITLE A--PART B
SECTION 101. IMPROVING MANUFACTURERS' REPORTING OF AVERAGE SALES PRICES TO SET ACCURATE PAYMENT RATES
Current Law
Prescription drug, biological, and biosimilar manufacturers that participate in the MDRP are required under Medicaid statute to report to the Secretary of
Medicare pays providers for most Part B drugs, biologicals, and biosimilars based on the ASP. In general, in setting Medicare Part B drug payment rates, CMS aggregates drug manufacturer ASP data by Medicare billing codes, so that ASP is the weighted average of the manufacturer ASPs for each product classified under a Medicare billing code. Generally, there is one billing code for single-source products, and there can be many generic drugs that are equivalent products grouped under a single billing code with their reference brand drug.
Provision
This provision would require prescription drug, biological, and biosimilar manufacturers that do not have a Medicaid drug rebate agreement to report ASP information to the HHS Secretary that would be used to help establish Medicare payment rates. These manufacturers would be required to report quarterly ASP information beginning with the first calendar quarter after the date of enactment.
SECTION 102. INCLUSION OF VALUE OF COUPONS IN DETERMINATION OF AVERAGE SALES PRICE FOR DRUGS, BIOLOGICALS, AND BIOSIMILARS UNDER MEDICARE PART B
Current Law
Prescription drug, biological, and biosimilar manufacturers often provide drug coupons for specific drugs to help privately insured patients reduce their cost-sharing obligations, including deductibles, copayments, and coinsurance. Manufacturers provide drug coupons for brand-name products as well as generic and biosimilar drugs. Manufacturers use coupons to help patients access needed medications but also to encourage patients to continue to use to their products, which can help generate more sales. Coupons are primarily provided to individuals with private insurance, as the anti-kickback statute prevents manufacturers from offering coupons for the purchase of drugs paid for by federal health care programs, including Medicare. Under Medicare statute, manufacturers are directed to calculate ASP for individual prescription drugs, biologicals, and biosimilars based on the price they sell to purchasers net of most price concessions, including volume, prompt-pay, and cash discounts and rebates, except Medicaid rebates. In calculating ASP, manufacturers are not required to include sales net of price concessions provided directly to patients, such as through drug coupons. When the value of patient coupons is high, ASP tends to overstate the amount drug manufacturers are receiving for their product, effectively resulting in higher Medicare Part B payments.
Provision
This provision would require prescription drug, biological, and biosimilar manufacturers to exclude the value of coupons provided to privately insured individuals from each drug's ASP, as reported to the HHS Secretary. This provision would apply to manufacturers' product sales for calendar quarters beginning on
SECTION 103. REDUCED WAC-BASED PAYMENTS FOR NEW DRUGS, BIOLOGICALS, AND BIOSIMILARS
Current Law
Medicare pays providers for most Medicare Part B drugs, biologicals, and biosimilars at 100 percent of each product's ASP plus a 6 percent add-on payment. In certain situations, however, Medicare may use different benchmark prices to pay providers for drugs, biologicals, and biosimilars, such as a drug's WAC, and also may use a different add-on payment. Medicare statute directs manufacturers to calculate ASP for individual prescription drugs, biologicals, and biosimilars net of most price concessions, including volume, prompt-pay, and cash discounts and rebates, except Medicaid rebates. WAC is a published price that is not adjusted for discounts; as a result, WAC is usually a higher price than ASP.
Medicare uses WAC to set the Part B drug benchmark price in several situations. WAC is used to set the payment when the ASP is unavailable during a product's first two quarters on the market as manufacturers have not yet recorded sales that can be used to determine the average price. In these situations, by statute, the HHS Secretary may use either a WAC-based payment methodology or a payment methodology in effect on
When ASP becomes available, the statute requires the HHS Secretary to pay Medicare Part B drugs and biologicals at ASP plus a 6 percent add-on payment.
Provision
This provision would establish a WAC add-on payment of no greater than plus 3 percent when ASP is unavailable for new drugs, biologicals, and biosimilars furnished on or after
SECTION 104. PAYMENT FOR BIOSIMILAR BIOLOGICAL PRODUCTS DURING INITIAL PERIOD
Current Law
Biological products are drugs derived from living organisms or that contain components of living organisms, whereas conventional drugs are manufactured from chemicals. In contrast to generic drugs, which are exact copies of brand-name chemical drugs, biosimilar biological products are similar, but not identical to brand-name biologicals (reference products).
Medicare pays providers for most Part B drugs, biologicals, and biosimilars at the rate of the product's ASP plus a 6 percent add-on payment. To encourage development of lower priced biosimilars, under Medicare statute the payment rate for biosimilars is the ASP of the biosimilar plus an add-on payment equal to 6 percent of the reference biological product's ASP.
Medicare statute does not specifically address the payment rate for biosimilars during the initial product introduction period when ASP information may be unavailable, but current Medicare payment rules establish that biosimilars are paid at their WAC plus 3 percent during the roughly two-quarter initial period.
Provision
This provision would establish a payment rate for biosimilars furnished on or after
SECTION 105. TEMPORARY INCREASE IN MEDICARE PART B PAYMENT FOR BIOSIMILAR BIOLOGICAL PRODUCTS
Current Law
In contrast to generic drugs, which are exact copies of brand-name chemical drugs, biosimilar biological products are similar, but not identical to brand-name biologicals (reference products). Medicare pays providers for most Part B drugs, biologicals, and biosimilars at the rate of the product's ASP plus a 6 percent add-on payment. To encourage prescribing of lower priced biosimilar biological products, Medicare pays physicians for biosimilar biologicals the ASP of the biosimilar product plus an add-on payment equal to 6 percent of the reference biological product's ASP.
Provision
This provision would increase the add-on payment for a biosimilar biological product from 6 percent of the reference product ASP to 8 percent of the reference product ASP for a period of five years. The temporary add-on payment increase would apply to a biosimilar: (1) paid by Medicare as of
SECTION 106. IMPROVEMENTS TO MEDICARE SITE-OF-SERVICE TRANSPARENCY
Current Law
Medicare payments are generally determined by the type of service and the site where it is delivered. Differences across Medicare's payment systems have created instances where Medicare payment rates for similar or identical services differ depending on the site. This includes Medicare payments across hospital outpatient departments (HOPDs), ambulatory surgical centers (ASCs), and physician offices. Generally, beneficiaries are responsible for a 20 percent coinsurance payment for Part B services. Therefore, different Medicare payment rates across sites of service result in different cost-sharing amounts for similar or identical services depending on the site.
To facilitate price transparency, the 21st Century Cures Act of 2015 (Public Law 114-255) required, beginning in 2018 and for each year thereafter, the HHS Secretary to make available on a public website the Medicare estimated payment to HOPDs under the outpatient prospective payment system (OPPS) and ASCs under the ASC payment system as well as the estimated beneficiary cost-sharing liability in each setting.
Provision
This provision would modify the transparency tool established under the 21st Century Cures Act of 2015 to require comparable information for services that can also be furnished in a physician office. Specifically, the HHS Secretary would be required to add the estimated payment to a physician under the Medicare physician fee schedule (PFS) and the associated estimated beneficiary cost-sharing liability, beginning in 2021, to allow beneficiaries to compare across the three settings.
SECTION 107. MEDICARE PART B REBATE BY MANUFACTURERS FOR DRUGS OR BIOLOGICALS WITH PRICES INCREASING FASTER THAN INFLATION
Current Law
No provision in current law.
Provision
This provision would require prescription drug and biological manufacturers to pay a rebate to Medicare for the amount that the price of their Medicare Part B drugs or biologicals increased above the inflation rate, as measured by the Consumer Price Index for All Urban Consumers (CPI-U).
This provision would define a "rebatable" drug as a brand-name prescription drug or biological that is separately payable under Part B, including when furnished in a physician office, HOPD, or ASC setting. This definition of rebatable drug would not include biosimilars or vaccines paid under Part B.
Beginning on or after
Manufacturers would be required to pay the HHS Secretary the quarterly rebate within 30 days of receiving such information from the Secretary. Manufacturer rebates would be deposited in the
The HHS Secretary would use the ASP payment amount for a rebatable drug in effect for the calendar quarter beginning
For new drugs, the Secretary would establish the payment amount benchmark as the date that the drug is first marketed by the manufacturer, with that payment amount benchmark being adjusted by the CPI-U percentage change in each subsequent quarter to arrive at the inflation-adjusted payment amount. The initial WAC-based payment amount benchmark would be compared to an inflation-adjusted WAC amount until an ASP-based payment amount is established. That ASP payment amount benchmark would then be compared to an inflation-adjusted ASP in each subsequent calendar quarter.
The HHS Secretary would impose a civil monetary penalty (CMP) on a manufacturer that fails to pay a required rebate that is equal to 125 percent of the required, unpaid rebate amount. The HHS Secretary would ensure that no payment under Medicare Part B is available for a drug for which the manufacturer has failed to pay a CMP imposed by the Secretary for non-payment of a rebate. In addition, non-compliant manufacturers could be subject to other penalties and assessments applicable under Title XI of the SSA.
This provision would amend the definition of Medicare ASP to exclude Medicare Part B rebatable drug rebates from the calculation of ASP.
SECTION 108. REQUIRING MANUFACTURERS OF CERTAIN SINGLE-DOSE DRUGS PAYABLE UNDER PART B OF THE MEDICARE PROGRAM TO PROVIDE REFUNDS WITH RESPECT TO DISCARDED AMOUNTS OF SUCH DRUGS
Current Law
Medicare pays for most prescription drugs, biologicals, and biosimilars covered under Medicare Part B based on a product's ASP plus a 6 percent add-on payment. Many Medicare Part B drugs, biologicals, and biosimilars are packaged in single-dose containers as identified from information included in the FDA approval, such as the label or package insert. Generally, Medicare pays providers for the total amount of product indicated on the single-dose package including the number of units of any unused product as well as the number of units administered to the patient.
To help identify and track the amount of unused Medicare Part B prescription drugs, biologicals, and biosimilars, on
Provision
This provision would require the manufacturer of a prescription drug, biological, and biosimilar beginning on
This provision would define "refundable" drugs as all drugs, biologicals, and biosimilars packaged as single-dose and covered under Medicare Part B, except for radiopharmaceuticals and imaging agents.
For each calendar quarter beginning on or after
The amount that a manufacturer would owe for a refundable drug during a quarter is: the amount by which the Medicare payment attributed to the unused units exceeds 10 percent of the amount Medicare paid for the total units. This formula would ensure that a manufacturer of a refundable drug only pay a refund if the unused units are in excess of 10 percent of the total units. It provides an incentive for manufacturers to produce efficient sizes while recognizing that the amount of a drug will vary based on beneficiary characteristics and needs.
The HHS Secretary shall increase the 10 percent allowance threshold before which a manufacturer would have to a pay a refund through notice and comment rulemaking for refundable drugs for which preparation instructions approved by the include filtration during the preparation process. The Secretary may increase the threshold through rulemaking for other refundable drugs that have unique circumstances that involve similar product loss. Manufacturer refunds would b e deposited in the
SECTION 109. CLARIFICATION OF MEDICARE ASP PAYMENT METHODOLOGY
Current Law
Medicare pays providers for most Part B drugs, biologicals, and biosimilars at the ASP plus a 6 percent add-on fee. Manufacturers calculate ASP for each drug, biological, and biosimilar and are required to report to the HHS Secretary ASP and the number of Medicare Part B units sold during a calendar quarter.
In calculating ASP, Medicare statute directs manufacturers to calculate their Part B drug sales net of price concessions such as volume discounts, prompt pay discounts, cash discounts, free goods that are contingent on purchase requirements, chargebacks, and rebates, other than Medicaid rebates. For sales after 2004, the HHS Secretary may include other price concessions, as recommended by the
Provision
This provision would establish a statutory definition of "bona fide service fees," which manufacturers do not have to include as a concession when calculating and reporting the ASP for a drug, biological, or biosimilar. Specifically, this provision would narrow the existing definition of bona fide service fees that the HHS Secretary established using administrative authority. The more narrow definition of bona fide service fees exempt from ASP reporting would explicitly prohibit: fees based on the percentage of sales; and fees determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties. This provision would expand the types of fees that manufacturers pay to wholesalers and group purchasing organizations that must be treated as a price concession and included in the reported ASP.
SECTION 110. ESTABLISHMENT OF MAXIMUM ADD-ON PAYMENT FOR DRUGS, BIOLOGICALS, AND BIOSIMILARS
Current Law
Medicare pays providers for most Part B drugs, biologicals, and biosimilars at the rate of the product's ASP plus a 6 percent add-on payment. The Medicare payment rate for biosimilars is the ASP of the biosimilar plus an add-on payment equal to 6 percent of the reference biological product's ASP. Medicare payment rate for a new drug during the first two quarters it is on the market is typically WAC plus a 3 percent add-on.
Provision
This provision would establish
SECTION 111. TREATMENT OF DRUG ADMINISTRATION SERVICES FURNISHED BY AN OFF-CAMPUS OUTPATIENT DEPARTMENT OF A PROVIDER
Current Law
Medicare Part B generally covers outpatient drugs that are administered by health professionals in physician offices and HOPDs. Health professionals receive a payment intended to cover the cost of purchasing the drug and another payment for the professional service of administering the drug to the beneficiary. Payments are determined under the PFS or OPPS depending on the site of service. Beneficiaries generally face cost sharing equal to 20 percent of the Medicare payment rate for the drug and administration of the drug.
In addition to covered drugs, some Medicare-covered services can also be provided in a physician office, HOPD, or ASC. The payment amount for these services is determined under the payment system for each different site. The payment amount typically differs for the same or similar service under the PFS, the OPPS, and the ASC payment systems.
The Bipartisan Budget Act of 2015 (Public Law 114-74) and the 21st Century Cures Act of 2016 (Public Law 114-255) specified that most HOPDs off the campus of the main hospital that had not billed Medicare under the OPPS prior to the date of enactment (or were in the process of being built) would be paid the lower rates under the PFS or ASC payment system, instead of the generally higher OPPS rates. Off-campus HOPDs paid under OPPS at the time of enactment of these laws are excepted from the policy and continue to be paid under the OPPS.
Provision
This provision would remove the exception for "grandfathered" off-campus HOPDs that was established by the Bipartisan Budget Act of 2015 and the 21st Century Cures Act of 2015 for the service of administering a Medicare Part B drug, beginning on
SECTION 112. AUTHORITY TO USE ALTERNATIVE PAYMENT FOR DRUGS AND BIOLOGICALS TO PREVENT DRUG SHORTAGES
Current Law
The Federal Food, Drug, and Cosmetic Act (FFDCA) requires drug and biological manufacturers to submit certain drug shortage information to FDA. Manufacturers of drugs or biologicals that are life-supporting, life-sustaining, or are intended for use in prevention or treatment of debilitating diseases or conditions, are required to notify FDA of any permanent discontinuance or temporary manufacturing interruption that is likely to disrupt the
Medicare covers outpatient drugs and biologicals under Medicare Part B. Medicare reimburses providers for most Part B drugs and biological products at a product's ASP plus an add-on fee of 6 percent of the product's ASP, regardless of providers' drug acquisition cost. WAC is a published price that is not adjusted for price concessions and as a result, WAC is usually a higher price than ASP.
Provision
This provision would provide the HHS Secretary the authority to use a WAC-based (or other reasonable drug price measure) payment methodology under Medicare Part B instead of an ASP-based methodology for drugs that are currently in shortage and are on the FDA shortage list or for drugs which have a declining number of manufacturers that may result in a shortage in the future.
This provision would also require the HHS Secretary to establish a modifier or other mechanism that hospitals would report to CMS on claims for inpatient services that would enable tracking of use of drugs and biologicals in shortage. Further, it would require the HHS Secretary to issue a public report to
SECTION 113. STUDY OF AVERAGE SALES PRICE
Current Law
No provision in current law.
Provision
This provision would require the Government Accountability Office (GAO) to study the difference between commercial and Medicare prices reported for ASP.
SUBTITLE B--PART D
SECTION 121. MEDICARE PART D BENEFIT REDESIGN
Current Law
Medicare Part D provides outpatient prescription drug coverage for Medicare beneficiaries and is the primary source of drug coverage for low-income individuals enrolled in both Medicare and the state-federal Medicaid program. Part D coverage is voluntary and administered through private health insurers, often referred to as plan sponsors.
Medicare pays insurers for each Medicare beneficiary who enrolls in Part D and provides additional subsidies for low- income individuals. Part D payment to insurers takes two general forms: the direct subsidy under which Medicare pays a monthly payment per enrollee calculated as 74.5 percent of the national average of plan sponsors' bids, and the reinsurance subsidy under which Medicare pays for 80 percent of drug spending when an enrollee's total drug cost exceeds a catastrophic threshold. Enrollees' premiums are 25.5 percent of the national average of insurers' bids plus or minus any difference between the insurer's bid for their plan benefit package and the national average bid, which means premiums vary by the plan selected. Medicare also pays insurers LIS to cover all or a portion of the cost-sharing and premiums of their low- income enrollees.
Insurers must offer "standard coverage" under Part D which consists of four phases (See Figure 1.):
- a deductible (
- initial coverage in which the enrollee is responsible for 25 percent of the cost of drugs (with the plan covering the remaining 75 percent);
- the coverage gap ("donut hole") in which the enrollee is responsible for coinsurance of 25 percent of the cost of brand-name drugs and 37 percent of the cost of generic drugs, with insurers covering the remaining 63 percent of generic drug costs and 5 percent of brand-name drug costs and manufacturers providing discounts for the remaining 70 percent of brand-name drugs; and
- catastrophic coverage (reinsurance) in which the enrollee is responsible for 5 percent of their prescription drug costs, insurers are responsible for 15 percent of costs, and Medicare subsidizes 80 percent of costs (the reinsurance subsidy).
Cost-sharing for Part D benefits is not capped, whereas a cap on out-of-pocket costs is customary with private insurance. Cost-sharing is based on insurers' negotiated prices for drugs, which are the amounts an insurer (or PBM) and the pharmacy have negotiated as payment for a drug. Insurers may pass on to enrollees the full value of any rebates and discounts that they have negotiated with manufacturers and pharmacies in the price paid at the pharmacy counter, but the majority do not, according to data from CMS. Most insurers use the majority of rebates and discounts on a drug list price to lower their premiums for Part D coverage. Although the list price may not reflect the final amount a manufacturer receives for a drug, it is often used as the basis for beneficiary cost sharing at the pharmacy counter.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Note: Above the catastrophic threshold, enrollee cost sharing is the greater of a nominal set copayment for drugs or 5 percent coinsurance. In addition to prescription cost-sharing in the standard benefit figure, enrollees pay monthly premiums.
The
Additionally, MedPAC analysis suggests that insurers' limited liability for drug spending during the coverage gap and catastrophic coverage phases of the benefit reduces their financial incentive to steer utilization toward the lowest cost drugs, including generic and biosimilar versions of brand-name drugs.
Provision
This provision would make substantial changes to the structure of the Part D benefit in order to simplify the benefit design and realign incentives to encourage more efficient management of drug spending. Starting
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
To simplify and reduce cost sharing for Part D enrollees, this provision would eliminate the coverage gap and establish 25 percent cost sharing between the annual deductible and the catastrophic threshold. It would also completely eliminate beneficiary cost sharing during catastrophic coverage. The catastrophic out-of-pocket threshold would be set at
Finally, this provision would sunset the current coverage gap discount program in which manufacturers pay 70 percent of drug costs. Instead, the provision would establish a new manufacturer discount program in which manufacturers provide discounts for drugs and biologicals utilized during catastrophic coverage. Under the provision, manufacturers that choose to have their drugs covered under Part D would enter into agreements with the Secretary of HHS to provide 20 percent discounts off negotiated prices during catastrophic coverage, including for LIS beneficiaries. Insurers would subtract the anticipated manufacturer discounts from the actuarial value of the Part D benefit when submitting annual bids to CMS.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Manufacturers would provide catastrophic coverage discounts to applicable beneficiaries, defined as individuals who are: (1) enrolled in a Part D plan; (2) are not enrolled in a qualified retiree prescription drug plan; and (3) have incurred costs for covered part D drugs in a year that are equal to or exceed the annual out-of-pocket threshold. The discounts would be provided for applicable drugs, which are defined as brand- name drugs and biologicals and biosimilars on the formulary of a Part D plan or otherwise covered by a Part D plan, including through an enrollee exception or appeal. The discounted prices would be provided at the point of sale at a pharmacy or through a mail-order service. Manufacturers would provide appropriate data to demonstrate they comply with the program.
The catastrophic coverage discount would be administered in the same way as the coverage gap discount program is today. CMS would contract with one or more third parties to administer the discounts. If a third party administrator determined a manufacturer was not in compliance, the third party would be required to notify the Secretary. The Secretary could collect appropriate data from insurers in a timeframe that allowed for discounted prices to be provided for applicable drugs. Manufacturers would be subject to periodic CMS audits. HHS could impose CMPs on manufacturers that failed to provide required catastrophic coverage discounts. The penalty would be commensurate with the sum of: (1) the amount the manufacturer would have paid with respect to such discounts under the agreement; and (2) 25 percent of such amount. The Secretary could terminate a manufacturer agreement for a "knowing and willful violation" of program requirements. A manufacturer could request a hearing, which would be allowed with sufficient time for the effective date to be repealed if determined appropriate. A manufacturer would be allowed to terminate an agreement to provide discounts for any reason.
SECTION 122. PROVIDING THE MEDICARE PAYMENT ADVISORY COMMISSION AND THE MEDICAID AND CHIP PAYMENT AND ACCESS COMMISSION WITH ACCESS TO CERTAIN DRUG PAYMENT INFORMATION, INCLUDING CERTAIN REBATE INFORMATION
Current Law
Private insurers and pharmaceutical manufacturers that participate in Medicare Part D or the state-federal Medicaid program must provide drug price information to HHS for use in program payment and administration. For market competition reasons, federal law protects the confidentiality of the data.
Under current law, Part D insurers must provide information as the HHS Secretary determines is necessary to calculate and administer payments (such as direct subsidies and reinsurance payments). During each plan year, CMS makes monthly prospective payments to insurers, based on cost and revenue estimates in their annual bids to provide benefits. Six months after the end of each year, CMS reconciles the projected payments with actual plan costs, based on updated data including actual enrollment, LIS eligibility, enrollee health risk scores, and prescription drug price data. Information disclosed or obtained pursuant to the drug data reporting requirements may be used by HHS to administer the program and conduct oversight, evaluation, and enforcement. The data may also be provided to the
Under current law, manufacturers must provide price data necessary to allow HHS to implement the Medicaid drug rebate program. Under the program, manufacturers that want to sell covered outpatient drugs, including biologicals and insulin, to state Medicaid agencies must enter into rebate agreements with the Secretary. The agreements require manufacturers to provide state Medicaid programs with rebates on drugs purchased for Medicaid beneficiaries and to ensure that Medicaid receives the lowest or best price for which the manufacturer sold the drug during the previous quarter. The price information is confidential and may not be disclosed by the Secretary in a form that reveals the identity of a specific manufacturer or wholesaler, or prices charged for drugs by such manufacturer or wholesaler, except: as the Secretary determines to be necessary to administer the program; to the GAO and
Provision
This provision would allow the HHS Secretary to share Medicare Part D and Medicaid drug price and rebate data with the executive directors of MedPAC and the Medicaid and
MedPAC and MACPAC would be barred from disclosing information about the specific amounts or identity of the source of rebates, price concessions, and other forms of direct or indirect remuneration (DIR) negotiated by insurers or price information submitted as part of an insurer's annual bid to offer program benefits. MedPAC and MACPAC could not publicly disclose data in a form that identified a specific manufacturer or wholesaler or prices charged for drugs by such manufacturer or wholesaler. This provision would be effective immediately.
Continues with Part 2 of 3
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